Summary: What Are Crypto VCs Looking For Right Now?

In this CryptoCoinShow interview, host Ashton Addison is joined by Dusan Kovacic, CIO at RBF (Rockaway Blockchain Fund) to discuss the fund’s investment thesis, how they get involved with blockchain infrastructure, and their thoughts on Web3 gaming.

Read our notes below to learn more.

RBF Background

VC fund started in 2017.
Currently manage ~$500m in assets.
Often invest $500k-$1m in verticals that align with the fund’s investment thesis.

RBF Investment Thesis

Core focus is crypto infrastructure, which needs to improve to onboard the next billion users.
Also invest in gaming, which will be the next place for adoption.
Fund’s primary business is making VC investments in these areas.
They also have a ~$50m yield fund which bootstraps liquidity for DeFi protocols they want to support.
Fund generates market-neutral strategies.
They take advantage of CeFi opportunities when available; this is the source of most of the fund’s yield today.
This includes lending to market makers in a decentralized way.
Fund also has engineering/technical background, they approach market in data-driven way.
They run nodes, contribute to decentralization of projects they are interested in.
The RBF Labs team builds products on top of platforms they’ve invested in.
VC fund provides capital, yield fund helps bootstrap liquidity, engineering team can help founders and build products.

RBF Infrastructure Investing

RBF believes in multi-chain world, aren’t fans of EVM or Solidity as they don’t allow networks to scale.
They look at execution models and programming languages of blockchains to find solutions that can address development needs of security and time-to-market.
Also looking at multichain infrastructure such as data, RPC platforms, oracles such as Switchboard , bridging protocols such as Axelar.

RBF on ZK Proofs

Team is looking at ZK (zero knowledge) cryptography, which is evolving fast.
ZK tech allows you to design any computation you want, execute it, and prove the result.
ZK allows for validation of proofs without every node having to run the computation, which increases scaling.

RBF on Multichain and Bridging

Process on how to launch an L1 is already figured out; you partner with validating companies who start running the network, start chain in testnet and then mainnet.
Easier to launch a blockchain than upgrade a blockchain.
Cosmos appchains can be a good model to scale bridging if users keep in mind that different appchains have distinct features.
Bridging tech in crypto isn’t there yet, but issues will decrease over time.

Decentralization vs Centralization

Dusan is practical; not everything needs to be decentralized as it prevenets upgrades, innovation.
There needs to be a balance between decentralization and centralization.
Level of centralization depends on use case; IRL people don’t carry their entire savings in their wallets.
Important for nodes to be distributed in different jurisdictions; RBF has developed observatory.zone, a way to monitor this information for Cosmos zones.

Ashton

SEC recently claimed that ETH transactions fall under U.S. jurisdiction since 40% of nodes are in the U.S.

Risks of ETH

Isn’t much risk in switching to PoS.
There is risk in using ETH when 40% of blocks are produced in U.S.
Risk comes if regulators pressure validators to censor transactions.
RBF is researching ETH PoS more.
Thoughts on Web3 Gaming
Dusan looks for proven Web2 game founders.
Web3 gaming could be similar to how DeFi disrupted TradFi.
Web3 gaming allows early-stage startups to disrupt big studios.
Graphics no longer drives innovation in gaming, the most-played games are focused on players creating experiences, like Roblox.
Likely that successful games will not have great graphics, as it hinders development process.
Roblox takes 70% fee from creators and can ban users, change terms of conditions at any time.
Blockchain democratizes access to digital assets.
Web3 gaming will not use the models Web2 games used, such as selling skins.
Business model could be based on secondary market royalties, although these can be bypassed.
A potential business model could be the Harberger tax, where item owners pay rent on assets continuously.
These models are still work-in-progress, will be figured out over time.
Games need to be entertaining and have strong economics.
Founders probably won’t be successful the first time, need to be able to pivot to the right economic model.
‘Metaverse’ is 5-10 years out; will start as many small economies that combine into one large economy with a AAA UX on top.