Keepers Reboot — Observations & Forward Looking Trends

Keepers — the term to generally define the utility-layer actors on P2P networks who contribute key resources and behaviors in order to achieve a cryptoeconomic-Nash-equilibrium — are a fundamental building block and source of great potential for any crypto-network. See my previous post on Keepers for an overview. Jake Brukhman calls the term “Generalized Mining”, Chris Burniske refers to Keepers as “Productive Capital”. In Bitcoin and Ethereum Keepers are referred to as “miners”, that confirm transactions and maintain network security. But Keepers can offer a much broader array of services and resources to the users of a P2P crypto-network.

Trends in Keepers

In the last year we’ve seen an explosion of interested parties looking to offer next-generation Keeper services. There is significant excitement in the space among investors and entrepreneurs for “Staking as a Service” (Jake refers to this as StaaS). Literally hundreds of startups are offering some form of Keeper service, often on multiple networks in an attempt to leverage economies of scale and lessons learned from experience. This wave of interest has led me to jam with many of these players as of late. The following are some ideas that have flowed from these conversations.

1- Differentiation will matter

Differentiated and complex Keepers services that require higher forms of intelligence should be much more attractive than commodity-Keepers services in the medium-to-long term, but timing matters a lot. Staking is a less complex service with low barriers to entry. It implies a trivial amount of computation and some reasonable security measures — but largely depends on token ownership and thus should tend towards near-perfect competition whereby economic profit is eliminated, even if accounting profit survives.

2- Multi-Layer Keeper Networks

Novel arrangements of Keepers with greater complexity are being developed. I note that some of the most compelling next-generation networks have their Keeper-layer perform new services and contribute certain resources in concert. This is very exciting. One great example is Polkadot, a network that I am particularly interested in. In Polkadot, Validators who confirm transactions and perform message routing are subject to a police-like layer called Fisherman. Usually Fisherman are also Parachain Collators that order and prepare transactions on a parachain for inclusion on the main relay-chain. Nominators are an additional party that can provide leverage to Validators (essentially StaaS is built in at the protocol layer). These different actors must find a multi-layer Nash-equilibrium between each other. While all of this may seem complex, cryptoeconomic design that will self-adjust via the governance mechanism provides the necessary flexibility to deliver security and drive network effects, which will make for a high-performance network.

3- Mitigation of Centralization, Self-Adjusting Block Rewards

There are some inherent problems with PoS. It is natural to conclude that PoS-staking will result in a consolidation of power through inflation, as anyone doing anything other than staking on a network is getting inflated away. Further, since PoS is much more complicated than PoW, I would suppose that there are many attack vectors that have been insufficiently explored, which gives rise to super-linear returns for creative stakers willing to attack their own network for personal gain. Finally, if too many participants on a network are using their time, energy, and tokens strictly for staking, then we could see reduced innovation in other areas. Thus, we run the risk that simple PoS leads to centralization and mitigation strategies should be considered. This is why I often find myself recommending to teams to consider the following:

4 — More research and modeling of Cryptoeconomic design

I am tremendously excited by the innovation being trialed in next generation crypto-networks. I’m grateful for the jam sessions with different teams in the space, reasoning through the game theory and cryptoeconomic design of new protocols. Through some of these recent jam sessions I’ve noticed that many teams are interested in more advanced modelling and testing of their cryptoeconomic models and I am actively looking for talented people to help build tools and data-driven models to test many of the theories herein. If you want to jam on some ideas, share new data, tools, best practices or findings from your own research please don’t hesitate to reach out. Further, if you want to dive deeply into cryptoeconomics research, I set up a Cryptoeconomics Lab at the Richard Ivey School of Business, which is currently seeking post-doc candidates for research positions. Apply here.

Founder of Dialectic (dialectic.ch) a family-office focused on alternative assets & Vine Ventures (vine.vc) a differentiated fund focused on psychedelics