Maven 11 Capital Research Head How does Maven 11 view the future of modularization and blockchain infrastructure?

Insights from Maven 11 Capital Research Head The Future of Modularization and Blockchain Infrastructure

Author: Marco Manoppo, Chain Catalyst columnist for Chain Venturer; translation: LianGuai0xxz

Mads Mathiesen (also known as rain&coffee) is the research lead at Maven 11 Ventures. Maven 11 is a leading cryptocurrency investment firm based in Amsterdam, Netherlands and one of the first entrants in the European cryptocurrency investment space.

He joined the Maven 11 team in early 2022 and is currently responsible for Maven 11’s technology infrastructure research and public-facing papers.

Rain has lived in Asia for five years and is fluent in both Chinese and Korean. He has conducted extensive research on various blockchain technologies, with a particular focus on Rollups, zero-knowledge proofs, and MEV.

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His academic journey includes studying Chinese at the University of Copenhagen in 2016, followed by an exchange program at Tsinghua University in 2018, exploring topics such as sociology, microeconomics, and international development.

He also writes a newsletter called “The Depths” that delves into emerging trends and developments in cryptocurrency and blockchain technology.

Key Points of the Article:

The one-size-fits-all nature of blockchain as a whole brings limitations, while modular systems offer flexibility, allowing specialization and customization for specific applications.

Large-scale applications with specific adjustment and optimization needs from mature user groups will see opportunities and reasons for adopting modular solutions.

dApps should take a phased approach, starting with a monolithic chain and gradually transitioning to more modular solutions as they grow and their needs change.

Transitioning to application-specific chains can bring about fairer value distribution and better coordination of the interests of each participant.

While technological innovation is important, the impact of marketing and community engagement in the cryptocurrency space is often underestimated for project success.

What was the defining moment that drew you into the world of cryptocurrency?

In 2013, Rain stumbled upon Bitcoin while casually browsing Reddit during high school. The cypherpunk nature and active community on Bitcoin forums caught his attention, but it wasn’t until 2014-2015 that he fully immersed himself in the cryptocurrency space.

Over time, Rain found himself engulfed in cryptocurrencies to the point where he almost gave up on formal education and embarked on a self-learning journey. Unlike many of his contemporaries at prestigious universities with backgrounds in economics or computer science, Rain carved out a unique path and developed unique cryptocurrency perspectives.

Rain highly values inclusivity in the crypto industry, prioritizing public output of work over formal qualifications. His active online participation and writing have become his key credentials.

A decisive moment: Around 2013-2014, Rain used Bitcoin for real transactions on the Just Eat food delivery app in Denmark. This practical use of cryptocurrency during high school was one of the defining moments that drew him into the world of crypto.

What is Maven 11 Capital?

Founded in 2015, Maven 11 is one of the most experienced funds in the cryptocurrency field. Initially, the fund operated like a hedge fund, investing in Bitcoin, Ethereum, early L1 solutions, and Bitcoin mining companies (as there were few venture capital-supported industries at that time). The fund primarily targeted wealthy individuals in the Netherlands and across Europe.

Overall, Maven 11 covers various lines of business, including a credit team specializing in underwriting mortgage loans, a liquidity investment department, and a quant team involved in market-making in the DeFi portfolio.

Fast forward to 2019, the venture capital sector in the cryptocurrency field started booming, bringing in numerous investment opportunities for emerging technologies like Solana, Avax, and Celestia. Maven 11 seized this opportunity and outlined a clear investment theme, emphasizing their belief in modular architecture. Their early investment in Celestia in 2019 reflected this idea and laid the foundation for their subsequent focus.

Which investment areas is Maven 11 particularly interested in?

Rain serves as the research director for the venture capital team, contributing through in-depth technical infrastructure research and public-facing papers.

In terms of venture capital, Maven 11 focuses on infrastructure investments, but the company also maintains activities in DeFi and RWA within the broader Maven 11 team, especially under the credit and liquidity teams.

Maven 11 has a strong modular theme, ranging from rollup and dedicated layers for data availability (e.g., Celestia) to settlement solutions (e.g., Astria) and rollup SDKs (e.g., Sovereign Labs). Maven 11 Venture also explores unique applications of modularity, such as off-chain computing solutions.

Maven 11 places great importance on genuine modularity, ensuring that the term is not just a buzzword but a significant aspect of project development. The team seeks to leverage modular architecture to enhance the functionality of projects, not just those that claim to have modular components.

The aim is to find innovative uses of modularity when necessary, resulting in customizable and professional solutions. It is precisely this thoughtful and effective application of modularity that makes projects truly remarkable and worthy of investment for Maven 11.

What is your opinion on the debate between modularity and the overall blockchain?

Rain emphasized the advantages of adopting a modular blockchain approach and compared it to the overall structure of Ethereum and Solana.

He stressed that while Ethereum and Solana have unique qualities, their one-size-fits-all nature brings limitations.

On the other hand, modular systems provide flexibility, allowing specialization and customization for specific applications, such as decentralized exchanges.

He illustrated these benefits by mentioning Rollup (a layer 2 scaling solution), highlighting its ability to improve execution and fair transaction ordering. He pointed out that modular architecture allows for innovation, such as verifiable sorting rules, ensuring favorable transaction conditions within blocks.

Our discussion also touched on the evolving blockchain architecture, particularly the concepts of PBS and shared ordering in Ethereum.

He compared a well-functioning blockchain ecosystem to a well-managed company, emphasizing the importance of optimizing authorization and verification processes.

Rain further emphasized the scalability and decentralized potential of modular architecture, specifically mentioning data availability sampling in the Celestia blockchain. He stressed that this approach supports adding more nodes to the system while maintaining decentralization during scalability.

What are your thoughts on the fragmentation of liquidity among different blockchains?

Rain highlighted several challenges related to the fragmentation of state, liquidity, and fees in modular blockchains, where functionalities are distributed across different layers or chains.

He emphasized the benefits of overall blockchains like Ethereum and Solana, which provide atomic composability and global state settlement, offering a clear and consistent view of the current state for all participants.

However, he also acknowledged the potential of modular solutions (such as storage proofs, off-chain computation, and shared ordering) to address these challenges, albeit requiring trade-offs in operational complexity and reliance on infrastructure providers.

Rain also suggested taking a phased approach to applications, starting with an overall chain and gradually transitioning to more modular solutions as the application and its needs evolve.

He cautioned that most current chains, especially those within the Cosmos ecosystem, may not be large enough or mature enough to operate as standalone application chains, highlighting the significant costs and security challenges associated with this model.

He concluded by suggesting that as user bases and application ecosystems mature, adopting modular solutions will have more opportunities and reasons, especially for large applications with specific tuning and optimization requirements.

Should new blockchain projects initially build on existing chains that align with their goals and gradually transition to their own application chains as they scale and develop?

When starting a new blockchain project, it is important to consider what it needs to succeed.

For example, game applications with a large number of on-chain operations may find Ethereum too expensive and not scalable enough. On the other hand, DeFi applications that require specific liquidity pools or financial instruments perform well on Ethereum because everything they need is there.

Running applications on Ethereum can help some applications, especially those in the DeFi field, to run quickly and securely, which is crucial. However, as projects develop, migrating to their own application chains may make more sense. This move can give projects more control and the ability to capture more value, especially in terms of fees.

Let’s take Uniswap as an example. It has a large amount of liquidity and trading volume, but Ethereum validators capture a significant portion of MEV value. This situation may not be the best for Uniswap or its liquidity providers.

Moving towards application chains can bring about a fairer distribution of value and better coordinate the interests of each participant.

In summary, starting with a mature chain like Ethereum gives immediate access to resources, but as projects develop, migrating to application chains can provide more control and benefits.

Quick Q&A

Which book should ambitious investment professionals read?

To dive deep into blockchain and gain a technical understanding, Tim Roughgarden from a16z provides valuable insights through his extensive lectures and writings (https://timroughgarden.org/).

What was your biggest investment mistake?

(Regarding his personal investments) Being biased towards technical innovation rather than the power of memes or the importance of marketing and community involvement in cryptocurrencies.

What is the most underrated use case for cryptocurrencies?

Provenance is a very powerful aspect of blockchain, but people often forget that zero-knowledge proofs (ZKPs) not only have the ability to change what we do in the crypto space but can even change things within traditional companies and industries.

What is your most unconventional view on cryptocurrencies compared to the general public?

The merging of modular and holistic infrastructure can be incredibly powerful.

What is the biggest risk facing the cryptocurrency industry?

Attacks from regulatory agencies and governments.

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