Multicoin Capital: Why do we invest in Superfluid

Multicoin Capital

21-07-17 10:56

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Original Title: Networked Cash Flows

Originally written by Kyle Samani, Multicoin Capital

Multicoin Capital

Defi is far and away the most effective application of blockchain. We have also spent a lot of time thinking about this direction and have been learning from the excellent DEFI entrepreneurs who are building the future of finance.

But when most people think of blockchain, the first thing that comes to mind is "value transfer." And why is that? Because the concept is easier to understand. In the racetrack, Superfluid is a new protocol we've just invested in that represents the biggest advance in value transfer since Bitcoin emerged.

Multicoin Capital led a $9 million seed round in Superfluid, along with Semantic Ventures, which led a pre-seed round, Also, Defiance Capital, Delphi Digital, Metacartel Ventures, Fabric Ventures, The Lau, Defi Alliance, Divergence Ventures, and MMC Ventures has also invested. Several prominent angel investors, including Balaji Srinivasan, Stani Kulechov, Do Kwon, and Ryan Selkis, have also invested.

Credit Card Fraud

Why credit card fraud is a very serious problem.

The question has been widely discussed online, but there is no real answer to the root cause.

In the crypto world, the root cause of credit card fraud is that the public and private keys are the same thing. If someone has your credit card information (similar to a public key), they can spend whatever they want. This is inconceivable to encrypted native users.

Over the past few decades, payment companies have built countless layers on top of this core system in an attempt to ensure security. The most widely known of these is the PCI standard requirements from people in the payment world, but there are many others.

Apple recently added public key encryption to traditional systems, adding secure space to every iPhone through Apple Pay. It actually reduces fraud so much that banks Pay Apple a fee every time consumers buy something with Apple Pay.

Public key encryption is a method to solve the problem of fraud. In the crypto world, each blockchain can easily use public key encryption for all payment authorizations. However, public-key cryptography on blockchains presents some new problems: key management and gas costs.

The Superfluid mitigates both of these problems more effectively and further creates a new interlocking, composable, and scalable value stream network that is not possible in a traditional financial system.

Programmable cash flow

Programmable cash flow has been talked about since Ethereum's inception. Superfluid pushes the idea of programmable cash flow to the logical extreme.

To better understand Superfluid, let's develop it at three levels:

First, the fundamental layer of a Superfluid is liquid cash flow. The point is easy to understand: "Five dollars per hour flows through." This may sound like a state channel, but it is not. Status channels require bilateral synchronous signatures between the sender and receiver. A Superfluid allows a sender to authorise a transfer with a signature, without the recipient being online. This approach reduces the burden of key management. The recipient of the asset can claim the token it has received at any time by signing it (or not claiming it, using a Superfluid to forward it to someone else).

The second aspect of the Superfluid is programmability. Smart contracts can control the transfer of tokens just like the deposit process. For example, "If I receive at least $10 per hour, transfer $5 to Bob." The logic of cash flow can be of any complexity.

A Superfluid is a network of interlocking value streams of many assets, all of which run simultaneously without any additional gas consumption. For example: "Bob receives $20 an hour from his boss, uses $5 to pay off the loan, transfers $10 into a savings account, pays some subscription fees, and keeps buying ETH with the rest."

The third layer is the "network layer," which is why the Superfluid is so powerful. Superfluid flows can build on other flows -- so Bob can send an asset to Carol at the same time he receives Alice's money.

This solution solves a number of problems simultaneously: increasing capital efficiency, reducing gas costs, and reducing the number of transactions that users need to sign.

application

A protocol like the Superfluid has never existed before, so it's hard to imagine developers using it to build all their creative products. In the four or so months since the beta launch, developers have built incredible solutions. The first wallets, such as the Minerva wallet, were already Superfluid natively integrated.

The DAO pays the infrastructure

· It is a hassle for DAOs to pay salaries and contractors at a weekly or biweekly pace. The Superfluid allows the DAO to authorize a single transaction to be paid out to the contractor indefinitely or until the transfer is completed. By the end of this year, every major DAO organization is expected to have taken advantage of the Superfluid. DAOHAUS enables DAOs to create streams with a code-free interface.

· This extends to DAO-to-DAO interactions. Ultimately, when multiple DAOs come together to provide new services, the Superfluid acts as the glue that connects all of these DAOs together.

DeFi

· Defi derivatives, credit and debt agreements and exotic on-chain financial instruments are imminent. These protocols will have algorithmic periodic asset flows that will be Superfluid encoded.

· With collateral management programmable in real time (as opposed to the current multi-day settlement, which exposes lenders to significant counterparty risk), Superfluid can transform risk management.

· A Superfluid user can convert an average dollar cost into a position with only one on-chain transaction (with minimal gas consumption). Ricochet Such a tool is currently under development.

The Internet of things

Hundreds of billions of IoT devices, most of which will be on Helium's network, are expected to power smart planets over the next 10 years, including self-driving cars, radars, cameras, wearables and other use cases. These devices will use superfluids to facilitate real-time payment flows.

A subscription service

Subscribing in encrypted mode is not yet possible because there is no way to authorize ACH payments (by design, public key encryption does not allow others to charge you for your account. A Superfluid can solve this problem by allowing users to push value to service providers over time without further authorization. Supersaiyan is one such project that has been built on a Superfluid.

Real-time financial

With Superfluid, we can build a whole new streaming economy on top of DEFI, which can move assets programmatically at speeds never seen before. Wolta Finance and StreamSwap are two projects that build tools and interfaces to programmatically transfer assets into and out of the DEFI protocol ina continuous stream.

Increase the speed of capital flow

Looking ahead 10 years, the Superfluid will have a profound impact on value streams, working capital management, IoT machine payments, and even valuation models for large companies. Individuals and businesses can now make weekly, biweekly and monthly payments. Sometimes products and services can also be paid for 30 or even 90 days after delivery.

These cash-flow disruptions reduce capital turnover and increase the cost of working capital throughout the economy. We accept these arrangements because we lack better technology and the inertia of our past lives.

Defi is improving the capital efficiency of assets by enabling cross-agreement remortgaging of assets. The Superfluid goes a step further, improving the capital efficiency of money by simplifying and automating networks of asset flows.

traffic

I first got to know Superfluid at the Ethereum hackathon in September 2020. Although it was a bit ahead of its time, I immediately recognized the power of the conditional liquidity module. Then I got in touch with Francesco on Twitter, got to know Michele, Miao, and the rest of the team, and we were very excited about the opportunity to lead the Superfluid round.

Since then, the Superfluid has been continually updating and iterating. They've built a strong organic community, and the community's fans are very willing to build on the building blocks they're pioneering. At the recent Ethereum hackathon, there were more than 35 teams working on a Superfluid, despite almost no publicity or marketing. As one of The Graph's first investors, we saw a lot of similarities in The Superfluid that weren't properly evaluated and valued early on in The project. We expect some of The Superfluid teams that have sprung up in recent hackathons to become leading applications over The next few years, just as earlier applications based on The Graph continue to dominate Defi (Aave, Uniswap, Compound, etc.).