Tari Investment Thesis
By Ed Roman and Alex Pack, Managing Partners at Hack VC
We’re excited to announce that the Tari protocol has launched its mainnet. We are proud to have supported this project from its early days. Our first investment was nearly four years ago and was one of the first investments we made at Hack VC. This post explains our investment thesis.
Overview
At Hack VC, we have consistently been believers in L1 smart contract protocols and think that, while it’s a hotly contested market, significant value will ultimately accrue to the tokens of the winners. The public markets have reflected this, with projects such as Solana, Sui, Ethereum, and many others rising above the pack. Some have tried to disrupt on scalability (e.g., Monad) while others have had special distribution advantages (e.g., Telegram/TON). Tari has a unique angle.
Backstory: L1s As Solutions Looking for Problems
Perhaps the biggest problem with Ethereum, and many research-heavy projects like it, is that its core developers are not building their protocols with use cases and applications in mind. This leads them to focus on directionally correct features and research (e.g., increasing transactions per second), but they tend to overlook key details that apps need built in order to function. There’s a classic Medium post about this issue, Fat Protocols are only half the story, which was partially inspired by Tari (the post’s author is a Tari investor as well).
Tari is refreshing in that it’s an L1 born to solve a specific problem, rather than a solution looking for a problem. The use case they have zeroed-in on is private stablecoin payments.
Overview of Private Stablecoin Payments
We view stablecoin payments as the #1 highest product-market-fit application of crypto today. The reason for this bold statement is:
- The value proposition is strong. Stablecoin payments are cheaper and faster than traditional Web2 payments such as checks or wire transfers (which are slow and expensive).
- The market is enormous. Just about every Web2 business needs to issue payments. The Web2 market is orders of magnitude larger than Web3. When you consider international and domestic payments, we’re talking about a multi-trillion dollar market, which can support multiple large and valuable outcomes for startups.
- Legislation potential appears favorable. The Trump administration, with David Sacks as the Crypto and AI Czar, is championing new regulation for stablecoins to make it more streamlined going forward.
The problem with stablecoins as a form of payment is privacy. For example, if I pay a remote employee their salary on-chain via stablecoins, I could be doxxing their income to others. That’s clearly unacceptable.
Tari solves this by making stablecoin payments private, giving the best of both worlds: fast/efficient payments that preserve anonymity.
How Tari Works
Tari is a two-layer protocol designed from the ground up to deliver secure, private, and scalable stablecoin transactions:
- The base layer is a proof-of-work (PoW) blockchain secured via a hybrid mining system. Roughly 50% of block rewards come from merge mining with Monero, and the other 50% come from the Sha3x algorithm. Blocks are produced every two minutes on average. This base layer uses the Mimblewimble protocol, which enables strong privacy guarantees, compact transactions, and full-node scalability. Tari extends this with features like TariScript (for simple smart contracts), stealth addresses, and one-sided payments, making it much more usable than traditional privacy chains.
- On top of the base layer sits the Ootle, a purpose-built layer for managing complex digital assets and smart contracts at high speed and scale. The Ootle achieves scalability by decoupling from the base layer entirely and relying on its own consensus mechanism (Cerberus and HotStuff) to finalize transactions.
This layered architecture allows Tari to combine the security and privacy of a PoW base chain with the performance and programmability of an app layer, offering a full-stack solution for private stablecoin payments.
Traction
Over 700,000 users participated in the Tari airdrop program, and over 100,000 users have downloaded Tari Universe (the Tari mining application). On the first day of mainnet, the Tari RandomX hashrate reached ~5% of that of Monero, and the SHA3x hashrate is over 1 TH. Nearly 10,000 miners are active on the network. This is an impressive start for a new proof-of-work base layer.
The Tari Labs team has also made substantial progress with their forthcoming stablecoin. An issuer has already agreed to develop and launch what could be the world's first default confidential and compliant stablecoin when the Ootle is ready.
The Tari Team
Of note, a key contributor to Tari is Riccardo “fluffypony” Spagni, the former member of Monero Core and lead maintainer of Monero. fluffypony is highly respected within the Monero community and Tari is fortunate to be working with him.
The Monero aspect of all this is actually the most important part of our thesis. On paper it is a leading privacy token by market cap (~$5B as of the time of this writing) that’s been around for over a decade, but to blockchain insiders it’s widely regarded as being one of the most technically advanced and functional blockchain protocols, as well as having a healthy and robust open-source community. The pace of execution at Monero is incredible: it has over 9,600 Github stars[1] across 294 contributors[2], and it has securely implemented complex anonymity technology into its platform, as well as scalability improvements into its chain. There are few protocols that can say the same.
Looking Forward
Tari has been in development since 2018, when the team was backed by noteworthy firms such as Multicoin Capital, Pantera Capital, Redpoint Ventures, Canaan Partners, Slow Ventures, Coefficent Ventures, Vy Capital, Hack VC, and many others. We appreciate the team’s patience and dedication to their mission for so many years. They have patiently and methodically iterated towards product market fit, which leads us to the mainnet launch.
We’d like to congratulate the Tari team on their hard work to achieve this milestone. After many years of development, Tari is refreshingly launching with real customers and real usage. We’re excited to see them grow their adoption as the stablecoin market blossoms.
Footnotes
[1] Source: https://www.star-history.com/#monero-project/monero&Date.
[2] Source: https://github.com/monero-project/monero.
Disclaimer
The information herein is for general information purposes only and does not, and is not intended to, constitute investment advice and should not be used in the evaluation of any investment decision. Such information should not be relied upon for accounting, legal, tax, business, investment, or other relevant advice. You should consult your own advisers, including your own counsel, for accounting, legal, tax, business, investment, or other relevant advice, including with respect to anything discussed herein.
This post reflects the current opinions of the author(s) and is not made on behalf of Hack VC or its affiliates, including any funds managed by Hack VC, and does not necessarily reflect the opinions of Hack VC, its affiliates, including its general partner affiliates, or any other individuals associated with Hack VC. Certain information contained herein has been obtained from published sources and/or prepared by third parties and in certain cases has not been updated through the date hereof. While such sources are believed to be reliable, neither Hack VC, its affiliates, including its general partner affiliates, or any other individuals associated with Hack VC are making representations as to their accuracy or completeness, and they should not be relied on as such or be the basis for an accounting, legal, tax, business, investment, or other decision. The information herein does not purport to be complete and is subject to change and Hack VC does not have any obligation to update such information or make any notification if such information becomes inaccurate.
Past performance is not necessarily indicative of future results. Any forward-looking statements made herein are based on certain assumptions and analyses made by the author(s) in light of their experience and perception of historical trends, current conditions, and expected future developments, as well as other factors they believe are appropriate under the circumstances. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict.