🏛️ Is Web3 becoming centralized?
- 🏛️ Is web3 becoming centralized?
- 💀 Chain exploits keep coming
- 👀 Under the Radar
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🏛️ Is web3 becoming centralized?
During the past 24 months, we have seen a great amount of talent migrate from traditional finance to the coveted web3 world. We have also seen an enormous uptick in venture capital investment coming to the space and it does make us wonder, how can web3 deliver on its promise?
We are still early. We learned from the previous two technology waves, the arrival of the Internet followed by the ubiquity of mobile technology, that to start reaching the mass market and experience the world changes that certain technology can bring, we need to see 1 billion users. Today, there are less than 200 million Ethereum active addresses, not necessarily an exact measure of web3 users, but it gives us an idea. It will take 3–5 years to reach 1 billion at this rate.
Venture Capital has bet big on crypto start-ups in 2021, investing ~$30 billion globally as of late November across 1,278 deals (according to Pitchbook). The average day in 2021 saw blockchain-related startups raise $20 million, and the average seed raise has risen from $1.5M in 2020 to $3.3M.
The amount of money coming to web3 is exponentially increasing every day, but it is still small compared to the investments allocated to other industries. Total VC invested in 2021 was ~$650.
Thus far this year, investors have poured more than $3.8 billion into startups in the space in 196 deals — surpassing even last year’s record pace.
Supporters say Web3 would increase transparency and accessibility, and make the internet open to more innovative technologies. Others — such as Twitter co-founder Jack Dorsey — say Web3 already has become centralized and owned, not by big tech, but venture capital.
Venture capitalists are voting with their wallets on a future where everyone (including IoT devices) is living in an interconnected metaverse, where every digital asset (basically every item in the metaverse) is traded as NFTs, and wallets hold everyone’s information, token and crypto balances, history, and a trail of all our activities.
Social media conglomerates became unthinkably wealthy in Web2 by monetizing all of our data and information, without giving creators and users a single penny. One of the promises of web3 is that decentralization will empower creators and users allowing them to own their data and creations and monetize them.
With all this venture capital coming into the space it does makes you wonder how decentralized is web3 becoming?
“We’re at an inflection point that will lead into an even faster pace of innovation and growth in Web3,” said Ali Yahya, general partner at Andreessen Horowitz, a Venture capital firm also known as a16z, that announced recently that it plans a new $4.5 billion fundraising round to support startup projects related to blockchain and Web3 technology.
💀 Chain exploits keep coming
Besides the threat of investors attempting to monopolize the web3 making it more centralized. Another big concern is the security side of it.
This week we hear of yet another exploit. “The Ronin Bridge that connects Axie Infinity’s Ronin sidechain to Ethereum has been drained of 173,600 ETH ($590M) and 25.5M USDC in what may be DeFi’s biggest exploit yet.” (thedefiant.io)
Sidechains are independent blockchains that are compatible with and run in parallel to Ethereum. They have their consensus mechanisms and connect to Ethereum via two-way bridges through which supported crypto-assets can be transferred. Ronin utilizes a Proof-of-Authority consensus algorithm, in which validators stake their reputations instead of their tokens.
“Move fast and break things,” the quote reads, but when investors are losing millions due to the neck-breaking speed that this technology is growing, it can be worrisome and it may compromise its credibility.
👀 Under the Radar
- Orca (ORCA) — Orca is the most user-friendly DEX on Solana. One of the first general-purpose AMMs launched on Solana. Users can swap assets, provide liquidity, and earn yield through an easy-to-use interface. Projects can use Orca as a money-lego to easily integrate swapping, farming, or on-chain data into their dApp.
- Gene (GENE) — A Free-to-Play, Move-to-Earn NFT game on Solana makes it fun and profitable to live an active lifestyle. Genopets combines user’’ step data from their mobile device and wearables with blockchain Play-to-Earn economics so players can earn crypto for taking action in real life as they explore the Genoverse evolving and battling their Genopet.
- Zilliqa (ZIL) — Token developed in the year 2017. Zilliqa is mainly based on the concept of Sharding and primarily aims at improving the scalability of the cryptocurrency networks as in the case of Bitcoin or Ethereum. The white paper mentions that the transactions speed would be approximately a thousand times more than that of the Ethereum network. Ziliqa is fast, secured, and decentralized. Zilliqa’s high throughput means that you can focus on developing your ideas without worrying about network congestion, high transaction fees, or security which are the key issues with legacy blockchain platforms.
- Lido Staked Ether (STETH) — Token that represents your staked ether in Lido, combining the value of the initial deposit and staking rewards. stETH tokens are minted upon deposit and burned when redeemed. stETH token balances are pegged 1:1 to the ethers that are staked by Lido and the token’s balances are updated daily to reflect earnings and rewards. stETH tokens can be used as one would use ether, allowing you to earn ETH 2.0 staking rewards whilst benefiting from e.g. yields across decentralized finance products.
- Frax Share (FXS) — Frax is the world’s first fractional-algorithmic stablecoin. The Frax Protocol introduced the world to the concept of a cryptocurrency being partially backed by collateral and partially stabilized algorithmically.
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