Introducing: Three Sigma
Apr 16 2022 · Three Sigma Team · 6 min read
The crypto/web3 industry has demonstrated how much it benefits from technical expertise and how far it still is from reaching its full potential. As a corollary, technical experts must assist in leading this industry to its optimal development path, allowing it to grow and succeed.
Three Sigma is the embodiment of this collective vision, and we are thrilled to share it with the world.
Three Sigma is built upon the belief that crypto can and must operate in a positive sum environment for it to be able to succeed. As such, our goal is to empower developers and bring innovative ideas to life, effectively contributing to the industry’s development.
Our company is called Three Sigma, and we have three distinct subsidiaries: Research, Labs, and Capital.
Innovation in tech is first led by advances in academic research.
Crypto is no different. Decades of progress in distributed systems research is what inevitably led to the breakthrough that founded this industry, Nakamoto Consensus. Without the research by Vitalik Buterin et. al., blockchains would not be equipped with a virtual machine, the execution layer where nowadays, exciting things happen. Today, efforts to scale blockchain technology to millions of users, privacy solutions, new financial primitives, MEV, smart contract security, amongst others, define the forefront of the new paradigm in which we find ourselves. Our goal at Three Sigma Research is to contribute to the entire ecosystem by developing and progressing research in these fields.
Shadowy super coders never stop researching.
Our passionate team members have a deep understanding of these subjects and are eager to expand their expertise and contribute to academic breakthroughs!
Engineering makes the (crypto) world go round.
For a brilliant idea to have impact in the world, it must become concrete or, as engineering terms, implemented. This is why at Three Sigma Labs, we offer a broad range of engineering services with the purpose of assisting every participant in this industry.
At a very high-level, every project begins by identifying a problem that needs solving. At Three Sigma Labs we help founders clearly delineating the solution, how it should be achieved, find product-market fit, and how the solution can be integrated into or replace the current infrastructure stack.
After establishing the goal, the next step is to create the mechanisms necessary to accomplish it. These mechanisms must address all potential issues while staying simple enough to avoid unexpected behavior and preventing malicious actors from gaming the system. We assist in the design of these mechanisms, using game-theoretical principles and knowledge of complex dynamic systems to prune the design space.
Evil actors might be lurking...
After designing these mechanisms, it is necessary to validate that they truly solve the original identified problem.
Specific techniques, such as Agent-Based Modeling, may be used to validate these mechanisms further. At Three Sigma, we have developed an Agent-Based Simulation Framework, the Neferpitou Simulation Framework, that enables the definition of exogenous conditions that affect protocols, agents, their utilities, policies, mechanisms. By using customized Virtual Machines, this framework allows performing actions such as mocking behaviors and enabling tracing functionalities to facilitate data analysis. These components function as lego pieces that may be reused to create various simulation environments.
Agent-Based Modeling can be used to inform and recommend possible tokenomics strategies, different system parameterizations, and the system’s ability to endure adverse market conditions, as well as many other aspects.
Our simulation framework is currently used to analyze protocols residing on a blockchain’s execution layer. One of our short-term goals is to modify it to enable the analysis of the robustness of consensus algorithms under adversarial agent and network environments.
Dev teams hoping there’s no need for a mechanism redesign. (Neferpitou on the right)
Finally, we also offer code auditing, which aims to ensure that the actual written code faithfully implements a protocol’s mechanisms, identifying flaws not just at the contract level (e.g. arithmetic operations), but also for example in the way contracts interact with one another. Our audits encompass both manual code review and the use of cutting-edge tools such as Echidna, with the objective of eventually building/contributing to open-source tooling. We now provide Code Audits for EVM-based chains but are interested in expanding into other ecosystems.
The current bottleneck for innovation in crypto is the scarcity of highly talented and committed builders.
This is why at Three Sigma Capital we search for bright and motivated developers to whom we can provide assistance with our engineering expertise, as well as other components that may be deemed necessary by the projects.
We are constantly on the lookout for early concepts that might evolve into the next great financial primitive or game that could fundamentally alter how economies operate.
As investors our major focus is adding value to a project by iterating with the developer teams on market fit and mechanism design — the process of creating the systems’ components as previously mentioned. We provide industry-grade recommendations, directions, and continuous support based on our researchers’ market knowledge and Three Sigma Labs’ expertise in mechanism validation and code auditing. In addition to engineering efforts, we also contribute with marketing and community building for these early-stage ventures.
Technology has been revolutionizing every industry and finance is no exception. We invest with the belief that crypto/web3 will establish itself and continue to change the financial world by creating a more efficient and trustless environment for settlement.
This is why we are looking to help long-term oriented founders who are determined to make this vision a reality!
The Three Sigma Flywheel
At that time (1909) the chief engineer was almost always the chief test pilot as well. That had the fortunate result of eliminating poor engineering early in aviation.” — Igor Sikorsky
Three Sigma has the largest impact when investing in a project and providing our engineering services altogether. This implies that our engineering expertise is used to assist in determining product-market fit, aid in mechanism design, validate the generated mechanisms using economic models, and finally, ensure that the mechanisms are correctly implemented in the code through code auditing. Since these processes are often iterative and work in a feedback loop, our engineers contribute the most when they are tightly connected to and involved in every step of the process. This combined approach ensures that every member of the Three Sigma team is incentive aligned with researchers assisting engineers and vice versa.
To summarize, our main purpose is to incubate ideas from their earliest stages of conception, and to continue contributing to their development long after they have launched.
While we aim to collaborate with teams in the very early phases of development, we are also available to work with and/or invest in projects that need engineering support and/or demonstrate growth potential. Having an investor with engineering teams willing to provide assistance at any stage of a project’s lifetime is always beneficial.
The beneficial trojan horse.
In conclusion, Three Sigma is always eager to collaborate with motivated teams regardless of the stage of their project, and we look forward to helping elevate the industry’s engineering quality standards!