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Hello readers,
As AI adoption accelerates, it’s creating the largest “honey pot” of private, user-generated data in history. This data reveals information such as health issues, political beliefs, religious practices, relationships, business strategies, travel, personal struggles, and future plans.
Of course, with AI tools, surveillance is no longer just about collecting data. It’s about interpreting it. Predicting behavior. Ranking people. Flagging anomalies. Inferring intent. And on and on.
We think this is a problem that will become larger and better understood in the coming years.
That’s why we’re covering Venice's “private inference” product in this week’s edition of The Watch List.
*Please note that you can click the data citation note under each chart to access the supporting dashboard for this week’s report.
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Let’s go.
Venice is led by Erik Voorhees, a well-known crypto founder best known for his philosophy and advocacy for anti-censorship and personal freedom.
Prior to founding Venice, Erik founded ShapeShift, a popular crypto exchange that became fully decentralized in 2021.
Key attributes as a founder:
Has a track record for understanding crypto users & product development.
Has lived through regulatory pressures as a founder and builder.
Has credibility on privacy and censorship.
Is mission-driven (the product aligns with his views on what he believes is best for the world).
Venice has not taken any outside investment. The company was seeded with investment solely from Erik Voorhees.
Venice’s core argument is that mainstream AI creates a new privacy + speech + autonomy problem. Users are increasingly putting their most sensitive thoughts, business plans, code, medical questions, personal relationships, investing ideas, and creative drafts into systems controlled by a handful of large companies.
The core product seeks to solve this by making AI feel more like self-custody for intelligence.
The core pitch to users:
Access powerful AI models without tying every prompt to your identity, without long-term server-side chat history, and with less content filtering than mainstream AI apps.
Do so while leveraging the same chat, images, video, audio, embeddings, web search, file inputs, crypto RPC, and an OpenAI-compatible API.
Gain access to over 250+ models, including open-weight/private models as well as anonymized access to proprietary models from OpenAI and Anthropic.
Venice has a normal SaaS/API business on the front end, and a crypto-native compute-capital layer on the back end. Subscriptions generate revenue. And some of the revenue is used to buy and burn the VVV token (more on the buybacks in the token economics section below).
The VVV token can also be staked for utility/yield and locked to mint DIEM — a tradeable claim on daily AI credits/inference.
The subscription tiers:
Pro ($18/month): access all Pro models, unlimited text prompts, 1,000 images/day, advanced features, video/music/frontier models via credits, etc.
Pro+ ($68/month): access everything in Pro with higher limits, 7,500 credits/month, and 2-month credit banking.
Max ($200/month): access to everything in Pro+ with higher limits, 22,500 credits/month, and 3-month credit banking.
We think Venice has early product/market fit amongst crypto-native AI users who value privacy.
The question moving forward is whether the average AI user cares about the core product offering: private access to AI inference. And whether regulations will allow private/anonymized access to proprietary frontier models offered by OpenAI/Anthropic.
As such, the questions we are entertaining as it pertains to Venice’s core offering:
Is there a catalyst/data leak/hack that shifts user behavior and preferences as it pertains to the use of AI?
Will Venice’s product be abused by criminals and terrorists, forcing regulations that block access to “private AI?”
Is “private AI” protected by the First Amendment?
For reference, DuckDuckGo (“private search”) has roughly 1.7% market share for “search” in the U.S. Today. Venice has roughly 0.1-0.2% of the total AI inference market. If you believe that 1) The market for AI inference will be much larger than search, and 2) “Private AI” will be more adopted than “private search,” then Venice looks interesting, even with its tiny market share today.
Data: The DeFi Report
Over the last 43 days, Venice has averaged 1,291 new sign-ups/day and nearly $1.3m of new sign-up revenues.
73% of new sign-ups have come from the Pro tier ($18/month). 21% of new sign-ups are on the Pro+ tier ($68/month), and 6% are on the Max tier ($200/month).
Venice programatically repurchases the VVV token based on new sign-ups. $2 of each Pro subscription is burned, $5 of each Pro+ token is burned, and $10 of each Max tier subscription is burned. The team has also conducted multiple “discretionary burns” in which they apply additional revenue to repurchase and remove VVV from the circulating supply (thereby accruing value to VVV tokenholders).
In terms of total all-time sign-ups, the platform hit 3 million a few weeks ago.
Data: The DeFi Report
There are currently over 30 million VVV (37% of the circulating supply) deposited in the sVVV staking contract. Staked VVV gives users access to a share of Venice’s AI inference capacity. For example, if you own 1% of the supply and stake it, you’ll be entitled to 1% of the staking pools' daily compute allocation, which can be used for API access/inference without paying per request as usual.
Staked VVV also grants users access to rewards/yield from VVV emissions.
Finally, staked VVV serves as the base asset for minting DIEM, Venice’s tokenized compute-credit asset. This allows users to mint DIEM tokens with staked VVV, which provides $1 in daily credits to spend on Venice AI tools.
The VVV token is both a 1) capital asset (earn yield through staking, buybacks, and capital appreciation), and 2) a utility asset (gain access to APIs/inference) + DIEM (credits for inference).
Below, we can see that nearly 27% of VVV is currently locked and accruing DIEM tokens.
Data: The DeFi Report
Genesis Supply: 100 million VVV
Max Scheduled Supply: 142.76 VVV (genesis + scheduled emissions)
Circulating Supply: 48.4 million VVV (32.5m unclaimed airdrop tokens were burned)
Data: The DeFi Report, Tokenomist
Airdrop: 35% (fully unlocked in January ‘25. 65% of the tokens were unclaimed and burned by the team)
Emissions: 30% (33% unlocked)
Developers: 17.5% (100% unlocked)
Venice Incentives: 7% (100% unlocked)
Team: 7% (78.3% unlocked)
Liquidity Deployment: 3.5% (fully unlocked)
Key Takeaway: Through year-end, a total of 1.89 million VVV, or $24.7m team tokens, will unlock. Starting in January of next year, all tokens will be fully unlocked except for the monthly VVV emissions (which will normalize to roughly 3m tokens/year or $40.8m at the current VVV price).
Venice has burned 10.7k VVV over the last two months ($140k).
These buybacks/burns come from a % of new subscription sales.
Data: The DeFi Report
Since its inception, Venice has added 11.4m VVV to the supply via emissions. It has offset this by burning 33.7m tokens. The vast majority of these burned tokens (96%) were unclaimed airdrops.
4% of the burned tokens came from VVV repurchased and burned (from platform revenue).
If we focus only on burned tokens from subscription revenue, Venice has burned 10.7% of new VVV emissions. However, emissions will normalize to the target rate of 3m VVV/year starting in July. At current burn rates, we project the annual inflation rate to be roughly 6% once emissions normalize.
Despite Venice’s “buyback and burn” model, which is based on a % of subscription sales, the token still has a fairly high inflation rate (roughly 6%).
VVV holders can receive that inflation by staking their tokens. Holders who do not stake their tokens are being diluted by those who do.
At the current sign-up pace (1,291/day) and tier splits (73% Pro, 21% Pro+, 6% Max), Venice could add $222.5 million in annualized subscription revenue before accounting for retention.
At 30% retention, they would generate roughly $66.7m (9.5x price to sales)
At 50% retention, they would generate roughly $111.2m (5.7x price to sales)
At 70% retention, they would generate roughly $155.7m (4.1x price to sales)
Data: The DeFi Report
Venice currently has a buyback yield of 0.44% (based on the circulating market cap) and 0.26% (based on the fully diluted market cap).
This signals that, for buybacks to meaningfully generate yield for VVV tokenholders, the team needs to significantly scale its subscription business.
Today, VVV holders are primarily compensated via the VVV emissions (for staking). As noted, holders of VVV who are not staking are being diluted by these emissions.
Addressable market. We know the market for inference is massive. But how large is the market for “private inference?” This is still unclear at this stage.
Regulation? A key risk for the product moving forward is that it becomes the “go-to” AI tool for criminals, terrorists, and those seeking to circumvent copyright infringement. If Venice has to “come into regulation,” by censoring prompts that violate copyright laws, does that change the perception of the brand/product amongst those who do not trust other providers?
Security/smart contract risk. Venice is running a typical SaaS business, but the token element adds complexity and smart-contract risk.
Competition from mainstream models (OpenAI, Claude) and user preferences. Do users want their data stored (for full history and ease of use)? Do people care enough about privacy? If they do, will the mainstream models simply implement privacy controls? Will existing players such as Brave and DuckDuckGo grab the “private AI” market with similar tools, leveraging their much broader distribution?
Leadership. Venice is led by Erik Voorhees, a principled crypto-libertarian operator. He’s ideological, articulate, contrarian, and focused on individual freedom. This aligns deeply with crypto natives. And maybe that’s a big enough market for Venice. But we’re not sure Erik is the right person if the goal is to reach a more mainstream audience.
Venice caught the “AI narrative” earlier this year, when the token made a 10x move from February through early June. We think the run (and the attention it drew) may have triggered a reflexive response among new sign-ups (crypto-natives).
We like the product and think it has a real niche to fill in the AI inference market. At the same time, the addressable market seems small today. And even with the token trading 35% off its all-time high, we think it’s overvalued.
As such, we plan to track Venice’s progress moving forward. That’s why VVV is on The Watch List.
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Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.