Digital assets: Andreessen Horowitz and their Uniswap tokens
Recent increases in global liquidity have remained in the driving seat for the crypto markets, where funding liquidity has carried a crucial role for the so-called high-growth industry. Venture capital firms have vastly deployed capital in the space, and Andreessen Horowitz has been one of the key players. Notwithstanding, the firm was recently feuding over Uniswap’s governance, further exposing the grip private investments have in the industry.
Although the asset class has potentially left the worst behind, advances in governance are of the essence. Fundamentals and developer activity have defied recession fears, and unless further macroeconomic-driven headwinds emerge, cryptos are in pole position to recover lost grounds.
Private investments were one of the biggest catalysts behind crypto’s latest bull run, deploying capital across companies in all stages of their lifecycles. With its technology-oriented thesis, Andreessen Horowitz (a16z) has amassed over USD35bn in assets by primarily targeting seed and early-stage companies in Web 3.0.
The firm has invested in one of the largest decentralised exchanges, Uniswap (UNI), via the 2020 series A and the 2022 series B, aggregating investments totalling USD176m. Interestingly, UNI is a governance token, therefore the holders of the token are the constituents of a Decentralized Autonomous Organization (DAO), for which they have a voting right depending on the amount of tokens they hold. That said, a16z holds a mammoth amount of votes.
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The firm diversifies its Web 3.0 portfolio by investing in other categories within the space. In the meantime, UNI, which is Ethereum based, has been flirting with the possibility of expanding its scope by deploying the protocol into Binance Smart Chain, Binance’s very own blockchain. For this to happen, there should be a majority approval within the DAO, and afterwards the DAO must vote on a bridging protocol to move assets between blockchains with smart contracts.
The protocol entitled to bridge assets will have a very attractive business case, and because of security and efficiency, the original proposal was to make use of the ‘Wormhole’ bridge. The venture capital, however, was not invested in this bridge, but rather in another one called Layer Zero, so they exercised their sizeable clout and voted against the proposal, whilst steering other voters. DAOs are not bulletproof, and crucial stakeholders can define an outcome.
Ultimately, a16z’s casted votes were not deterministic, as the approved proposal was going in the opposite direction of a16z’s interests. We believe cryptos have left the worst behind and there is much room to grow. Still, governance should be emphasised across all market segments. On another note, unless recession fears increase and global liquidity constraints rise, the asset class should regain some of the lost ground.
