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, Author: Author: Yin Yaoping, published with authorization.
Framework Ventures (hereinafter referred to as Framework), a cryptocurrency venture capital institution that was just established in 2019, has not been in the market for a long time, but it is enough to deserve everyone's serious attention. In the current hot wave of DeFi (Decentralized Finance, decentralized finance) investment, this nascent institution proud of "native venture capital in the encryption field" may be the biggest profiteer and the most important "behind the scenes" push hands".
Don't believe me, let me tell you some truths:
According to the report of the blockchain media Decrypt, Framework is the largest holder of the synthetic asset issuance platform Synthetix’s native token SNX, and may also be the largest holder of the decentralized oracle provider Chainlink’s native token LINK (if not the Chainlink team If your own currency holdings are counted) —— You must know that Synthetix and ChainLink belong to the most popular "Shuangsha" in the current wave of DeFi boom, with an astonishing increase;
Behind those DeFi projects that make people jealous, Framework is always there. They recently invested in the decentralized trading platform Futureswap, led the investment in the decentralized lending project Teller, and even purchased decentralized lending on the cusp Token of the project Aave.
The two founders of Framework have repeatedly stated that blockchain technology and decentralized networks represent the next major paradigm of computing technology. They see that the blockchain industry is fundamentally different from the traditional Internet industry in the way it creates and captures value. Encrypted assets are "unique existences that are different from all previous asset types, so the existing evaluation models are not suitable for encrypted assets, and the encrypted world needs a new investment philosophy and investment service framework."
Because of this, they appear as a new type of leader in the blockchain venture capital circle. They are breaking the traditional investment service model and trying to build a new investment service framework belonging to the encryption field. In this framework, they redefine the role of crypto venture capital: not a bystander, but a builder, an immersive participant of the entire open blockchain network.
So what kind of innovative investment ideas and investment service framework does this cutting-edge venture capital institution bring to the encryption world, what kind of investment portfolio it has established, and how it "immersively" serves these blockchain startups What about?
Who is Framework: Both an investment company and a development company
According to Framework's own introduction, this is a venture capital fund established in July 2019. The team is composed of technical experts, researchers and investors, and is committed to investing in open crypto networks and helping to build its products and Serve. The team's top areas of focus include decentralized finance (DeFi), Web 3.0, token-based games, and decentralized media.
There are two founders of Framework: Michael Anderson and Vance Spencer, both of whom have rich experience in investment banking consulting, strategic management and product development.
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Vance Spencer (left) and Michael Anderson (right), source: Forbes
Michael Anderson graduated from Yale University with a major in computer science. He initially worked as an investment bank analyst at Barclays Capital, and then worked as a product manager for Dropbox and Snapchat, two Silicon Valley star technology companies. He has nearly 5 years of Internet product manager experience.
Vance Spencer graduated from the University of Southern California with a major in economics and econometrics. He initially worked at Monitor Deloitte (Deloitte) as a business management consultant for two years, and then went to Netflix (Netflix) streaming media platform to be in charge of corporate strategic affairs. He helped The company expands its business in Japan.
Before founding Framework, Spencer and Anderson co-founded a game company called Hashletes in 2018. The gaming company, which trades blockchain-based NFL player cards, was backed by venture capital firm Khosla Ventures and eventually acquired by JDS Sports, a sports company.
Of course, the exploration journey of the two founders in the encrypted world has already begun. According to Spencer, the two have been investing in the encryption field since 2013, so they have rich experience and their own experience in evaluation, valuation, and execution of transactions. Coin fundraising.
Anderson and Spencer started Framework about a year ago with an initial startup fund of about $20 million.
Investigating their original intentions, Anderson and Spencer believe that just as the Internet democratizes content and information, blockchain will democratize value and trust. As blockchain technology continues to mature, they firmly believe that it will be used in finance, markets, insurance, Sectors such as gaming, media and entertainment are seeing an explosion of innovative products and new business models, and it is hoped that investment opportunities in these areas can be captured.
The Global Transition to Decentralized Technology Requires a New Framework.
They believe that blockchain-based encrypted digital assets are unique and different from all previous capital asset classes. Therefore, traditional valuation models are not suitable for encrypted assets, and networks and companies in this emerging industry need new support and The growth model, which is exactly what the Framework was created for, is where the Framework comes in.
On the official website of Framework, the first thing that catches the eye is a striking slogan:
At the beginning of the establishment of the fund, the two founders, Anderson and Spencer, wrote an article to introduce Framework as follows:
"The core of Framework is a technology company that supports open blockchain networks by building products and services. In order to achieve this goal, Framework combines its own investment strategy with technical experts and research teams, and combines multiple forces Find, support and build the best blockchain networks and companies."
This means that, in terms of investment and operation, Framework will be a complex of investment companies and development companies—an existence that is different from existing investment companies and technology companies in the market.
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Preliminary Study on Investment Strategy: "Builder" instead of "Bystander"
Determined to enter the encryption field, Anderson and Spencer naturally did a lot of thinking and analysis on this field. In their view, although there are many similarities between the blockchain industry and the Internet 1.0/2.0 industry, there are also many fundamental differences. The two analyzed these differences in detail on the official website of Framework, and Lianwen organized them into a table as follows:
They argue that it is these nuances that determine how value is created in this nascent industry, who captures it, and what is the best strategy for building or investing in it.
In an interview with Forbes in March of this year, Anderson summed up what he believes to be the "best investment strategy" in the crypto space:
In the process of investing in blockchain startups for more than a year, Framework will not only purchase a certain proportion of network tokens, but also personally participate in the initial network verification, token pledge, liquidity construction, and community governance of each blockchain network and other ecological construction activities, and cooperate with the community to develop related tools and services.
Different from the traditional investment model, Framework integrates multiple roles in this process. It not only purchases tokens to inject capital as an investor, but also becomes the first to become the most active maintainer of the blockchain network it invests in. and users, experience the services of the network immersively, and at the same time assist in building ecological applications and tools as developers.
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Framework's Portfolio: Favoring DeFi
According to the disclosed public information, as of press time, Framework has invested in about 10 encryption projects, most of which are DeFi projects whose market popularity has continued to rise recently.
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Analyzing the current investment portfolio of Framework, we will find that, unlike the traditional Internet investment model, most of the investment in these encrypted projects is completed in the form of purchasing the original tokens of the project. In addition, most of the projects that Framework chooses are projects in the DeFi field.
According to the two founders of Framework, they participated in Chainlink’s token fundraising in 2017 as angel investors of Chainlink and became one of the largest holders of LINK tokens. In the later investment portfolio, Framework continued to increase new DeFi projects, and successively invested in the synthetic asset issuance platform Synthetix, the decentralized exchange Futureswap, and the decentralized lending protocols Teller and Aave.
In addition, Framework also has a small amount of cross-chain ecology. Two popular cross-chain project ecology have been involved, such as Kava, a cross-chain DeFi mortgage lending platform investing in the Cosmos ecology, and the development team of Edgeware, a Polkadot ecological PoS blockchain project. Commonwealth Labs also received funding from Framework.
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Framework Ventures partial investment summary
In many interviews and public conversations, the two founders, Anderson and Spencer, made no secret of their determination and preference for the prospects of DeFi.
In an interview with The Defiant in June this year, Anderson said that after studying the blockchain ecosystem, they believe that Web3.0 may take 5-10 years, or even 15 years to achieve decentralized Twitter and decentralized There are products like Facebook, but projects like Uniswap and Compound have proven to the market that DeFi can provide value now. He saw that in the vertical field of DeFi, innovators have launched challenges based on blockchain technology to traditional financial services.
Of course, they are also well aware of the challenges and difficulties that exist in the actual development of DeFi.
However, he also emphasized that in order to build a mature DeFi industry, “multiple participants are required, including underwriters, credit infrastructure parties, and hedge funds that provide lending capabilities, all of which will take time to realize.” Until now, identities, credit scores, and all the credit-related data needed to get a loan from a bank have not been tied to the blockchain.
But they are still firmly optimistic about this field. Anderson believes that "blockchain is about value transfer, and value transfer is carried out in a decentralized network. DeFi really has the opportunity to become the fastest growing field in the blockchain industry in 2020."
According to Anderson, Framework will focus on investing in derivatives and lending projects in the future, and stablecoins (Stablecoins) are also one of the focuses, because they believe that stablecoin projects are very suitable to become the infrastructure for building consumer applications.
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How to interact with invested projects?
Perhaps the pure investment theory cannot intuitively understand the new investment logic that Framework brings to the encryption reality. You might as well use the investment service cases of Framework in the past year to understand how it "deeply interacts" with the blockchain projects it invests in.
After analyzing multiple cases, Lianwen concluded that in the process of supporting the blockchain projects in its investment portfolio, the main in-depth participation or the most concerned are the following modules:
Buy tokens for investment
Primarily this is the way to inject capital into the blockchain network and facilitate the distribution of this token. Framework will not only participate in the first-level investment in the early stage of the project and before the token is released, but also dare to invest in the token project after the token has been traded in the secondary market—they did this to Synthetix last year and KAVA and Aave this year This is the case for all investments.
Assist in building a token economic model
The token economic model is emphasized on many occasions by Anderson and Spencer, the two founders. They believe that the biggest shortcoming in the current DeFi field is that many projects lack a sound token economic model and governance model. They believe that if decentralized finance (DeFi) wants to replace centralized finance, it must establish a robust token economic model and a governance model that can replace centralized exchanges such as BitMEX and Binance or major lending platforms.
Promote the improvement of network liquidity
Liquidity supply is crucial to many DeFi projects, especially the early development of the project. Framework will invest certain tokens (for mortgage or loan) to help build liquidity on each DeFi protocol network.
Community Proposals and Network Governance
Case study
There are often many imperfections in the new blockchain network. Framework will initiate community proposals and improvement suggestions for the problems found. At the same time, as a token holder, it will participate in network governance through token pledge and voting.
Collaborate with the community to build ecological products and new features
Finally, Framework will use its own technical strength to cooperate with the community of the blockchain project it invests in to build upper-level applications or new products and new functions to promote the growth of the ecology.
Let's take a look at several Framework investment service cases.
Case 1: Synthetix, a synthetic asset platform
Synthetix is an Ethereum-based synthetic asset issuance platform. Anyone can join the network and provide collateral to support the issuance of synthetic assets such as gold, bitcoin, and U.S. dollars on Ethereum.
Framework is considered one of the earlier investment institutions to support Synthetix. On October 29, 2019, Synthetix announced on its official blog that it had purchased 5 million Synth (SNX) tokens from the Synthetix Foundation to support the development of Synthetix, becoming one of the few SNX "big currency holders". Calculated by the price of one piece, it is worth 3.8 million US dollars. And most of these tokens have set a custody period of up to 24 months, indicating that Framework intends to invest in Synthetix in the long term.
Synthetix emphasized that Framework has been contributing to the Synthetix system, increasing the supply of the entire system by staking SNX, and participating in the community governance process. In addition, the Framework team also helped Synthetix set the long-term vision of the project, solve short-term project problems, and promote Synthetix to establish connections with some influential blockchain individuals and teams.
Anderson, the co-founder of Framework, said that he invested in Synthetix because Synthetix's "infinite liquidity" model has a huge advantage over its competitors.
Anderson said, "Synthetix assets are an original financial tool that can achieve inclusiveness and innovation outside the traditional financial market, and may represent the next stop of DeFi. Protocol liquidity can be regarded as Web3. 0 is a barometer of network success, and Synthetix's model outperforms other synthetic asset platforms. Superior liquidity, broad asset authorization, and good governance will enable Synthetix to succeed."
In November 2019, the Framework official website released the investment analysis report of Synthetix. In the report, Framework stated that it hopes to "make Synthetix a decentralized BitMEX."
Framework believes that native investment in the encryption field cannot be just a bystander. Most venture capital firms are bound by existing limited partnership agreements (LP agreements), huge assets under management (AUM), and traditional equity investment thinking.
However, the investment style that Framework adheres to is that venture capital investment in tokens or equity can be carried out, and the focus is on active participation to promote the development of the blockchain network. For the Synthetix project, they made the following investment commitments:
Invest funds to help build liquidity for SNX trading pairs;
Actively pledge SNX to help build a mortgage pool;
Writing Synthetix Improvement Proposals (SIPS) to drive resolution of issues identified in the network;
Build related products based on the Synthetix network;
Most importantly, will help the core team of Synthetix.
On July 23 this year, Synthetix announced the latest list of investment institutions on its official blog, and announced that Framework Ventures, ParaFi Capital, Three Arrows, IOSG, DTC Capital, Hashed and other venture capital companies or institutional partners will become institutional partners of the Synthetix network and liquidity providers. Together, the institutions have invested more than $4 million so far, according to Synthetix.
Additionally, according to Synthetix, Framework has grown its share of the Synthetix network over the past few months, while Framework helped drive the release of SNX.tools and helped guide several other community-based initiatives such as margin trading and more.
Case 2: Aave, a decentralized lending protocol
Aave Protocol is a decentralized lending protocol based on Ethereum. On July 15 this year, Aave announced on its official blog that it raised $3 million through the sale of tokens. The venture capital firm Framework and the cryptocurrency hedge fund Three Arrows Capital participated in the investment. The two institutions invested $0.1 per token. Price $3 million worth of Aave's native token Lend was purchased (30 million tokens purchased), which are currently worth over $9 million at current prices.
Additionally, Aave announced that both Framework and Three Arrows plan to work directly with the Aave protocol to lead and participate in its journey toward decentralization. Stani Kulechov, founder and CEO of Aave, said the participation of the two VCs will go a long way toward expanding the institutional use of the Aave protocol.
According to the Aave team, Framework and Three Arrows will be deeply involved in the ecological construction of the four modules of the Aave protocol:
New Token Economics
The first is to build a new token economic model. Both investment institutions have given a lot of feedback and suggestions on Aave’s new token economic model. After migrating from LEND to AAVE, token pledges, liquidity supply rewards and new smart contracts, etc. Mechanisms are all part of the new token economic model that needs to be considered.
Lianwen Note: Aave has previously confirmed to Lianwen that it will launch a new token AAVE, which will replace the currently issued token LEND through token swaps. The economic model designed for the new token AAVE will include liquidity rewards and token pledge rewards Mechanisms.
Aave Protocol Governance
Both investment institutions will actively participate in the governance of the Aave protocol, mainly including submitting and voting on Aave Improvement Proposals (AIPs, Aave Improvement Proposals) around the protocol, risks, and specific market policies.
Market Access & Depth
Both investment institutions plan to change the existing over-the-counter lending (OTC borrow / lend) activities, thereby helping to promote the growth of assets on the Aave platform, while also helping to increase liquidity and market depth, and facilitate the entry of large institutional players.
In addition, they also plan to introduce a new service of credit delegation (Credit Delegation), allowing Aave depositors to entrust their credit lines so that users can borrow without collateral. This is an innovative DeFi component that will expand Aave's influence on the traditional financial market Impact.
Insurance Fund
The two investment institutions will also participate in the pledge of Aave's insurance fund, which is also part of the new token economic model and can provide a backup support mechanism in case of any problems with the Aave protocol.
Case 3: Kava cross-chain DeFi mortgage lending platform
Kava is a Cosmos-based cross-chain DeFi mortgage lending platform.
On April 22 this year, Framework announced that it had invested $750,000 in Kava by purchasing 1% to 5% of its native tokens. Prior to this, Framework had provided many suggestions on improving Kava's monetary policy. In addition, Framework co-founder Anderson said that he planned to provide continuous technical support for the Kava team.
On March 17 this year, Framework posted a post on its official blog explaining the specifics of its efforts to improve Kava's monetary policy.
The article pointed out that Framework and Kava will jointly improve Kava's monetary policy to drive user growth. In order to overcome the initial liquidity problem of the Kava stablecoin USDX, the two parties plan to launch an incentive mechanism to create USDX that generates more than US$10 million through collateral assets of more than US$30 million. Specific methods include:
Modify the inflation rate curve of KAVA tokens to generate additional KAVA for growth incentives;
In order to avoid a large increase in the initial market supply, additional KAVA generated for incentives will be locked for 52 weeks before circulation.
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According to the plan, the reward inflation rate of Kava in the first year is about 15%, and the Staking inflation rate is 4.75%, which will gradually decrease after that, and will drop to 2.5% and 3% in the fourth year.
Afterwards, on March 17, Framework launched a vote on the Kava monetary policy improvement proposal in the Kava community, suggesting that a set of incentive mechanisms be established through token inflation to promote the initial flow and growth of the Kava stablecoin USDX on the network. The proposal was passed in the Kava community on April 8, and the weight of the agreed votes accounted for 48 million KAVA (worth 25 million US dollars). Kava officials stated that they will implement this proposal in future network upgrades.
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In addition, Anderson, the founder of Framework, revealed that they helped Futureswap build a token economic system, and plan to provide million-level liquidity to the Futureswap network after the project is launched.
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The Commonwealth Labs team also received corresponding support, and Framework participated in running the first batch of validator nodes on the Edgeware network, and participated in the election for the council (similar to DAO seats). And Framework also helped the Commonwealth Labs team clarify some strategic decisions, such as determining which applications to pursue next. Framework also intends to build some products and new features based on the Edgeware blockchain.
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