Mainnet: Decentralized Internet Infrastructure
A concentrated, high-conviction portfolio of the protocols rebuilding the internet's foundational layers.
The Internet is Being Rebuilt
The internet is undergoing its most significant architectural shift since the introduction of TCP/IP. The centralized infrastructure that powers today’s web — controlled by a handful of corporations — is being replaced by a new generation of open, permissionless protocols that decentralize finance, data, computation, and intelligence.
Just as TCP/IP, HTTP, and SMTP became the invisible backbone of the internet, these new protocols are becoming the invisible backbone of a decentralized web. They are not applications. They are infrastructure — foundational layers on which everything else is built.
The AO Mainnet Fund concentrates capital in 5–10 infrastructure protocols that serve as these foundational layers. Our thesis is simple: invest in the picks and shovels, not the gold miners. Invest in protocols, not applications.
Think of it like investing in TCP/IP, HTTP, and SMTP in the 90’s — instead of investing in the companies built on these protocols. Fantastic risk-reward macro investment.
The Shift from Centralized to Decentralized
The Problem: Centralized Infrastructure
The current internet is controlled by a small number of corporations. Five companies — Amazon, Google, Microsoft, Apple, and Meta — control the majority of cloud computing, search, identity, payments, and social infrastructure. This concentration creates single points of failure, enables rent extraction, and introduces censorship and surveillance risks.
After friendly beginnings, these platforms have become more extractive and less cooperative. They attract users and builders with open APIs and fair terms, then gradually extract more value and compete with their own ecosystems.
The Solution: Permissionless Protocols
Decentralized protocols solve these problems by making infrastructure permissionless, composable, and owned by users. No single entity can shut them down, extract rent, or change the rules. They are credibly neutral — anyone can build on them, and everyone benefits from their growth.
These protocols capture value fundamentally differently from centralized platforms. Instead of extracting revenue through subscriptions and advertising, they accrue value through usage fees, token burns, and staking rewards — creating productive, yield-generating assets that reward long-term holders.
The Opportunity
Investing towards an open, decentralized and more robust architecture of tomorrow’s web.
The Decentralized Infrastructure Stack
Just as the internet is built in layers — from TCP/IP at the base to HTTP for transfer to applications at the top — the decentralized internet is being built in layers. Each layer replaces a centralized equivalent with a permissionless protocol.
Infrastructure Categories We Target
Oracles & Data — The Nervous System
Connecting on-chain and off-chain worlds. Oracle networks provide the data feeds that connect smart contracts to the real world.
DeFi Infrastructure — The Financial Rails
Lending, trading, tokenization. DeFi infrastructure provides the financial primitives that replace banks and exchanges.
AI & Compute — The Intelligence Layer
Decentralized AI and agent infrastructure. AI and compute networks provide decentralized intelligence.
Data Availability — The Scalability Layer
Modular data for scalable blockchains. Data availability layers provide the scalability that blockchains need to serve billions of users.
Layer 1 — The Execution Layer
Next-generation blockchain architecture. Layer 1 blockchains provide the execution environments on which everything runs.
Each category represents a critical layer of the decentralized internet. We do not pick applications. We invest in the infrastructure that all applications need.
Value Accrual at the Infrastructure Layer
The most durable investments in the internet era were not in applications — they were in infrastructure. Applications come and go (MySpace, AOL, Yahoo), but infrastructure compounds. TCP/IP has been running since 1983. HTTP since 1991. SMTP since 1982.
The same pattern holds for the decentralized internet. Applications will compete fiercely and many will fail. But the infrastructure protocols they all depend on will compound in value as adoption grows.
- Users switch easily between apps
- Revenue depends on retention
- Winner-take-most dynamics
- Vulnerable to disruption
- MySpace → Facebook → TikTok
- High switching costs once integrated
- Revenue from usage across all apps
- Every new app strengthens the protocol
- Network effects compound over time
- TCP/IP (1983), HTTP (1991) — still running
Protocol Revenue Models
Infrastructure protocols generate real, usage-driven revenue through multiple mechanisms:
- Transaction fees — Every on-chain action pays a fee to the protocol and its operators
- Token burns — Many protocols burn tokens proportional to usage, creating deflationary pressure
- Staking yields — Validators and stakers earn yield for securing the network (3–8% APY)
- Protocol fees — DeFi protocols charge fees on trades, loans, and liquidations
This is not speculative value — it is real economic activity flowing through open infrastructure.
Protocol Example: Uniswap vs. NYSE
Uniswap replaced centralized exchanges with an open protocol — no company, no middleman, just code. The comparison illustrates how decentralized protocols can replace entire industries.
ICE (NYSE’s parent) earns $7.3B revenue with 12,000 employees. Uniswap generates $1.1B in fees with zero employees and zero operating costs — 100% margin. Value accrues to the UNI token, not a corporation.
Fund Strategy
- Strategic accumulation of Network Tokens
- Focus on long-term value appreciation
- Technical Monitoring & Risk Management
- Downside protection through hedging
- Continuous due diligence and rebalancing
- Protocols showing breakout metrics
- Higher risk-reward asymmetry
- 2–5 high-conviction positions
- Individual positions: 5–10% of fund
- Continuous due diligence and rebalancing
Selection Criteria
- Protocol Revenue — Real, usage-driven fee revenue. Not inflationary token rewards. We invest in protocols that generate genuine economic throughput.
- Network Effects — Does usage beget more usage? Are switching costs high? We seek protocols with compounding moats.
- Token Design — Supply caps, burn mechanisms, staking yields. Tokenomics that reward long-term holders.
- Team & Governance — Proven execution, credible decentralization roadmap, and strong community governance.
- Market Timing — Early enough for asymmetric upside, mature enough to demonstrate traction.
Risk Management
All staked positions maintain liquidity buffers. Portfolio rebalancing is conducted quarterly. Individual position limits (max 20% core, max 8% emerging) prevent concentration risk. All infrastructure is secured using institutional-grade multi-signature wallets.
Investment Rationale
1. Structural Inevitability
The centralization of internet infrastructure creates the same coordination failures that Bitcoin was designed to solve for money. As dependence on centralized platforms deepens, the demand for decentralized alternatives will intensify. This is not a question of if, but when.
2. Asymmetric Risk-Reward
Decentralized infrastructure protocols are valued at a fraction of their centralized equivalents. Chainlink’s oracle network secures hundreds of billions in DeFi value — yet its market cap is a rounding error compared to the data infrastructure companies it is replacing.
3. Yield Generation
Unlike traditional venture capital or passive crypto holdings, infrastructure protocols generate real yield. Staking, validation, and protocol fees generate 3–8% APY across our positions. This yield covers operational costs (enabling our 0% management fee) and compounds the portfolio over time.
4. Regulatory Tailwinds
Increasing regulatory clarity for DeFi and crypto infrastructure — particularly in the EU (MiCA) and the United States — is removing uncertainty and opening doors for institutional capital.
5. Network Effect Compounding
Infrastructure protocols exhibit powerful network effects. Each new user, developer, or application built on top strengthens every other participant. This flywheel is difficult to replicate and impossible to compete with once established.
Portfolio Return Scenarios (2031)
Four scenarios for portfolio returns over a 5-year horizon, reflecting different rates of infrastructure protocol adoption:
Risk Analysis
Infrastructure protocol investing is a high-risk, high-volatility strategy suitable only for sophisticated investors with long-term horizons and high risk tolerance.
Infrastructure protocols depend on complex smart contracts with potential vulnerabilities. Bridge exploits and protocol hacks remain an ongoing risk.
The portfolio is exposed to crypto market cycles with potential 50%+ drawdowns. Short-term price action may not reflect fundamental value.
AWS, Google, Stripe, and other centralized incumbents have massive resources and established moats.
Adverse regulatory developments could materially impact DeFi protocols and token values.
With 5–10 positions, individual protocol failures have outsized impact. Mitigated by category diversification.
Some positions may have limited exit liquidity during market stress.
Fund Terms & Structure
| Parameter | Details |
|---|---|
| Legal Structure | AO Mainnet Fund GmbH & Co. KG |
| Taxation | Fund Level: ~25% | LP Distribution: 0% (tax-free) |
| Management Fee | 0% — operational costs covered by staking rewards |
| Performance Fee | 20% |
| Super Carry | 30% (if return >20x) |
| General Partner | Johannes de Waal |
| Management Company | Tokenstreet GmbH |
Team
Conclusion
The internet is being rebuilt on decentralized protocols. This is not speculative — it is happening now, across every layer of the infrastructure stack. From oracles providing data feeds to DeFi protocols replacing banks, from AI networks decentralizing intelligence to data availability layers scaling blockchains — the foundational layers of a new internet are being laid.
The AO Mainnet Fund’s concentrated approach maximizes conviction while maintaining diversification across infrastructure categories. We invest only in protocols with real usage, real revenue, and real network effects.
For qualified investors seeking exposure to the foundational layers of the decentralized internet, infrastructure protocols represent the most compelling risk-reward opportunity in the current market.
Web 3.0 empowers a collectively owned future over a corporate or government owned future. We invest in the infrastructure making this possible.