Reputation For Machines
Down the Ethereum rabbit hole with Rated, 4 exits, newsletter year 2, funding rounds, compensation in Greek startups, making agile work, jobs, and more
Welcome to Hunting Greek Unicorns #51! This is a special one. Hunting Greek Unicorns turns two on Sunday! The 24 issues of Year 2 surpassed 105,000 views and I couldn’t thank you enough for being part of this journey. From the founders and operators that share their insights and lessons learned, to all those of you who read, share and engage. I’m having a blast writing this newsletter and can’t wait to continue sharing everything you need to know about Greek startups in Year 3. I’m Alex, a product guy turned VC, and you can join 3,453 readers by subscribing here:
Reputation For Machines
Last year, Ethereum moved $11.6 trillion. That was the total value of transactions in the network. A trillion more than Visa. A whole economy is living and breathing here that grows fast, unlocking new paradigms. People make a living by selling art or playing their favourite games, form communities and fund projects, borrow money using digital assets as collateral, send money around the world, and much more.
This week we go down the Ethereum rabbit hole. We hit the road starting long before its public launch, we teleport to the current state of affairs and unfold the story of a team that’s just starting up with a vision to keep the machines that make Ethereum run in check and with it, the web3 economy. Let’s get to it!
Baking Money Into Code
It all starts back in March 2011. Vitalik Buterin is a crazy smart, high school kid in Toronto, Canada. Bitcoin has just begun making waves (the 10,000 bitcoins for two pizzas was only a year before that). He joins an early Bitcoin forum and responds to a call for writers for a Bitcoin publication. Vitalik earns himself a name in the community by putting his ideas out there. A year later, he joins the University of Waterloo as a computer science freshman. He’s really into crypto and decides to work for a crypto company (remember Ripple?) for his first-year summer internship. Well, that doesn’t work out, as Ripple is a US corp and they can't get him a visa. So, Vitalik decides to take a gap year, travel to Europe and Israel and hang with folks, who were building projects on top of Bitcoin to extend its application. Only to realise that wasn’t enough.
This is all cool in building on top of Bitcoin, but you're all just scratching the surface of a bigger idea. This is whack a mole of adding set functionality to Bitcoin. Bitcoin is a calculator, let's build a computer.
David Rosenthal, Acquired
He flies to San Francisco and starts working on his idea. A generally programmable computer that can solve any reasonable computational problem. After several iterations and multiple contributors, Ethereum is born. An open-source, globally decentralized computing infrastructure, which lets people build apps and products that nobody could stop them or their applications. An uncensorable, trustless, infinite machine with money baked into code via a native currency (Ether or ETH). Code with money. Ethereum launches in July 2015.
Think of it as a virtual computer that’s stitched out of tens of thousands of real computers. That computer is very inefficient. It’s very slow. So comparing it in throughput to your home computer is nonsense; it’s besides the point. But any piece of code running on this is very trustworthy. You no longer need a government or a single actor in the middle, like a Mark Zuckerberg running Facebook, to tell you which transactions are valid, which programs are valid, and which ones aren’t. You’ve done away with the need for trusted third parties, and you’ve replaced it with a trusted computer that is being verified by tens of thousands of other computers. This giant contraption is Ethereum.
Naval Ravikant, AngelList
Today, Ethereum is by far the most in-demand blockchain. It’s where a large part of the decentralised economy takes place. And if network effects have something to teach us, it’s that this is where most likely it will continue to do so. In 2021, Ethereum did 1.2 million transactions per day (or ~15 transactions per second). Everyone that wants to create or access any application needs to use its native currency, ETH. From the digital artist Beeple selling an NFT for the equivalent of $69 million in a Christie’s auction to the ConstitutionDAO, a group that raised $47 million to try to buy one of the original copies of the US Constitution, ETH was used.
The fun thing about ETH is that I view it like: Ethereum is AWS, if you had to use Amazon stock to use AWS.
Packy McCormick, Not Boring
At the core of this is Ethereum’s consensus mechanism. Blockchains don’t have a central gatekeeper, like a bank, to verify transactions. To keep running, Ethereum uses a mechanism called proof-of-work (PoW), also used by Bitcoin, that achieves the same thing as your bank account balance going down and someone else’s going up when you send them money. Instead of a centralized bank, there’s a distributed network of miners (machines that run code and solve complex math problems), which agrees that transactions occurred and balances are updated. Miners verify transactions, secure the network and earn rewards for doing so.
There are a bunch of challenges with how this works (and several advantages depending on which side of the PoW debate you are on). It’s slow, expensive and requires lots of energy. Ethereum currently does somewhere ~15 transactions per second, while Visa does ~1,700. Moreover, users have to pay a fee for every transaction (gas fee), like a bounty you pay someone to do something; in this case, you pay miners to process your transaction. That can be very high at times of high network usage. When it comes to energy consumption, Ethereum uses as much power as the Netherlands.
From Computer to Supercomputer
Very soon, the network is about to go through the most critical milestone in its history (scheduled for ~ Q3/Q4 2022). And probably the most significant network upgrade this industry has seen. Ethereum plans to transition to proof-of-stake (PoS), a different consensus mechanism, which promises to make the network more energy efficient and potentially more secure. Let’s zoom in here for a second.
PoS does away with miners and replaces them with validators. Instead of machines consuming electricity and processing power to secure the network, it’s now ETH holders with min 32 ETH (currently worth $100,000) that are responsible for processing transactions. They just have to lock up — or stake — their coins on the network and run some computer software. If they validate correctly and timely, they earn rewards. If not, they get penalised and lose money (slashing). Those who hold less than 32 ETH can delegate their coins to a validator and share the rewards/risk. Overall, the more value is staked from more validators, the harder it is for anyone to take control of the network. Now, the fun part begins.
All of the other proof-of-stake chains haven’t been tested at the transaction scale, the market capitalisation and the activity level that Ethereum brings to the table. Being able to test proof-of-stake at that level is very, very interesting.
Andreas Antonopoulos, Mastering Bitcoin
Last month, Ronin, the blockchain behind the popular game Axie Infinity, lost $620 million after a hacker compromised five out of nine of its validators. With proof-of-stake representing a total market capitalization of $370 billion (roughly 18% of the total industry, which is expected to double after Ethereum’s transition), the role of validators as the machines that secure the web3 economy rises dramatically.
Keeping Machines In Check
The world runs on machines. If one day 50% of the world’s transactions run on a blockchain, it will be thousands of blockchains and thousands of validators that process them. Soon, more than half of the industry (in terms of market cap) will run on PoS, whereas two years ago it was ~5%. Every new blockchain is using PoS and others are migrating. In this future, it becomes extremely important for validators to be kept in check. This is where we come in. Reputation for validators. Reputation for machines.
That’s how our conversation with Elias Simos kicked off. Until recently Elias worked at Coinbase, one of the largest cryptocurrency exchange platforms, as a Protocol Specialist, and at the same time is also a contributor to several web3 projects. In September 2021, he teamed up with Aris Koliopoulos, previously Head of Engineering at Sprout ai, and the team started building a reputation system for proof-of-stake validators, focusing first on Ethereum. A rating system to help ensure that the network runs as intended. Rated was born! Elias told me that:
I’ve been noodling on the seeds of this idea since October 2020. As these machines play a game of truthtelling, they provide security to the network and earn rewards. What performance means or how much risk underlies them are, as of today, poorly understood and contextualized concepts. Potential risks from validators not operating properly could be system wide failures, parts of the network going offline, transactions not going through, stake being slashed, etc. Now imagine a world where this information is well understood and contextualized, and is readily available to be used as inputs not only to human workflows, but also to machine workflows (for insurance, derivatives, etc)!
Within just a couple of months after its first release, the data that Rated produces has attracted the community’s attention (including some of the most prominent investors in crypto) and is already being experimented on by leading staking pools, insurers and so on. Elias added:
We plan to operate as a good steward of the networks we get involved with and build alongside the communities we engage. I see a future where Rated could evolve into its own protocol; a generally accepted set of quality score standards for validators, oracle and relayer nodes and their operators across all major networks.
Yes, the bull case for Rated is the bull case for an economy powered by proof-of-stake blockchains. But at the same time, it’s more than that. It’s to achieve legitimacy in the community and propel a race to the top for the machines that secure the web3 economy. Enter reputation for machines. Enter Rated.
Looking for your next opportunity? Check out job postings from Greek startups in Greece, abroad, and remotely.
Pretty sure this is the largest acquisition of a Greek founded startup so far this year. Blockchain-based payments provider Wyre, was acquired by online checkout company Bolt for $1.5b!
Transifex was acquired by US fund PARC Partners. The continuous localization platform, founded in 2009, empowers over 1400 customers across 70 countries to launch digital products in multiple languages.
Wishpond, a provider of marketing-focused online business solutions, acquired Viral Loops, the all-in-one referral marketing platform.
Applied neuroscience company Neurons acquired VisualEyes and its parent company Loceye to enable its platform to use AI to accurately predict human emotions and sentiments.
Digital private equity investment platform Moonfare raised $35m, bringing the company’s total capital raised to date to $220m.
Fixing the broken food chain, Better Origin, raised a $16m Series A round led by Balderton Capital with participation from Metavallon VC, for its plug-and-play mini-farms that convert food waste into animal feed.
Neurosoft Bioelectronics, a spin-off from the Swiss Federal Institute of Technology in Lausanne, announced a $3m round to advance treatment for epilepsy and tinnitus.
Investing platform, Wealthyhood raised a pre-seed round of £525k led by Genesis Ventures for their DIY wealth-building app for long-term investors.
A new fund of funds targeting Greek startups was announced (InnovateNow) with a size of €100m.
Ferto, Spotawheel, WiRE FS, Beautly
Interesting Reads & Podcasts
Sanne Goslinga, Director of Talent at Marathon VC, and Panos Papadopoulos, Partner at Marathon VC, discussing the findings of the Greek Tech Startup Compensation report and answering community questions.
Why managed fractional ownership is a big deal for real estate from Nikos Drandakis, founder & CEO of Flyway, here.
Making agile frameworks work for your team by Manos Kyriakakis, Head of Product & Growth at Simpler, here.
Georgios Konstantopoulos, CTO of Paradigm, on hardware acceleration for Zero Knowledge Proofs, here.
A post by Alex Letsas, MBA candidate at MIT, on onboarding new users and helping them make the jump from web2 to web3.
New newsletter launched by Joseph Alvertis, SVP Product at Orfium. A series of topics and stories around product teams, with emphasis on B2B startups, and teams under the Greek reality.
All you need to know about private equity growth capital with Nikitas Koutoupes, Managing Director at Insight Partners, and Fidel Manolopoulos, Principal at Hermes GPE, here.
A post by Michael Petychakis, CTO of Orfium, on M&A as an option for businesses trying to scale up.
Dimitris Togias, CTO of instacar, discussing use cases of blockchain technology and more, here.
Why user-generated content in emails is important by Maria Avgerinou, Senior CRM Marketing Manager at Blueground, here.
“Introduction to ML Ops” by Thessaloniki .NET Meetup on Apr 15
“Athens UX meetup no38 | Do it the Amazon way” by Athens UX Community on Apr 27
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