Better Decisions with Butter
Conditional Funding Markets will change how we allocate capital
We’re excited to invest in Butter as they begin their first Conditional Funding Market with real money, for the Uniswap Foundation.
These markets are similar to the prediction markets you’ll find on Polymarket, but they are used to determine the most impactful way to allocate funds from a treasury. In general, conditional funding markets help organisations make better decisions about how to allocate resources, and they do so without recourse to any committee. They form the backbone of a new kind of CFO.
This matters to African founders and builders, who routinely go unnoticed by committees and grants councils generally made up of people from the Global North who can neither see the significant work Africans have done to get where they are, nor understand the markets in which they operate and the scope of opportunities that exist.
Rather than rule by committee, CFMs get traders to put their money where their mouth is, buying or selling tokens that represent different outcomes if (or if not) a given project is funded. In this manner, Butter is able to generate more valuable signals about which projects will actually have a meaningful impact than any other current method.
Crypto needs Africa, and part of fulfilling that need is creating effective, credibly neutral mechanisms for allocating funds, in which cultural legibility is not a dominant factor. Butter’s Conditional Funding Markets are a significant step in this direction.
We find it meaningful to help ensure that the playing fields are programmed in a more level and open manner for the future of all things financial.
Scaling Trust
We’ve written before about the second pillar of LAVA: trust infrastructure. This term specifically diverges from the common narrative of “trustlessness” associated with cryptocurrency. By reducing the frictions that exist when people are forced to trust critical parties, or removing the barriers that exist when systems are designed around centralised providers, we arrive at a world with more trust, not less. We think more interpersonal trust, and less institutionalised force, is a Good ThingTM.
We think it is a worthy goal to design and implement systems that help us trust each other directly, and that help us trust more people than we could without technological augmentation. We think that trust infrastructure should help us discover the “uncommon ground” shared by large, diverse groups of people, and then coordinate around that–without force–in a profitable manner. Casting this in terms of economic incentives is interesting because it protects against the meaningless relativism and fragmentation that might result otherwise.
In short: we think trust is the ultimate scaling technology. Always has been.
And we think that Butter creates the markets that enable organisations with lots of divergent opinions and different stakeholders to make better decisions, where “better” means “can be trusted by all participants”. This is different from the kind of motor vehicle infrastructure we used to illustrate our ‘trust infrastructure’ visions, but it is critical nonetheless.
Layer 0: The People
Most of our investments as a pre-seed fund are premised on talent.
Vaughn McKenzie-Landell is a seasoned founder, who strikes us as having both the grounded experience and grand vision required to create something truly valuable. He was responsible for the first rollout of a blockchain network in the IP industry (around music), was listed on Forbes 30u30, and scaled a fintech company as CPO from £33m in payments in 2019 to £240m in 2022.
Alex Hajjar went to Télécom Paris, one of the top French Grandes Écoles in engineering and computer science, worked on open source at beta.gouv.fr (which serves as the Digital Services Incubator for the French government) and has produced meaningful research on Mechanism Governance. He has proven his ability to implement some of their less trivial ideas in the form of innovative smart contracts that build on (and extend) industry best practices. He also previously built and scaled a legal tech company to 150 people and €20m in revenue.
They are in the process of building an incredible team and network of relationships around themselves, and have folks like Robin Hanson, Bo Waggoner, and Yiling Cheng actively advising them. Robin was the originator of Futarchy as a concept, and there are very few people in the world, if any, who are better placed than the three listed above to help Butter implement better, more trustworthy decision making at scale.