It took the Romans about 500 years to build the aqueduct.
Before the aqueduct was built, residents relied mainly on local water sources: rivers, springs and streams, as well as groundwater wells and ancient cisterns that collected rainwater.
This meant that entire water sources were scattered across the country, hampering Rome's growth. Demand outstripped supply, and in addition to basic sanitation, water was necessary for the development of Roman industry, including mining, agriculture, and mills.
So, over the course of five centuries (the middle and late half of the empire), Rome built a system of 11 aqueducts, including pipes, tunnels, bridges, and canals. The aqueducts brought fresh water from sources as far as 57 miles from the city, supplying more than 1.5 million cubic yards of water per day (750 liters per person per day).
The Romans routinely drilled wells in their homes. Blockchains have done essentially the same thing — attracting large amounts of cryptocurrency capital to power their networks, but that capital is effectively trapped within their respective ecosystems.
Thankfully, it didn’t take long for cryptocurrencies to build their plumbing systems.
Crypto is busy building an aqueduct right now. Monolithic chains like Ethereum Mainnet, Binance Smart Chain, and Solana have largely absorbed the majority of crypto capital staking, both through validators staking directly to the chains themselves and through their DeFi ecosystems.
Liquidity staking protocols like Lido, Rocket Pool, and Jito help mine a portion of locked capital, tokenizing staking receipts so they can be traded, loaned, or otherwise put to use in liquidity pools.
These allow cryptocurrency stakers to maintain the productivity of their digital assets after contributing to the economic security of platforms such as Ethereum, Solana, etc. According to DeFiLlama, there is currently about $54 billion in cryptocurrency locked in these liquidity staking protocols, accounting for more than half of the total value locked in DeFi.
Restaking protocols such as EigenLayer, Karak, and newcomer Symbiotic are looking at how to direct productivity to securing other platforms, rather than for trading and liquidity farming, with the goal of channeling liquidity to smaller-scale financial products that also require economic support to ensure their functionality.
So far, $20 billion has been locked in these crypto aqueducts, much of it locked up by EigenLayer, which now has about a dozen actively validated services.
Karak has surpassed the $1 billion market cap mark as it builds out its ecosystem, though in addition to staking ether, it also accepts other types of collateral, including wrapped bitcoin and stablecoins.
The Romans couldn’t get enough water, and cryptocurrency users couldn’t get enough yield. Both dynamics led to an explosion of infrastructure.
This approach worked for the Romans—until it didn’t. That’s probably best attributed to governance.
Some important data
Currently, the staking rate of ETH's supply is over 27%, up from 24% in January.
1/3 of the staked ETH is staked through liquid staking applications such as Lido. Another 9% is staked through re-staking protocols, mainly EigenLayer.
According to DeFiLlama, $175 million of WBTC, FIL, and NEAR is currently invested in smaller staking platforms Pell, Parasail, and Octopus.
BTC is struggling to reclaim $67,000 after falling 6% over the past week.
NOT, UNI and TON led the rebound, with the former up 21% in the past day but still down 4% in the past week.
Tracking (Modular) Funds
As a curious person with a penchant for everything, let’s focus on what’s interesting in crypto – where the money is going and who’s interested in what.
Last week we saw a modular blockchain solution raise millions of dollars, and in the first quarter of this year we also saw some funding flow into other similar projects.
Naturally, there’s a lot of buzz about how venture capital views modularity, a sector of crypto that, while hot, remains small.
Vance Spencer, co-founder of Framework Ventures, said interest in modular is “down from last year.” He added: “I doubt that wave of interest will come again unless we see more adoption.”
“At the same time, the advantage of monolithic architectures is that they allow for deep integration and optimization across modular boundaries, leading to higher performance…at least initially,” Ali Yahya, general partner at a16z Crypto, wrote in January. But he praised modular technology stacks for allowing “permissionless innovation,” thereby allowing those who interact with them to specialize and fostering organic competition.
While I’ve heard about interest in SocialFi and the need to focus on building infrastructure, modularity was largely absent from conversations about capital flows in the first quarter of this year.
Vance Spencer believes that one part of the modular technology stack has received enough attention that it will reduce interest in similar projects. He explained: "If anything, I think there is a non-zero chance that venture capital interest in modular will remain flat or slightly decline at least in the short term."
This doesn’t mean there’s no interest, just that capital is less likely to continue flowing into certain parts of the tech space as some players — like Celestia and EigenLayer (and even Avail after its funding round) — become more established.
If you are familiar with these projects then you know that they are focused on data availability, which as Vance Spencer says is the first layer of a modular technology stack, and they have received millions of dollars in funding, in February EigenLayer raised $100 million from Andreessen Horowitz.
Then, competitors Celestia and Avail raised millions of dollars. Spencer told me that he had a hard time imagining new data availability projects getting more funding without some kind of differentiation, and maybe he has a point…
What remains are the other two parts of the entire technology stack: the settlement layer and the execution layer. Vance Spencer further stated:
“I think we’ll probably see more experimentation at these levels, but I think the tweaks will be smaller, like different programming languages (see Movement Labs), and some of these types of projects will continue to be funded, but I think we’re unlikely to see the same scale of projects as we’ve seen at the DA level,” he said.
There is a limited number of “crypto aqueducts” that the crypto market needs to build simultaneously, especially when the products are not very different. Modularity can stimulate competition and allow more innovation, which is still very interesting even if venture capital funding is slowing down.
