A Thought Leader Guest Post from Tomasz Tunguz:

My Mental Model for the World of Crypto

How does crypto work at the highest level? 

This is the mental model I’ve been using.

There are six key categories of players.

Asset acquirers - these include brokerages, custodial and non-custodial wallets, banks, asset managers, hedge funds, market makers, and lenders. They aim to acquire assets to plunge into the crypto ecosystem. Each acquirer offers a unique value proposition, tempting investors to park cash with them.

These companies might target retail or institutional investors, hawk loans, offer trading of varied assortments of tokens, compete on lower trading fees, share better market information, or reward loyalty with their own token. Many in this group attract investors/users with high interest rates for deposits, which are funded by lending assets to other market participants. Then they plan to cross-sell other financial products, much like a modern bank or brokerage.

Protocols - Protocols are invented, created, designed, and managed by organizations and companies. Protocols are computer programs that decide how digital assets should behave. These assets might be coins, tokens, NFTs and be used in different ways. Tokens might be used as stores of equity value, as a replacement for government money, to pay for a particular service, or simply as as collectible.

In the language of the land, the protocol is often called a...

Read the rest of this article at tomtunguz.com...

Thanks for this Guest Post to Tomasz Tunguz, Venture Capitalist at Redpoint.