Blockwall Capital II Thesis

Blockchain is the next major evolution of the internet

The fundamental axiom on which Blockwall's existence is based on the realization that Blockchaintechnology facilitates the internet's evolution. The web we use today, generally referred to as Web2.0, is the improved version of Web 1.0. In the earlier days, the internet was unidirectional, where theinteraction of a user was read-only. The websites of Web 1.0 were static as only the content curatorscould edit and write content. As a result, there were only chat applications with limited interactionfeatures compared to the current social media platforms, and hardly any multi-sided platformbusiness models existed. When the internet progressed to Web 2.0, users could write and read data,and new services such as video streaming, online gaming, among others, were introduced. Thedynamic websites in Web 2.0 created an ecosystem through which many human interactions - eithersocial or economic - took place online. The introduction of web applications and cloud servicesopened a new avenue of products, services, and user experiences.

Nonetheless, Web 2.0 has many disadvantages. For instance, multi-sided platform business models'nature is that significant power and control lies with an intermediary (e.g., Facebook, Amazon, Uber,etc.). The inefficiency of Web 2.0 is more problematic because the intermediaries depend on baselayer technologies that are not proprietary, and for which they do not incur any costs. Web 2.0 allowsthe intermediaries to charge significant economic rent for the marginal investments they have madeon top of the universally accessible factors of production (in the case of web applications, this is theInternet Protocol Suite). Moreover, users often go through sub-optimal experiences due to theadvertising revenue model primarily used in Web 2.0 and the platforms' aggregation of personal dataand users having no or, at best, limited control of their data. The evolution of the internet from Web2.0 to Web 3.0 will see the shortcomings of the current internet being amended for the user's benefit.

The vision for Web 3.0 is a decentralized, democratic web that empowers its users via peer-to-peer solutions. Often referred to as the semantic web, this new internet will be a web of data that could be shared and reused across application, enterprise, and community boundaries. Decentralization will be a significant characteristic of Web 3.0 as applications need access to uninterrupted data with no gatekeepers. Substantial amounts of data today are created by individual users who do not control their data nor are rewarded for sharing their data. In order to realize the vision of Web 3.0, there needs to be a system that can store data in a decentralized and distributed manner; an accounting system to keep track of the exchange of value; digital currencies and an integrated payment system; mechanisms that facilitate the trustless interaction of different software agents; a decentralized, distributed, and immutable ledger to save the state of all the interactions; standardized, digital identity frameworks and platforms to confirm the legitimacy of users, and much more. Blockchain technology, as it happens, offers a solution for each of these requirements and, at the same time, democratizes the previously siloed economic rent streams.

The missing piece for a transparent and digital economy

Blockwall Capital I is focused exclusively on this new layer of infrastructure for a major upgrade to aWeb 3.0 world. Therefore, investments are based around a decentralized technological approach tovalue streams that exist today but have evolved and are 100% dependent on intermediaries.

Investments in decentralized infrastructure require an entirely new approach to investing intechnology as Blockchain is based on a breakthrough in technological development where valuecapture cannot be found in a particular company but rather in the network itself. Within this scope, theemergence of tokens plays a crucial role as an enabler and value capture tool.

If you look at how Google has emerged from an internet protocol called HTTP or CISCO from what isknown as TCP/IP, we can only imagine what the different Blockchains will bring about. The realcomplexity lies within the various use cases of what Blockchains are set out to deliver. Therefore, it isimperative to combine both the aspects of technological feasibility with commercial viability as thecombination will ultimately become the engine that provides trust in our digital world.

Blockchain affects business models with key value propositions

Based on the trust engine called Blockchain, many business models that exist today can be re-writtenin a way that provides a significantly better result than its status quo. Moreover, there is a yetunknown array of new business models that could not exist before the emergence of Blockchaintechnology. As a catalyst for the evolution from Web 2.0 to Web 3.0, Blockchains enable enhanceddata privacy, security, and self-sovereignty leading to a democratization of data. In other words,existing data silos and monopolies can be broken up fairly and reasonably, shifting value to users.One example is a simple data marketplace where each user can monetize his data without revealinghis identity but, more importantly, with a settlement setup that is not engineered by a profitingintermediary and cannot be tampered with. Another large field around companies using Blockchainas a necessary tool lies around the Blockchainization of values, and in particular, assets. Fromcreating and trading financial derivatives by reducing stock settlement infrastructure lead times, to aworld of truly peer-to-peer asset movement in the future. The world is already digital, but its truepotential has not yet been realized as fungibility is hindered by middlemen, whose goal is tomaximize profits for their shareholders. A large market is being enabled around vast improvements ofexisting processes by simply providing a tool for trustless automation.

In essence, we have identified several key value propositions that should be found in ventures thatuse Blockchain technologies to build superior business models. As the USP of these ventures isderived from using Blockchain, it is crucial to understand how and if Blockchain is enabling an edgecombined with classic market entry and expansion strategies. Based on what we have seen in themarket so far, we expect a major power struggle on the horizon, leading to exciting developments.