Sustainable business model: a business model that creates, delivers, and captures value for all its stakeholders without depleting the natural, economic, and social capital it relies on.
Every technology goes through generational cycles, including the internet. When a critical threshold of upgrades is crossed, it marks the beginning of a new generation. This moment, and its significance for the marketplace, can prove confusing.
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After all, the features that existed in the first generation still exist, only with additional layers. This is what happened when Web1 morphed into Web2 and now we see this occurring in the shift to Web3. Let’s start differentiating them:
In the late-90s, the internet was just starting to go mainstream. The Web1 era was highly decentralized for a couple of reasons:
Low bandwidth infrastructure (up to 1Mbps) precluded the media-heavy internet as we know it today, with 4K video-streaming platforms.
Underdeveloped infrastructure went hand-in-hand with simple coding practices. Everyone could learn HTML or copy a template to deploy a website, as they were builtServer-side: generating web content and database query on servers.
As a result, Web1 was static, simple, and non-interactive, making it possible for everyone to create their own websites — blogs, news, forums, and yellow pages. Most internet content was centered around personal web pages hosted on ISP-provided servers, often for free.
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Over time, telecom companies built broadband infrastructure (above 10Mbps) and spurred entrepreneurs to develop new ventures that deepened the experience, and the economics, of the internet.
In the late-’00s, ventures such as YouTube and Netflix scaled as they delivered streamed content to the mass market.
More complicated software stacks began to emerge as the internet demonstrated it was a new channel for television, radio, and publishing.
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Customize Stacks
Alongside HTML, the Web2 software stack includes PHP, CSS, JavaScript, Ajax, HTML5, Java, Ruby, and other programming languages.
In essence, Web2 is the merger of Server-side (programs executed on a server) and Client-side (programs executed in a browser) programming, with web browser languages as the starting point:
Web browser stack: HTML, JavaScript, CSS
More advanced Server-side and Client-side stack: PHP, JavaScript, Ruby, Python, Java
Additionally, to scale up web development more easily and maintain large websites, Server-side web frameworks emerged: Django, Ruby on Rails, Laravel, and other scripting libraries.
Web developers often customize their stacks. For example, the MEAN stack consists of MongoDB, Express.js, AngularJS/Angular, and Node.js. Or, they could focus on the MERN stack: MongoDB, Express.js, React, and Node.js.
These programming layers made it possible to create dynamic web content, sandwiched between Client-side and Server-side.
Such platforms manifest as Vimeo, YouTube, Twitter, (Meta) Facebook, and TikTok. All of them have in common increased user interaction and effortless content contribution, enabled by Client-side web stacks.
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Web2 Centralization
Web2 was predicated on raising capital and traditional management of business. That meant centralization. Additional programming stacks made web content both labor and hosting intensive.
Moreover, no individual or small business could pay for vast months of data traffic delivered through video sharing and social media platforms. On top of that, the network effect took place. Even if someone could clone Twitter, the value of Twitter is not in its software, but in the number of people using it. Even former Twitter CEO, Jack Dorsey, admitted as much.
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In other words, as people became dependent on Web2 platforms, they magnetized them for further growth, dulling even quality competition.
This is best exemplified by companies like Google. It went from a search engine start-up to a go-to platform (Alphabet) for everything under the sun — ad integration and monetization, news aggregation, video-sharing, payment rails, AI, robotics, and smartphones.
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Google’s annual revenue from 2002 to 2021, exemplifying power and wealth concentration during Web2. Source: Statista .
As if corporations in control of user data weren’t enough, an extra problem surfaced — deplatforming and inter-corporate collusion. Companies control who uses their platforms.
In the end, Web2 turned into an ecosystem made up of a handful of tightly-regimented nodes. These nodes make it convenient to interact with the world, but companies control the nodes and can change their policies when they like.
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Web3 Explained
When all is said and done, everything is about the concentration of power. The more a system is centralized, the more it yields lopsided results.
Case in point, when the Federal Reserve started bailing out commercial banks during the Crash of 2008 by pumping $498B into their balance sheets, the Occupy Wall Street movement expressed outrage at the use of taxpayer funding.
Protests and movements come and go, but technology stays. A year after the Great Recession of 2008–09, Bitcoin emerged as peer-to-peer (P2P) digital money, its genesis block directly referencing bank bailouts. Bitcoin emerged as an alternative to central banking.
Bitcoin’s blockchain technology also laid the groundwork for Web3. After all, if money can be made both digital and decentralized, it is a layer that can easily be integrated into the internet.
From file storage (IPFS) and video streaming (Livepeer) to monetization, smart contracts in chained data blocks are agnostic to which content is decentralized.
In other words, Web3 mirrors Bitcoin — it is a permissionless, trustless, and decentralized way of generating content, distributing it, and owning it.
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How Does Web3 Work?
Just as different programming stacks defined Web1 and Web2, a new software stack defines Web3 to make decentralized internet happen. Web3 is in many ways a continuation of Web2 in terms of interactivity, but at the bottom of the stack is a blockchain protocol.
On top of the blockchain protocol are four layers that bind blockchain to the end-user experience:
Smart contracts are embedded into each data block. Because they chain together, smart contracts are immutable, which is also what makes both NFTs and cryptocurrencies so valuable. Ethereum is the leading platform for deploying smart contracts written in Solidity. Other blockchains, such as Cardano, use Haskell.
Web3 libraries that link smart contracts to dApp interfaces: ethers.js, web3.js, or web3.py
Nodes as blockchain’s decentralization cornerstones, linking Web3 libraries to smart contracts. Instead of relying on a centralized cluster of servers, blockchain networks are dispersed across computer nodes. For example, Bitcoin has over 14,000 nodes, while IPFS (Interplanetary File System) for decentralized storage has over 200,000 nodes.
Wallets that connect to blockchain networks and individual dApps on them. Wallets should not be considered as containers. Instead, crypto wallets like MetaMask unlock access to blockchains and their dApps, via private keys.
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With these Web3 layers in play, it is possible to replicate every existing Web2 platform. They offer the same Web2 functionality but with decentralized monetization, funds/data ownership, and censorship-resistant content.
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Web3 Examples
LinkedIn is a centralized platform for job hunting and business networking. LinkedIn’s decentralized version is Indorse.io.
This platform uses Indorse tokens (IND) to monetize the platform and establish voting governance. IND tokenholders could then use their tokens to “indorse” either prospective employers or employees.
There are also YouTube decentralized equivalents in the form of D.tube and Odysee, one built on IPFS and the other on LBRY file-sharing and monetization network. Later on, Odysee split into its own video-sharing company. It has since matured into a viable YouTube alternative, but without YouTube’s intense censorship.
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Source: Odysee .
When it comes to Web3 social media, the leading lending dApp, Aave, launched Lens Protocol in which the entire social pipeline is tokenized. Users can not only store their own content — posts and comments — as censorship-resistant NFTs, but they can do the same for their followers.
Because everything is tokenized, this means that users have complete control over their online interactions, but without being censored by central entities.
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Web3 Apps To Replace Web2 Tech
There is no shortage of Web3 dApps. They link back Web1’s initial selling point — decentralization. But now they havetokenized monetization and ownership via wallets. The problem is, they are unlikely to amass much adoption unless Web2 platforms begin to deplatform and censor even more aggressively.
Ultimately, most people prefer the easiest shortcut that requires the least amount of effort. This is where Web2 platforms exce.
Nonetheless, Web3 on a global scale could coalesce into a rival mega-meta Web3 platform in which all blockchain networks are interlinked, and tokens are easily swappable on decentralized exchanges (DEXs).
They may require extra steps and more engagement, but many will see it as a worthwhile and necessary effort.
Fundraising has quickly become one of the most popular topics in the crypto community. In a falling market, the activity of smart money is only increasing. Funds tend to be the first to find promising projects and establish trends. As such, CryptoRank has compiled comprehensive research on recent crypto fundraising activity.
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Key Highlights:
The market downturn has had an impact on crypto fundraising, but the overall outlook remains positive;
The number of M&A and debt financing transactions has increased; non-crypto companies are tending to invest in Web3 startups;
Large investors are launching additional funds;
Web3 has become the most popular category among investors.
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The State of Fundraising
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The past months have been tough for the crypto market. With all of the troubled projects, frequent exploits, bankruptcies, and negative news in the background (especially in non-crypto media), the crypto market cap is sitting around the $1 trillion mark, while less than a year ago it has almost touched $3 trillion.
The macro picture is looking bad too. Inflation is rising all across the world (except in a few countries), and governments have had to raise rates. Rate hikes have negative effects first and foremost on young companies, which is, essentially, any crypto project.
Indeed, fundraising has followed the trend, and the past months have not been as good as April 2022, when the raised amount and the number of deals reached an all-time high. However, fundraising has not performed as badly as the crypto market as a whole. It is worth noting that fundraising is an early stage investment, and it is difficult to judge the success of an investment after only a few months (sometimes even years). In addition, it is worth noting that many crypto investment funds are multi-profile companies that also might conduct trading activities, which may lead to a poor performance. A great example is Three Arrows Capital, which had an outstanding portfolio of early-stage projects, but went bankrupt due to trading losses and uncovered debt.
What we are seeing today is an evolution from going in blind into investments to a more thorough assessment and risk management of long-term strategies. While raised amounts and number of deals are comparatively lower than what has previously been achieved, this transition to more cautious investments will help the market to grow during the next bull-runs by filling it with high-quality projects with enough money and support from experienced leaders to sustain growth. Investors have realized that Web3 and crypto projects can exist in the non-crypto world and become real money-making businesses.
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As we can see, the number of deals has fallen slightly, with the raised amounts falling significantly, especially in July. This means that funds are not necessarily less active, but they are tending to pick only the best of the best, and choosing to invest more modest amounts. Speaking of August, the picture over the first half of the month does not look promising. Still, we’ve seen a few notable deals including between tier 1 investment funds and promising projects. Additionally, it is worth noting that more and more non-crypto companies are investing in crypto startups despite the market downturn.
As mentioned above, Web3 as a category is dominating among crypto projects that raised funds in 2022. The number of Web3 projects shows that it is one of the most sought-after startup categories . Investors are seeking such projects since Web3 is on the verge of mass adoption.
Blockchain infrastructure and centralized finance, on the other hand, have raised the highest amounts of $8.79 billion and $8.44 billion respectively. Many prospective blockchains are raising significant amounts, but more on that later. While a core part of crypto is its “decentralization”, it also relies heavily on centralized organizations. First of all, these are exchanges and trading platforms, which help to explore new markets and bring new users to crypto. In essence, centralized finance is crucial to mass adoption by institutions.
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A total of $30 billion has been raised from 1412 deals so far in 2022 . The number of deals and totals may be higher due to undisclosed amounts of investment from private investors. Yet still, it perfectly describes the current state. In one of our recent posts (https://t.me/CryptoRankNews/7239) we provided a breakdown of monthly fundraising volumes by categories over the year. The data shows that NFT was raising higher amounts during the period from the end of 2021 — beginning of 2022, while Web3’s raises significantly accelerated in this year’s second quarter.
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Crypto VCs are the New Gurus of the Bear Market
Crypto investment funds are the trendsetters. At a time when it is difficult to find good investment opportunities on the public market, large funds are regularly discovering new projects at early stages. Investment managers have become new gurus for the selection of promising cryptocurrency projects, creating new trends in the industry. Tracking their portfolios might be extremely useful for those who want to find early-stage prospective projects and potential airdrop or whitelist opportunities.
Despite the fact that the main goal of cooperation between a project and the VC remains funding, priorities are changing. As mentioned above, the behavior of funds has changed from extensive portfolio expansion to the selection of better projects to support development. This guidance is also important for projects that intend to develop a complete product, as such,interaction between funds and projects has expanded to help in organizing processes, finding employees, and other areas of growth.
Now, in addition to traditionally governed investment funds, decentralized autonomous organizations has become a new trend for running investment funds. Some of them are showing as good as performance as tier 1–2 VC funds, however, they often come across some pitfalls.
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Gaming Guilds stand out as a DAO category, they primarily invest in GameFi projects. Some of them are struggling due to market downturn. The is exasperated by that fact that in-game assets (NFTs, utility tokens) may lose their value much faster than the broader market due to changes in in-game mechanics or play to earn rewards. For example, the token of one of the most popular blockchain games, Axie Infinity, has lost over 90% of its value since its ATH in November 2021. The same goes for their NFTs, which are required to play the game and earn rewards. However, the GameFi industry is quickly developing, and many guilds have already made confident bets on upcoming projects, which may even overtake established leaders as Axie Infinity.
Recently, several major VCs have announced the launch of new high-volume funds. Of note, Sequoia Capital has launched three region-specific funds (China, India, and Southeast Asia) totalling $11.85 billion.
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On CryptoRank.io you can track performance of over 250 major crypto investment funds, including their publicly traded assets and upcoming projects.
There were plenty of venture deals in 2022 that are worth attention and analysis. We are half way through 2022 and it has already became the most important year for crypto fundraising, despite the market downturn. Arguably the most important fundraising event over the past 30 days was the Series A investment round of Aptos, led by FTX Ventures and Jump Crypto.
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Overall, projects are raising lower amounts and valuations are tending to be lower. Nevertheless, many companies are still coming out with new record valuations. Note that the valuations do not appear by coincidence. They reflect future cash flows, and for such significant values, it must be really impressive profits or growth rates. This once again underlines that the crypto industry can make a profit no worse than traditional finance.
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It is worth mentioning Animoca Brands, which recently raised $75 million with a $5.9 billion valuation. Animoca has an outstanding portfolio and is one of the most active investors today. This is a great example of how a company investing mainly in Web3 projects can compete with traditional financial investors.
The poor state of the market has led to an increase in merger and acquisition deals and debt financing. Companies on the verge of bankruptcy (most of which are DeFi projects), for some investors, are an attractive prospect. For example, Sam Bankman-Fried (FTX, Alameda Research), Changpeng Zhao (Binance) and Justin Sun (TRON) have expressed their readiness to save some projects from extinction. However, such investments are a very long game, besides, not many projects have a real chance of survival.
Among the recent M&A deals, it is worth highlighting following:
The mixing of cryptocurrency projects and other companies is continuing to grow and gain momentum. Large projects, such as Uniswap, are doing well by expanding their activities into new areas. NFT is probably the closest to fully-fledged mass adoption, many non-crypto companies are beginning to understand the sector and are ready to develop in this direction.
This fundraising data, in a way, describes the current state of the crypto market, even without mentioning global market cap and price of Bitcoin. Obviously, the activity has slightly decreased over the past few months, and raised amounts are not as high as previously seen. However, investors are finding new promising projects and investing funds into already proven quality ones and thereby stimulating their growth. In a similar way, the market is also being “cleaned up”: weak projects are losing users, followed by their cryptocurrency rate falling.
We are witnessing the accelerating integration of cryptocurrencies into traditional financial institutions, as well as the arrival of a huge number of new users in Web3. It is quite possible that very soon Web3 will become a part of our daily life, as Web 2.0 once became. After all, it is no wonder that many of the large companies of the previous generation are the same investors who are now actively investing in Web3 projects.
Blockchain makes the changes currently taking place available for many users to participate, not just to a select few and large foundations. The widespread amount of information available publicly are allowing crypto enthusiasts to follow the activities of large funds, and the projects themselves are prepared to listen to users and reward them for their input. This is also a distinctive feature of Web3.
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To keep up-to-date on fund performance you can visit the Funds page on CryptoRank: https://cryptorank.io/funds
Brought to you by the organizers of Transform and GamesBeat Summit: Into The Metaverse, MetaBeat will bring together metaverse thought leaders to give guidance on how metaverse technology will transform the way all industries communicate and do business.
Dismal Numbers at OpenSea May Augur Long Winter for NFT Market
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In a sign the NFT market is enduring a brutal winter, OpenSeas trading volume plunged to its lowest level in 13 months on Tuesday.
OpenSea, the No. 1 NFT marketplace, handled $6.5M worth of trades, a fraction of the $204M executed at its peak in February, according to data from DappRadar.
The number of transactions on the site has also plunged by two-thirds in the last six months. As for active players, that, too, is way down with 15,220 traders on the marketplace, a 70% dive from the heady days of February.
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Here For the Art
OpenSea is not the only platform in the dumps. Volume on NBA Top Shot, Dapper Labs NFT sports series, is down 87.4% from its high of $3.17M on April 29.
Theres plenty of gallows humor in the NFT space.
“Im here for the art,” Twitter user apebayc tweeted sarcastically after watching the value of their NFT portfolio slump from $1M to $300,000 in the last 12 months. Bubz0088 replied that their portfolio was worth just $10 after investing $30,000 into NFTs.
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Reality Check
The downturn is a reality check for a market that became a pop-culture phenomenon in 2021. Even as Ethereum and other DeFi stalwarts rally in the runup to The Merge — ETH has soared 41% in the last 30 days — the leading collections in NFT land are swooning.
The floor prices for Bored Ape Yacht Club, perhaps the most celebrated collection with fans such as NBA star Stephen Curry, have plunged 69%, to $128,722, after peaking on May 1.
Other collections are doing even worse. Doodles lost 81% of their value since surging to $67,750 on May 6. Clone X plummeted 82% after peaking at $72,600 on April 4, and Azuki tanked 88% since tagging $108,000 on April 3, according to data from NFT Price Floor and CoinGecko.
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Yet many traders have bailed on NFTs as the bear market in crypto tightened its grip in the third quarter this year. Many may be piously bag-holding as a result of the brutal downtrend of Q2 2022.
According to Google trends, the volume of traffic searching for the keyword NFT surpassed Ethereum in November, and crypto in December. However, interest in nonfungibles appears to have since declined by 85%.
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Meanwhile, only a handful of collections have posted meaningful gains against Ether in recent months. CryptoPunks, the five-year-old blue chip collection, jumped 82% since May 30 to an all-time high of 83.7 ETH on July 18. But it remains down 72% against the dollar.
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It seems NFT holders are retreating to tried and true assets as times get rough. Thats a new role for CryptoPunks.
Dragonfly purchases early Ethereum investor in undisclosed deal
Dragonfly managing partner Haseeb Qureshi formerly worked as a partner at the hedge fund firm
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Cryptocurrency-focused venture capitalist Dragonfly has purchased its first digital assets hedge fund firm backed by Sequoia and a16z.
The acquisition, MetaStable, founded in 2014, is one of the oldest and highest-performing crypto hedge funds. MetaStable was an early investor in Ethereum, Filecoin and Algorand — at one point raking in a return in excess of 500%.
More recently, the fund has invested in trading platform Floating Point Group and layer-1 protocol Iron Fish.
Dragonfly managing partner Haseeb Qureshi, who formerly worked as a partner at MetaStable, in a blog post Monday said the firm is now “more expansive than it’s ever been.”
The news comes months after Dragonfly, based in San Francisco, CA, closed its third crypto venture fund at an oversubscribed $650 million. Its second fund, closed in 2021, cleared $250 million. The company remains interested in native protocols, Web3 initiatives and tokens that aim to create new digital economies, General Partner Tom Schmidt said in May.
Dragonfly will also soon be the new owner of 10 million LDO tokens — equal to 1% of the total supply — after the Lido DAO approved the sale earlier this month. Lido is a liquidity platform where traders can earn yields on staked assets. LDO token holders came to an agreement after floating different versions of the proposal.
Dragonfly committed to buying the LDO tokens at $1.45 apiece, or at the two-week average price as of the vote plus a 5% premium, whichever is higher. There is a one-year lockup period.
As part of a brand overhaul, also announced Monday, the firm has dropped “Capital” from its name.
The acquisitions and rebranding effort fit into Dragonfly’s broader goal to reintegrate itself as a crypto-native brand. Its new look is affectionately inspired by the “hacker” and “weirdo” culture often displayed throughout the space, according to Qureshi.
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