Empire Newsletter: What the Roman Empire and crypto have in common

Plus, VC dollars are pivoting away from modular tech


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When in Rome

It took the Romans about 500 years to build the aqueducts. 

Thankfully, crypto isn’t taking quite as long to build out its own plumbing systems. 

Before the aqueducts, citizens mostly relied on local water sources: rivers, springs and streams. Water was also available through groundwater wells and ancient cisterns which harvested the rain.

This meant the overall supply was spread across the land, fragmented, which stifled Rome’s growth. Demand outstripped supply, and aside from basic hygiene, water was needed to expand Roman industry, including mining, farming and milling. 

So, over five centuries (the mid-to-latter half of the empire’s lifespan), Rome constructed 11 aqueduct systems, including pipes, tunnels, bridges and canals. The aqueducts brought in freshwater from sources as far as 57 miles away from the city, supplying over 1.5 million cubic yards of water per day (750 liters per person, per day). 

Crypto is busy with aqueducts right now. The Romans often bored wells inside their own homes. Blockchains have effectively done the same thing — attracted gluts of crypto capital to power their networks, but it’s effectively stuck within their respective ecosystems.

Monolithic chains like Ethereum mainnet, Binance Smart Chain and Solana have largely sucked up the majority of crypto capital staked, both directly to the chains themselves through validators and via their DeFi ecosystems. 

Liquid staking protocols like Lido, Rocket Pool and Jito have helped tap some of that locked capital, tokenizing staking receipts so they can be traded, lent out, or otherwise put to work in liquidity pools. 

Those have enabled crypto stakers to keep their digital assets productive even after they’ve contributed to the economic security of Ethereum, Solana and the like. About $54 billion in crypto is tied up in those liquid staking protocols right now, more than half of the total value locked in all of DeFi, according to DeFiLlama.

Restaking protocols like EigenLayer, Karak and debutante Symbiotic are working on ways to channel that productivity into securing other platforms, rather than for trading and liquidity farming.

A large ETH rally led to a major influx into EigenLayer

The idea is to pipe that liquidity to smaller offerings that also need economic backing to secure their functions. 

So far, $20 billion has been locked up in those crypto-aqueducts, most of it with EigenLayer, which now has about a dozen actively-validated services. 

Karak has crossed over the $1 billion mark as it builds out its own ecosystem, although it also accepts other types of collateral than staked ether, including wrapped bitcoin and stablecoins.

Where Romans couldn’t get enough water, crypto users can’t get enough yield. Both dynamics have led to an explosion in infrastructure. 

It certainly worked for the Romans — until it didn’t. Better blame that on governance.

P.S. Katherine and I need your help. No, we’re not soliciting you for donations. Phew. We just want to get to know you better. Fill out this survey and help us produce journalism tailored to you and your interests.

— David Canellis

Data Center

  • Over 27% of the ETH supply is now staked, up from 24% in January.
  • 1/3 of staked ETH is with liquid staking apps like Lido. Another 9% is staked through restaking protocols, mostly EigenLayer.
  • $175 million in WBTC, FIL and NEAR is currently in smaller restaking platforms Pell, Parasail and Octopus, per DeFiLlama.
  • BTC is working on reclaiming $67,000 after falling 6% over the past week.
  • NOT, UNI and TON are leading the bounce, with the former up 21% in the past day but still down 4% over the past week.

Follow the (modular) money

I’m always curious — about everything, but let’s focus on what tickles me in crypto — where money’s going and who’s interested in what. 

Last week, we saw a multimillion-dollar raise for a modular blockchain solution, and over the first quarter of this year we’ve seen a bit of money trickle in for other similar projects. 

Naturally, this led me to wonder how venture capital is approaching modularity, a buzzy but still little, sector of crypto.

Framework Ventures co-founder Vance Spencer said the interest in modularity “has declined a bit in comparison to last year.”

“I doubt that the wave of interest will return until we see more adoption,” he added.

Ali Yahya, general partner at a16z Crypto, wrote in January that “monolithic architectures, meanwhile, have the advantage of allowing deep integration and optimization across what would otherwise be modular boundaries, leading to greater performance… at least at first.”

But he praised modular tech stacks for allowing “permissionless innovation” which then allows those interacting with it to specialize, and promotes organic competition.

While I’ve heard about the interest in SocialFi and the need to focus on building infrastructure, modularity largely didn’t come up in conversations I had around capital flows in this year’s first quarter.

Spencer thinks there’s been enough raised in one part of the modularity tech stack, which would drive down interest in similar projects.

“If anything, I think there’s a non-zero chance that VC interest [in modularity] either stays flat or slightly decreases, at least in the short term,” Spencer said.

This doesn’t mean there isn’t interest, just that capital is unlikely to continue to flow into certain parts of the tech stack because some players — think Celestia and EigenLayer (and maybe even Avail, after its raises) — are becoming more established. 

If you’re familiar with those projects then you know that they specialize in data availability, the first layer of the modularity tech stack, as Spencer put it, and they’ve secured millions in funding. In February, EigenLayer raised $100 million from Andreessen Horowitz. 

Then you have the millions raised by rivals Celestia and Avail. Maybe Spencer had a point when he told me he struggled to see the case for more major funding in new data availability projects without some kind of differentiation…

That leaves two other parts of the overall tech stack: settlement and execution layers.

“I’d argue that we might see more experimentation within these layers, but I think the tweaks will be smaller, like different programming languages (see Movement Labs). I think a few of these types of projects will continue to get funded, but I think we’re less likely to see something emerge at the same size as a project on the DA layer,” Spencer said.

To David’s point above, there are only so many “crypto aqueducts” that need to be built at the same time, especially if the offerings aren’t that different. But with the ability to spark competition and allow more innovation — as Yahya pointed out — modularity remains really interesting even if the VC funding is taking a breather. 

— Katherine Ross

The Works

  • Binance CEO Richard Teng said this year is a “landmark year” for crypto, Bloomberg reported.
  • Riot Platforms boosted its stake in Bitfarms to 14% despite the latter adopting a poison pill strategy to fend off the former.
  • Bernstein initiated coverage of MicroStrategy with an outperform rating on Friday.
  • Ripple’s pushing for a lower fine in the SEC’s case, using the $4.5 billion Terraform sum to make its point.
  • Trezor unveiled its newest hardware wallet, Safe 5, Friday in a post on X.

The Morning Riff

More proof of an elevated crypto spring arrived yesterday with news that Paradigm has raised a big new pot of venture funding.

Sure, it didn’t cross the $1 billion mark, but $850 million is no small potatoes, either. Coupled with the fact that these funds will be directed to “crypto projects at the earliest stages,” it’s safe to say these funds will go far.

Paradigm’s round would seem to support the narrative that crypto venture capital is back after an extended chill. 

Sure, investment levels — actual dollars deployed to startups — are still well below 2022’s days of wild abandon, but maybe that’s a good thing. Maybe a more modest funding landscape is a net positive compared to the, uh, reckless insanity over in the “celebrity” memecoin gambling inferno. 

Of course, the wheels could always fly off if the crypto VC brakes are released entirely in the months ahead. I hope that’s not the case. 

— Michael McSweeney

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