Our TAM is Bigger Than Yours

the holy trinity

Well hello there! If you already have the pleasure of knowing us from our slightly more highbrow research (or algotrapped twitter) then welcome back, albeit with a slight change of pace. For all new frens, let us introduce ourselves…

At ID Theory, we’re all about investing in the biggest and boldest applications of decentralised technology, targeting the very bloodiest of edges.

Fair warning: if you don’t like infinite markets, this is your last chance to look away.

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FAQs:

But why? 

Well… we’ve been doing this for a while now, but the logic remains the same… [inhale] as the digital world evolves, how it’s governed becomes increasingly vital, and the protection of fundamental rights alongside increased innovation (uniquely offered by crypto) should scale in tandem.

You sure? 

Yeah, the old system needs a V2, and our elders have often shown us that the long-term moat for general aggregation isn’t wide, especially when access to alternative coordination technology becomes permissionless. Thus, the name of the game is one of replacing sovereigns with self-sovereignty whereby decentralised trust (or trustlessness) becomes the core commodity for global coordination [exhale]…

[Yawn] Fair enough. So wen impactful apps then?

[De]AI-Sci-Fi 

Decentralised AI (DeAI): 

autonomous agents will rule the world.

Crypto and AI are the biggest software developments in recent history, fortunately they are uniquely synergistic. Crypto will benefit from the explosion of AI proliferation and activity, and AI will rely on crypto as an enabler (access to permissionless rails and services) and a counterbalance (verification, governance, and realignment). Autonomous agents (discussed below) have the ultimate PMF.

Decentralised Science (DeSci):

because every disease is curable.

Before Agents: Pharma has become totally stagnated. There are exponentially fewer breakthroughs made and healthcare given (especially in the long tail) due to misaligned incentives and antiquated regulations. DeSci flips this notion on its head, utilising crypto to coordinate and fund R&D at a stakeholder level.

After Agents: Autonomous R&D agents supercharging drug discovery, driving innovation and spewing out IP, coordinating and incentivised on globally permissionless networks.

Decentralised Finance (DeFi): 

trust code not banks.

Before Agents: Removing the reliance on centralised accounting whilst exponentially increasing the programmability, velocity, and accessibility of money. Numerous iterations and a handful of standout successes have helped pave the way for a sustainable and scalable DeFi… it’s better and broader (GameFi, SocialFi, EverythingFi) than most give it credit for.

After Agents: Well, when a huge slice of global markets move on-chain, agents will supercharge all of the boring but essential bits of DeFi that we can’t do as efficiently (AMMs, arbitrage, risk management, audit and bug fixes, cross-chain transfer, governance…). For those dreamers out there, the window is still open to build an infinite money machine.

[Perks up] Damn son, but who are these agents you keep talking about?

Onboarding the Next Trillion Users: 

In its comparatively short lifespan, the crypto industry has plenty of things to be proud of. But amongst a sea of moonshots, one wet dream has been lacking… mass adoption. 

People often talk about onboarding the next billion users, and whilst many indicators will tell you that we're on the right track when we hit the magic billy - is that mass[ive] enough? 

At ID Theory, we're more interested in the next trillion users³. 

Autonomous agents are the new buzzword that's here to stay. These are systems that can act without continual human intervention (autonomous), designed to perceive, analyse and act (assert agency) within their environment to achieve predefined objectives (for now). 

More simply, these agents can automate the entire workflow of anything digital; even more so with multi-agent systems. Sounds pretty good right? 

But as programs without traditional sovereignty, they may encounter various roadblocks when accessing goods and services (e.g., you need to be human to transact). This is where we arrive at the beginning of a generational match made in heaven…  

1. Demand Side: Autonomous agents can only scale with the level of autonomy afforded to them. 

2. Supply Side: True cryptonetworks (permissionless, decentralised, and composable) have been selling autonomy-conducive blockspace for many years. 

At this intersection of supply and demand we have the ultimate and infinitely replicable coincidence of wants with little to no slippage. 

We've been discussing this trend in general and in vertical-specific areas such as DeFi and Autonomous Worlds (stay tuned for the upcoming DeSci piece) for a while, but it's always fun to do a recap.

Infinite TAMs:

growing the pie

As is the constant theme in markets, when there are new kids on the block leveraging novel forms of generative finance and disrupting innovation, it’s almost a fool's errand using traditional valuation models (designed to fit an old market structure) to size them up because they don't just grow the pie, they eat it all and bake a new one. 

In this pie-eating contest, the new kids have unlimited demand drivers (agents), highly scalable networks (crypto), and reduced traditional constraints for market growth (human labour, resources and attention); taken together, you get the machine economy (= old ‘TAM’ broken and a newer exponentially larger one is created). 

Until now, many of the crypto-specific predictions have (in parts) been overly optimistic or rigged with bots and hopium. But with this added supercharged layer, you can try to use all the valuations you want (trust us, we do many), and most will come up laughably short… why? 

Because there’s no TAM for infinity.

NB: if you're an analyst and want to look like you've done your DD, tell people you've been microdosing with Sarnoff, Metcalfe and Reed.

This is not entirely new; after some hearty speculation, the weeding of pretenders and the ascendance of new crownless kings, the market will continue to try and find a fair price. But unlike the first iteration of already significant internet-enabled value creation (accrued to corporations, not communities), it is hard to predict the value creation ceiling of agents and property rights in the new internet.  

But if everyone's TAMs go up then surely no one’s does? 

Well, yes and no. Most [useful] cryptonetworks will benefit from a proliferation of agentic activity, and so the rising tide will lift [mostly] all boats. But they won't rise equally. 

Agents will make tradeoffs based on the tradeoffs made by various networks and applications; some will be left counting DAUs on their left hand, while others will ride off into the exponential age on their Lambos.  

What trade-offs though? 

Well, that's a question that justifies a performance fee.

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This milkshake will bring all the funds to the yard, and we’re like, our TAM’s bigger than yours.

Disclaimers: 

1. Nothing said here is financial advice. Please use forward P/E ratios at all times to sell the bottom. 

2. When not investing in the next generation of finance, work, and healthcare, we spend a little time investing in the future of fun, autonomous worlds (AKA the cruise ship business of crypto). Why? Because when we retire ourselves on internet coins, and the future of work is automated away into agentic UBI, there’s gotta be somewhere for the OG agents to chillax alongside their eternal companions. 

3. Props to @Nickbtts for some excellent title wizardry (his TAM is bigger than mine).