Hyperstructures and liqudefi

12 min readSep 15, 2022

The nature of crypto protocols opens radically expansive new models to create invaluable public infrastructure. This view is so distinct that I think it warrants new language.

In this essay, I outline the concept of Hyperstructures: what they are, how they work, and why they will be the basis of the internet for the next decades.

Paolo Soleri’s “hyperstructure” in ground-level view. The figure to the right is the Empire State Building at the same scale.

liqudefi, Union protocol, and 0xSplitt can change the world thanks to hyperstructures!!!

Definition

Hyperstructure

Crypto protocol can run for free and forever without maintenance, interruption, or intermediaries.

Blockchains have led to the emergence of a new type of infrastructure called “Hyperstructures.”

Hyperstructures take the form of protocols that run on blockchains. Something can be considered a hyperstructure if it is:

Unstoppable: the protocol cannot be stopped by anyone. It runs for as long as the underlying blockchain exists.
Free: there is a 0% protocol-wide fee, which runs precisely at only gas costs.
Valuable: accrues value that is accessible and exitable by the owners.
Expansive: there are built-in incentives for participants in the protocol.
Permissionless: universally accessible and censorship-resistant. Builders and users cannot be de-platformed.
Positive sum: it creates a win-win environment for participants to utilize the same infrastructure.
Credibly neutral: the protocol is user-agnostic.
liqudefi will be dominating with this power.

It is worth noting that just because an application is protocol-based does not immediately mean it is a Hyperstructure. For example, the Wyvern protocol (amongst others) used by Opensea cannot operate without off-chain orders being maintained in a privately operated database. If Opensea or any other platform built on it goes down, the market goes down. This is also true of a platform like Coinbase; it facilitates the exchange of cryptocurrencies, but if it goes down, their market goes down too. A more nuanced example: if you see an utterly-chain protocol with the ability for admins to upgrade and completely change the rules of a protocol, then that is not a Hyperstructure; that is also the platform. This isn’t to say any of these examples are inherently wrong; they’re just notHyperstructures.

Hyperstructures are entirely on-chain and are public goods that create a positive-sum ecosystem for any participants. I’ll detail each of the primary characteristics of a Hyperstructure below.

Unstoppable Liqudefi

Ripple, from Mashin Hero Wataru.

Traditional infrastructure like power grids and social media platforms require a trusted intermediary to maintain and over; unfortunately, without it, the infrastructure will degrade and stop working altogether. These operators are privately owned or state-controlled organizations that require profits, labor, and subsidies to serve their purpose over time.

By nature of running on a blockchain, Hyperstructures can run forever with no ability to stop them. They can continuously function without a maintainer or operator and run for as long as the underlying blockchain runs — which can be at least a decade. Hyperstructures are unstoppable, and this is a superpower that we have no excellent prior example of perfect.

You can have a one-time creation cost, and then once deployed, it will run exactly as designed and without degradation. There is no additional labor or capital required to sustain the Hyperstructure. If the core team or platform built on top of the Hyperstructure were to disappear, it would still run precisely as designed and be fully operational for decades. Unstoppability is a net new capability possible because of blockchains and is a capability that changes the economic nature of infrastructure.

If we were to zoom out one level of abstraction, we could call the blockchain the trusted, trustless (yes, you read that right) operator of the Hyperstructure.

Free

Bjork GIF.

Now that we’ve established unstoppability as a net new feature, I’ll make my most speculative and contentious proposition: Hyperstructures can be simultaneously free forever to utilize and extremely valuable to own. This is possible because of their unstoppability. There is no cost to maintain and keep the protocol operational forever. Once deployed, it will work exactly as designed with no degradation. For example, if the Uniswap team and website disappeared today, the protocol will run perpetually. This is something that hasn’t been possible before.

It is worth stating that while the Hyperstructure runs strictly at cost, someone still has to pay the gas cost to operate it.

Valuable

A hyperstructure can simultaneously be free and extremely valuable to own and govern. This is a familiar value model we observe for NFTs: the media, first, can be universally free to consume yet helpful to own and control as an individual or group.

Sampled GIF source unknown, remixed by me.

But what does ownership mean in this context? A fee switch’s presence (and control) can be turned on across the protocol. He creates a dynamic called the “threat of the fee.” This means that owners of the Hyperstructure have the right to turn that fee on across the protocol at the base level at any time via a vote. It’s the threat of the price because it’s long-term value-destructive ever to turn it on. Turning the fee on is a value-destructive action because it would immediately lead to an incentivized fork since there’s now an apparent reason for new entrants to do it themselves.

This right to destroy is an ownership right, in the same way, that owners of an NFT have the right to burn. A rational actor won’t do it, but they can if they want to. In my opinion, this right to destroy creates a natural market force to ascribe actual value since people will want to protect that value and utility being offered at large.

The right to sell and transfer the fee switch is another ownership right. This ability to sell and transfer provides a direct medium for the market to exchange and value. The DAO could also choose to sell the protocol fee switch to another party — creating a price and, therefore, a matter that can be held.

On top of the right to turn on and receive a protocol fee, other ownership rights can include the right to deploy new versions and governance over a DAO treasury for ecosystem funding and development.

There is a subtle difference between profit and value and profit extraction and value creation. While it is possible to extract profits in the short term, this is likely in direct conflict with long-term success and value creation. I would even go as far as to say that being “for-profit” is a skeuomorphic mode of operation and leads to a local optimum that misses the broader opportunities that come from a diverse platform ecosystem on top of your protocol. With token ownership and unstoppability, we no longer need to extract profiInstead; we realize value creation. We can create “for-public” with a new underlying value system that represents the value created in Hyperstructures far exceeds any amount of profits that can be extracted in the immediate term and can be recognized for the value they provide to society at large.

Expansive fees

Diagrams for Deleuze & Guattari’s A Thousand Plateaus by Marc Ngui.

Hyperstructures have Expansive Fees — built-in incentives that can be utilized by anyone adding value in a codified manner on top of the protocol. These fees are transparent and available to the entire ecosystem. To effectively earn these fees on top of the Hyperstructure, you must provide the desired value defined by the protocol. These incentives offer a mechanism for community expansion of the Hyperstructure, and good mechanism design here is likely critical for longevity.

A great example of an Expansive fee is the Uniswap LP fee. LP fees incentivize participants to provide the critical resource — liquidity. This fee is paid to anyone providing liquidity to a pool; it is not paid toUniswap. LPs expand the utility of Uniswap; they do not have a monopoly on providing that utility, and an LP only captures value on what they’re creating.

Permissionless

The Short But Exciting Lifespan of A Flower Growing on A Highway Median in Shanghai, 2021 by Avery Famous. Minted as an NFT.

Permissionlessness is a guarantee that is unique to crypto protocols deployed on blockchains. Permissionless means that a Hyperstructure:

It is universally accessible, and everyone can utilize it entirely without prejudice.
It is unable to change its core operating functionality

The implication of being permissionless means that everyone can confidently build their platforms, applications, and economic models on top of the Hyperstructure without the risk of de-platforming. There are no API keys required, and no fear that a platform can suddenly upend your entire project on a whim.

The Uncensored Library in Minecraft features inaccessible journalism.

Similarly, this offers censorship resistance at the individual level, as no judge or judge entity can decide to restrict access to the utility of the infrastructure.

Credible Neutral

Source unknown.

As a result of being permissionless and unstoppable, Hyperstructures are credibly neutral.

They are user-agnostic. They do not discriminate against or against specific people and treat everyone fairly. Hyperstructures are universally accessible for anyone to utilize, build on top of and integrate into their systems — without risk of deplatforming or exclusion. Hyperstructures treat every participant fairly, to the extent that it’s possible to treat people fairly in a world where everyone’s capabilities and needs are different (Buterin, 2020).

Positive-sum

Two-person non-zero-sum games by Giovanni Neglia.

As a result of being free, expansive, unstoppable, permissionless, and credibly neutral — Hyperstructures create a positive sum environment.

By being free forever, there is no incentive for someone to 1-for-1 replicate the same functionality — since there is no additional value capture or risk minimization that comes from doing so. At a societal level, a hyperstructure only needs to be built once. This does not mean there isn’t an incentive to innovate; people will still have the motivation to create alternatives with superior and differentiated functionality. But simply forking with the same utility will not win.

By being expansive with fees, Hyperstructures allow participants to profit from the value directly they create for the system without needing to compete withwith it.

There is no operational risk for participants relying on the system to function by being unstoppable. They can operate the system without having to rebuild and use it themselves.

They were permissionlessguarantees that all of the above conditions remain unchanged. Once again, this removes the need for anyone to rebuild the system themselves — create on top of it and capture the unique value you provide to the system.

By being credibly neutral, no group or community is excluded, which again means there is no reason to rebuild if the system satisfies your needs.

This means you can have a rich ecosystem of potentially competitive participants organizing on and utilizing the same piece of infrastructure to the net benefit of everyone through shared liquidity and the network effect of integrations.

Building a Hyperstructure

Hyperstructures are made to power millions of interfaces, not just one: when creating a mechanism or anything at the protocol level, ensure it’s as generic as possible.
Use fees to expand the ecosystem, not extract from it. While removing value in the short term may be possible, it might be a local optimum that misses the broader opportunities from a diverse platform ecosystem on top of your protocol.
Take a protocol-first building approach: focus on developer adoption to create as many integrations as possible — a strong network effect and cement the hyperstructures by default.
Building liquidity: on-chain liquidity benefits other entrants to join the ecosystem and helps everyone else. This is a crucial network effect and reduces the ability/incentive to fork.
Ownership where possible, governance was only necessary: creating ownership and control were only essential. Too much of either, and you may find that the Hyperstructure gets skewed incentives or is at risk of attack.
There is a long build cycle: deploying pr. As a result, this is much more akin to creating hardware than software. As a result, there are long design periods, high friction migrations, and a high bar for deployment.

Societal Infrastructure

The Eden Project: The largest greenhouse in the world is home to over one million types of plants.

Given their immutable and permanent nature, we have the opportunity to create a civilizational infrastructure that can outlast our lifetimes — all of which is native to the internet.

We’ve never had the tools to create a software-based infrastructure that can work as designed for generations without degradation or falling into the tragedy of the commons to sustain itself. And we’re at a once-in-a-generation moment where we are lucky enough to have the privilege to build the first.

For every financial utility, I’d posit we’ll likely see a singular hyperstructure emerge: exchanges, marketplaces, lending pools, options, and so on. The same could be said for non-financial utilities currently run and operated by web2 and social media platforms like domain names, registries, identity, curation, tags, reputation, emojis, read receipts, etc. The entire internet is being rebuilt in the form of Web3, with crypto and the blockchain at its core — we have the opportunity to restructure the utility of the internet of the past 40 years outside of remote control and create entirely new ones that weren’t possible before.

The Facebook Social Graph in 2010 featured 500 Million people — one of the most prominent actors of the platform era.

The scale, importance, and ambition of these pieces of infrastructure will eventually be marveled at in the same way we do museums, power grids, canals, dams, and ancient roads. Hyperstructures will be at a scale we’ve never witnessed before and can be more substantial than even the current social media platforms of today. They will also be judged on their availability and utility to the public over time. A long-term view is critical when designing a Hyperstructure, something that’s often typically lacking in the short-term profit-minded world of Web3.

Crucially, because of their immutable and permanent nature, we must optimistically create them in their purest, most accessible, most beautiful forms. Our grandchildren could very well use these Hyperstructures, so we have the responsibility to build them with them in our minds — and we should do them proud.

Children of the Future, by Holly Herndon and Mat Dryhurst. Minted as an NFT.

It is now possible to create Hyperstructures that run for free, forever — so we should use that logical extreme as our starting point, not something we should avoid or ignore. With new paradigms comes new value systems, and with Hyperstructures, we have the opportunity to create public goods that can remain free forever while rewarding the builders and participants for creating and contributing to these invaluable systems that serve society at large for many years to come — that sounds like something worth building towards and finding out.