# CSX: Week 3 Notes

**Published by:** [Jayme Hoffman](https://newsletter.jaymehoffman.com/)
**Published on:** 2024-04-21
**Categories:** csx
**URL:** https://newsletter.jaymehoffman.com/csx-week-3-notes

## Content

Here are my notes from Week 3 of a16z Crypto's CSX. This week, which focused on tokens, included talks on protocol design, security, compliance, and more.Talk: Eddy Lazzarin on TokencraftToken = balance in a crypto program Four types of tokensMemecoinsStablecoinArcade tokenNetwork tokenMemecoinsExplicitly no purposeIf purpose, then more interesting than a memecoinGambling and purely speculativeCould be decentralized, could be a scamScam = deep asymetry of info in the memecoinMemecoins have been around for a whileLook at CoinMarketCap in 2013#40: Memecoin with $5,709 market capStablecoinsPrixe fixed to a target assetBacked by collateralRegulation likelyArcade tokensPrice dampenedLimited transferability and useContinuous issuance and redemptionWouldnt be reasonable to buy them and expect price appreciationNot a security because price dampened and issuanceExample: SLP from AxieNetwork tokensIntegral to decentralized protocolPotentially high volatilityComplete economic modelThe most interesting: You don't design a token; you design a protocolFaucets and SinksFundamental power = issuanceAlways consider the sinkProtocol as a MarketplaceSupply = parties creating goodNetwork capacity, blockspaceDemand = people pay to consume thatPeople pay for computeBad reasons for tokensIncentivesPay for this is terrible; printing money and throwing it somewhereThe infinite ad budget you didn't pay for is not protocol designgoal = pmfmake a product people wantVotingwho wants to vote?voting is a last resortPaymentsTalking about network tokensEvidencePeople do not want to pay in protocol tokensPeople don't like paying with a volatile assetPayment is not a direct sinkGood reasons for tokensAlign the networkSupport network effectsPay for network effects - Incentivize things that lead to network effectsSolve cord start - token issuance can helpSecuring a protocolPay for securityETH proof of stake pays for securityPeople should be paid to take riskWhat is your protocol for selling?Is this good and high quality = verifiedPay to ensure qualityIncentives changing over timeWhat about the thing you want to change over time?Manual programsYou want to be able to walk away from the system and it still worksInitially, use manual token allocations aggressively.You're trying to find PMFPath to decentralization“Decentralization is the regulator strategy”End users don't care about decentralizationThey don't care about monetary policyThey care about banks don't steal money, hold value, high-quality productsHigh-quality productsBuilt on the most solid foundationif network token, needs to be decentralizedWhere to start?Centralized but functionalPointsBlackbird doing a great job$Fly = offchain (good idea)Nobody is going around buying flyPeople are excited about itWhat about testnet?“If transfer entire balance, was it just mainnet all along?”people can still be burntmarkets can still happenHow does it look?Did people lose moneyAvoid riskTweet bad, and the price goes to 0?A simple testif the team disappears, what happens to the token price?if goes to 0, you’re not decentralizedMemecoin decentralizationBottom left - decentralized but no functionalityWhy not go right?Legal riskThe minute you benefit, you are moving way back up the decentralized pathYou can become a security againIf totally decentralized, how are you going to find PMF?Easier when centralized because you’re in control and you can feel pull of the marketWhen to consider token design?The earlier, the betterDesign a protocol first, then see where a token's role is necessary—it may not work without one.Design: Centralized app over here, Decentralized protocol over hereImagine if Coinbase made BitcoinSeparately, they have a business with a client of that protocolCompliments together - “I have a protocol I like but I can think of a company i want to be a client or vice versaDoes value go to equity or token?When we invest, we prefer both to preserve alignmentHow to distribute tokens?Automatic programsManual programsWish people thought more about themAirdropWe think of it as something to give to usersUniswap exampleAnyone that swappedThose were primarily developersDiscount to regular peopleThink more about long-term stakeholders who are going to build on itThose are the people who are most valuableRetrosGrantsPrizesPartnershipsTalk: Matt Gleason on Security Best PracticesNote: this was one of the most dense and actionable talks. I recommend watching it when it hits YouTube.Security in cryptoWho are the parties that want your cryptoWhat are they doing to try and get itHow can you address itTypes of threatsIndependent actorsCriminal organizationsLazarus - mid-level nation statesSand Eagle - The scary oneCriminal orgs and Lazarus are the ones to care aboutMotivationsHacktivism = defacing websites, leaking tools and emaikFinancial crimes = steal cryptoEspionage = ip theft, steal secretsTargets = anyone that has cryptoYouYour orgYour customersAttacks against accountsMostlySim swapPassword guessingTTP - peoplephishing and briberyTTPs - dependenciesfind someone the target depends on, hack themIn order of likelihoodsomeone gets phishedsomeone gets sim swappedsomeone password guessedsmart contract exploitdisgruntled employeehighly motivatedHow to avoid?For youavoid using sms for authuse uniqu passwordsharden account recoveryMFA = most importantFor your bizMFASSO to force auth across servicesKeep track of dependencies and due diligenceFor your customerHow do you make sure the password isn't guessedForced OTPNotify user on new loginsAudits in cryptoAlmost everyone who gets hacked thinks they cant beYou need your system reviewedHow?Find someone goodReserve some of their timeGet the report and fix the issuesCrowdsource auditsDont have as many examples of code getting hackedIf the code isn't up to snuff, you will get 100s of commentsAfter you do it, you need to get another auditTalk: Hilmar Pétursson (EVE Online)HilmarStudent of historyExpert on economic primitivesTalked to oil industry - “omg that is well game-designed”Eve OnlinePlayers work on projects that take 100s of people … for a year not monthsMission: Make virtual worlds more meaningful than real lifeHow is crypto like virtual worldsTokens equally not realJobs aren't realThe economy is equally not realWhat is meaningful?Kant on rules for happinessSomething to doThe gameSomeone to loveFriendships in the gameReal-life friends have never been testedSomething to hope forThe next expansionReal life has failed people7B people, only 200m people like what they doCan we solve that?Give people agencyGive people meaningful social networksWhy decentralizationToday: user agreementNothing belongs to youYou must adhere to the rules of CCPEve is like BitcoinDerives its value from social consensusLindy trust propertiesLayersis there a way to replicate it in a game simulation?is there a way to design it so that it's better than real life?On collective sufferingEve = Where nobody dies, but great loss can be experiencedSomething magical about the collective sufferingUnderestimated part of biologyPeople seek this outadventures togethermarathonsCrypto is similarWinters = collective sufferingSuch bonds → What winter did you join?Building in cryptoVery similar to when we said were going to make a database gamePeople were like, “Weird.” .. “elves in Iceland are going to use a database to make a game”ComparisonSlow: databases 20 years ago were slowTransferability: happening already, claim they don't want it, but people are already buying/sellingFinancial: People have more money in Even than in a bank accountAverage Eve savings = $1300 vs America savings = $500Should be able to pull on that in case of an emergency“Why would I disallow that?”What is the moral principle of making that wrong?ChallengesSecretsYou need to be able to have secrets → ZKAs soon as we announced (ZK) all the people working on this came out because they needed to test their ideasAgencyYou need to limit agency (i.e., moving from one solar system to another) → Every action has a costBlockspace“There is a fight for blockspace anywhere and anything”What hits in block matters a lot if a spaceship does or doesn't surviveTheres a queue to get into the framethe queue is unpredictable - “When is my message going to get in”never-ending warfaresimilar to cryptoTime dilationSimilar to real-lifeIf a lot going on, time dilatesTime dilation = allows you to strategize moreReal-time, only so much you can doIn some ways, crypto is a big MMO (Solona vs. ETH)If you were starting as an entrepreneur today?Find people who love what you are doingBetter than millions that just like what you’re doing“We like it, and if you like it, come join”Avoid ambivalenceStart there and then diffuse into mainstreammain things started as niches: metalica, appleOn getting inspirationIceland is smallPeople in your social network are weirdYou can’t specialize in anythingthe initial team were artists, i wasn't a game devDeconstruct history and evolutioneconomists = good at analyzing the economyphysics = good at emergent behaviorScaling large groupsGetting 10k people to do anything is very hardsporting events, concerts, protestsConcert = single player replicated 10k times - eddyBurning Man took a long time to scale upMilitary takes decadesDoctrine → Train peopleTakes 100s of years to train militaryEve took a decade to get to 10kOn designI like to think of design as in “de-sign”Take everything awayFigure out what is essentialLinks that came upWhat’s Blackbird and $Fly?Blackbird is a crypto startup that connects restaurants and customers.$FLY is like miles on your favorite airline, but instead of one airline to redeem from, the points are good at all the restaurants in the world.Computer vs. CasinoWhat’s the difference?Computer: build new networksCasino: speculation and money-makingTokens’ true purpose?Tools that enable community-owned networks.Community ownership doesn’t work unless communities have a way to own.All things tokens from a16z On tokens as a new digital primitive By Chris DixonOn designing internet-native economies: a guide to crypto tokens by Patrick RiveraOn token design mental models, capabilities, and emerging design spaces by Eddy Lazzarin [watch time: 32 minutes]On a novel framework for reputation-based systems by Jad Esber and Scott KominersLauncher Labs ProgressSign in with Farcaster - Farcaster / LaunchcasterRight-click on any image to curate to frameboardSee quality dot and image size on image selector in curate from URL and browser extension.See the Chrome extension on the home pageURL support in bios 🔗

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