Welcome to zero knowledge. A weekly newsletter breaking down where the top VCs are investing in web3/crypto.
Expect portfolio breakdowns (like this) every Tuesday. And random crypto topics, insights, and updates everywhere in between.
Here we go 💪
This week, we break down Pantera Capital, a wildly oversubscribed fund started in 2013 that's backed more than 90 blockchain companies and 100 early-stage token deals.
Here's what to expect 👇
- Recent funding news from Pantera Capital.
- Pantera Capital's portfolio broken down by layer, blockchain, company type, and category.
- 🕵️♂️ The most interesting portfolio company.
- The most interesting innovation in their portfolio.
- 💼 Entire Pantera Capital portfolio (in an Airtable sheet).
- 💰 Tokens available from Pantera Capital portfolio companies.
Recent funding news from Pantera Capital
1. Rarify, raises $10M at $100m Valuation (equity 💵)
- Rarify is simplifying access to NFT technology through a suite of APIs that let enterprises and developers integrate marketplaces on their own platforms.
- This allows them to create, manage, and verify digital assets + mint and port NFTs between various blockchains, all without needing to stitch together disparate systems or spend months integrating blockchain technology.
2. Metaverse Game Studios (equity 💵)
- Pantera, Animoca Brands Co-Lead $10M Investment in Metaverse Game Studios along with Solana Ventures and Everyrealm.
- Their flagship game, Angelic, is a turn-based strategy combat game where the player is a “unique neo-human” who meets and collaborates with companions along the way.
3. Pantera's Blockchain Fund has $1B+ In Commitments
Where they plan to invest...
“We’ll really be diving into consumer [use cases] a lot more, the intersection of traditional finance and DeFi and also things around the continued global institutionalization of the space,”
Distribution of capital in the fund...
"About 40% of the Blockchain Fund’s assets will be allocated toward venture equity. Roughly 30% will go toward early-stage tokens, and another 30% will be allocated to liquid tokens."
Below is a thematic view of Pantera Capital's investments by:
- Category (ex: infrastructure vs. finance companies)
- Company type (ex: payments vs. NFTs and digital ownership companies)
- Layer (ex: L1 vs. L2)
- Blockchain (ex: Eth vs. Solana)
#1 Investments by category
#2 Investments by company type
#3 Investments by layer
#4 Investments by blockchain
Most interesting portfolio company 📈
- Elevator ⚡️: Liquity is an interest-free, decentralized borrowing protocol.
- In plain English 🙏: Borrow at 0% interest, with a collateral ratio of just 110%.
- Key insight 🕵️♂️: Liquity can offer 0% interest loans because of a unique fee structure. In reality, you do borrow at 0% but you pay one-time fees every time you borrow or deposit. The fee percentage ranges from .05% to 5% and fluctuates algorithmically according to the volume of redemptions. Too many redemptions over a short period of time and the protocol will stabilize the price by adding pressure in the opposite direction (e.g. by making it very cheap to borrow and very expensive to sell).
- Key solution ✅: So how can anyone offer 0% interest when borrowing? The combination of one-time fees and an algorithm that utilizes those fees to balance supply and demand.
- The catch 🎣: I like Liquity conceptually. It's decentralized, it's clever, and with specific use cases like holding ultra-long positions, it's a good option. The issue I have is that their two main value props come with asterisks. #1) 'Interest-free liquidity'. Yes, it's technically interest-free, but not fee-free. #2) 'Most capital-efficient loan'. It's true they allow low collateralization ratios. But the issue then becomes losing too much money too often from auto-liquidations (the second your ratio dips below 110% your position is closed). This is why we see the average collateral ratio sitting at 225% and not 110% (source dune analytics).
The most interesting innovation in the portfolio
Subspace Network, the robinhood of layer 1 blockchains, is creating a more fair and secure alternative to Solana, Eth 2.0, and Cardano.
And they just bagged $33m to keep building 🚀.
- Elevator ⚡️: a layer 1 blockchain with a novel twist on an old consensus mechanism, PoC (proof of capacity). Subspace replaces energy-intensive mining and capital-intensive staking with a new form of disk-based farming.
- Key Insight ️️🕵️♂️: There are many issues with existing blockchains. Bitcoin uses PoW (proof of work) = secure but bad for the environment and doesn't scale. Eth 2.0 and Solana use PoS (proof of stake) = scales, increases TPS and throughput but lacks security and decentralization. Subspace uses PoC (proof of capacity) = an alternative that's more energy-efficient and secure. It comes with its challenges, but Subspace claims to have the solutions to these challenges.
- The 3 Challenges and Solutions of PoC:
- 👎 Challenge #1 - Finding a secure consensus mechanism that is environmentally friendly, permissionless, and fair.
- ✅ Solution #1 - Allow anyone to farm by pledging their available disk space, not just people that can afford the hardware (for energy-intensive mining) or have the capital (for staking).
- 👎 Challenge #2 - PoC networks are prone to centralization, due to an incentive misalignment design called the farmer's dilemma (where farmers allocate their disk space to maximize their ROI rather than to store the history and latest state of the blockchain).
- ✅ Solution #2 - Subspace uses a proof-of-archival-storage (PoAS) consensus method that incentivizes users to store the history of the blockchain, rather than force them to choose between increasing personal ROI or maintaining decentralization.
- 👎 Challenge #3 - To scale transaction throughput without sacrificing the security or decentralization of the network.
- ✅ Solution #3 - By distributing storage across the entire ecosystem, it allows the network to scale linearly and avoid long transactions times caused by blockchain bloat (slow processing times as more and more information is added to the blockchain).
- So why would you use Subspace 📜: Subspace auto-scales with demand, allows for massively scaleable on-chain data storage and compute, doesn't make any tradeoffs with security or decentralization, and employs a much fairer incentive system.
Individual portfolio company data
Tokens available from Pantera Capital backed companies
Let us know what you think here!