Why we invested in Predicate
Predicate today announced it has raised $7M to build the first network for transaction prerequisites. We are a proud investor, having participated in Predicate's Pre-Seed round in November 2023. Other notable investors include Tribe Capital, 1kx, Figment Capital, Reciprocal Ventures, White Star Capital, Hashkey Capital, cyber fund, and GSR. You can read coverage of the announcement in Fortune.
What does Predicate do? In a nutshell, Predicate allows users, application developers, and communities to set their own customizable rules – or policies – for onchain interactions. Just as stablecoins have created a critical linkage between decentralized finance and traditional finance in the form of a common monetary denominator, Predicate enables the pre-transaction rules necessary to scale blockchain technology into the mainstream economy.
Blockchain startups begin globally on day one, but then have to adapt to a multitude of different geographies as they link their activities to the broader economy, such as regulatory, business, and user requirements. Meeting all of these different requirements necessitates developers and ecosystems to build pre-transaction rules into their onchain protocols—an onerous but critical task. Policies can use onchain and offchain data, such as historical flow-of-funds, blockchain analytics, verifiable credentials, dynamic allowlists, and more.
For example, a decentralized application or protocol could use Predicate to restrict transactions to only those that are free from involvement with a blockchain address subject to sanctions or associated with a DeFi hack. An RWA project could use Predicate to verify on and offchain collateral requirements in order to execute a transaction. A social project could limit the activity of an application to specific geographic regions. All of this, without compromising on the core ethos of decentralization.
The company’s founders are Nikhil Raguveera and Jesse Sawa, with backgrounds across web3, finance, consulting, and policy at organizations including Celo, JPMorgan, the Boston Consulting Group, and the Atlantic Council. The idea for the company was initially born out of their experiences at Celo Foundation where they gained first-hand insight into the unique needs of decentralized projects when it comes to compliance.
As a twice-former regulator and someone who has spent a considerable part of his career in public policy, I am often pitched on compliance related solutions for blockchain and fintech. Predicate is the first one I’ve found to be groundbreaking enough to get truly excited about, for a few reasons:
An acute and growing pain point: Decentralized blockchain protocols and applications have seen ongoing regulatory, law enforcement, and legislative attention directed at them. While we are yet to see a comprehensive regulatory or policy framework come to fruition, it is clear that the status quo will not last. For decentralized applications to scale they will need to interact more directly with traditional economic systems. And that will require meetinging certain regulatory or law enforcement objectives, even if those objectives are met in new (often better) ways than traditional methods.
A novel and decentralized solution for decentralized actors: What Predicate offers is a blockchain native way to achieve key underlying objectives of a community, such as keeping bad actors like terrorist financiers out, while remaining true to the principles of permissionless decentralization. The customizable nature of the solution allows a community to set policies that match their values and use cases. Some communities may choose to set very few policies, while others, such as RWA platforms that bring traditional assets onchain, may set more restrictive ones. Compliance related use cases represent just one opportunity area among many.
A team uniquely positioned to win: Nikhil and Jesse bring a unique blend of policy and regulatory expertise alongside deep technical blockchain experience and conviction. They are true believers in decentralization and permissionless innovation, motivated by a desire to enable an ecosystem that is widespread and enduring. In other words, they are able to translate between two different worlds (the river and the village, in Nate Silver’s parlance) in an authentic and compelling way that is necessary for adoption of the type of solution that is Predicate.