The blockchain ecosystem is constantly evolving, but there always seems to be one overarching sector that dominates at a given time. Decentralized finance (DeFi) projects, for example, received significant VC funding in 2021, making it the industry with the most investment last year. The survey results further show that non-fungible tokens (NFTs) are the second largest investment area, while Web3 and infrastructure come in third.
Now, Web3 is proving to be the most sought after investment area in the blockchain industry. New findings from Cointelegraph Research confirm this, showing that Web3 accounted for around 42% of all single transactions in the second quarter of this year, while DeFi came in second with 16%. Interest in Web3 is also growing as venture capital giants like Andreessen Horowitz (a16z) close multi-billion-dollar funds dedicated to investing in Web3 projects.
Web3 also caught the attention of Wing Venture Capital, a Silicon Valley-based investment firm focused on early-stage enterprise technology companies. Wing recently hosted a virtual Web3 Builders Summit with FTX CEO Sam Bankman-Fried and Solana co-founder Anatoly Yakovenko to help early founders better understand best practices for building a Web3 ecosystem.
Wing partner and summit host Zach DeWitt told Cointelegraph that the firm has been investing in Web3 since 2017, but that the industry is structurally more capitalized than ever. “The best time to invest is in a historical bear market. Prices drop and tourists are scared away,” he said.
Join me tomorrow at 10AM PST to discuss building in Web3 with @SBF_FTX and @aeyakovenko! https://t.co/aARnfa9GRM
— ZacharyDeWitt (@ZacharyDeWitt) July 18, 2022
However, confusion surrounding Web3 persists, as DeWitt points out, despite Wing’s many interviews with founders, there are still a handful of early-stage companies that may not know how to build and scale. With this in mind, DeWitt commented that the recent Web3 Builders Summit aimed to address these issues. “We hope this virtual summit will focus on building, scaling and founder lessons — things that the early Web3 community can absorb and hopefully make the entire ecosystem stronger,” he commented.
learn from mistakes
Wing’s Web3 Builder Summit begins with Bankman-Fried discussing some of the mistakes he made early in his career. “We screwed up a lot,” the executive admitted. For example, Bankman-Fried shared an embarrassing moment when FTX was initially launched, noting that at the time he thought 99% uptime would be a remarkable achievement:
“I thought it would be very good, even if 100% would be better. But it turned out not to be true, because it turned out that it is very important for customers to trade anytime, anywhere. If we were down for 10 minutes a month, that would be It was horrible, so we had to go back and redesign some of our systems.”
Bankman-Fried also mentioned that early FTX focused on product prioritization, but pointed out that many of the products initially launched by the cryptocurrency exchange did not receive attention.
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“When you look at institutional traders, order throughput is significant. We should have prioritized earlier,” he said. Bankman-Fried further noted that FTX customers were phished in the early days of the exchange. He said FTX has safety features to prevent this, but these are optional. “Many of these features are now mandatory because we realize it’s very important to our users. Security cannot be optional,” he said.
Yakovenko, who previously led the development of the operating system at Qualcomm, told Cointelegraph that he helped develop products such as the Amazon Fire phone, as well as other previously failed devices. With this in mind, Yakovenko explained that he intends to build Solana’s Android mobile device Saga for a small audience made up of the Solana developer ecosystem and the crypto community. “The initial user target is developers, core Solana people using Magic Eden NFTs and DeFi. There are already around 2 million monthly active users, but we are aiming to reach 50,000 active Web3 mobile users in the future,” he said.
In a fireside chat, Yakovenko added that founders launching Web3 products should choose their partners wisely. To put this in perspective, Yakovenko explained that he connected with Bankman-Fried early in his career, noting that the FTX CEO told him the need to make the blockchain faster. Yakovenko explained that FTX’s engineers then attacked the Solana network, which led the company to develop Project Serum, Solana’s decentralized derivatives exchange. “Early-stage founders need partners who are aligned with their vision and can help execute immediately,” Yakovenko said.
According to DeWitt, one of the biggest takeaways from the Web3 Builders Summit was hearing Bankman-Fried and Yakovenko discuss their mistakes. “It’s amazing to see these CEOs operate with such humility and transparency,” he said. DeWitt further noted that both Bankman-Fried and Yakovenko were quick to announce platform issues on Twitter to keep their communities informed. “Twitter is at the heart of the crypto community, which is why it’s important for FTX to use the platform on a regular basis,” Bankman-Fried commented.
Assessing Web3 Recruiting Culture
The Web3 recruiting process was also a topic during the Builders Summit. These takeaways are key given the rapid growth of Web3 developers since 2021. Bankman-Fried initially emphasized the notion that many companies tend to overhire rather than underhire. However, he points out that in the long run, this often leads to lower productivity. He says:
“When running a business, it’s easy to fall into the trap of hiring a lot of great people, and then you end up with a complete spread of responsibility. Then you have so many cooks in the kitchen that no one knows what anyone is supposed to do.”
Bankman-Fried also said companies shouldn’t hire new employees unless they’re going into a team that’s already working well but has too many responsibilities assigned. “The current team needs to be at the company long enough to know how to do their job well. They also need to have the managerial skills to teach new people,” he said.
In terms of recruiting developers, Yakovenko shared that during the 2018-2019 bear market, it was difficult due to the lack of interest in layer 1 blockchains. “We host small events and sometimes I’m the only one there,” the founder said. However, Yakovenko explained that after FTX incubated Serum in July 2020, Solana’s developer ecosystem took off.
Best Web3 Use Cases
While Web3 is rapidly gaining traction, it’s important to recognize the potential behind different use cases. For example, Yakovenko explained that NFT marketplaces like Solana’s Magic Eden and OpenSea generate billions of dollars each year without using any elements of the Web2 economy. “There is no ad exchange involved or the theft of user data,” he said. According to Yakovenko, this represents a fundamental shift in the way businesses operate in terms of digital ownership.
Yakovenko also mentioned that it is increasingly important for Web3 applications to run on mobile devices, noting that encryption “has been stuck on the desktop” for years:
“If you look at most of the activity and sales that happen on Magic Eden and OpenSea, you see that everything is mostly happening on desktop. It’s crazy considering every app is mobile-first these days.”
According to Yakovenko, this is due to the poor user experience of encryption-based applications on mobile devices. The app store itself still doesn’t support encryption, he said, noting that the newly released Solana Mobile Stack aims to solve these challenges by making it “a first-class citizen of encryption on the mobile side.” Web3 applications built on the Solana Mobile Stack do not require usernames and passwords because they are privacy-first by default, Yakovenko said. “Everything will be designed through the ‘Mobile Wallet Adapter’, a protocol that connects web apps and native Android apps to wallets on mobile devices. We’ll see apps once developers have a chance to build the user experience Drive Saga adoption.”
While the Web3 mobile experience is appealing, Bankman-Fried noted that FTX is interested in blockchain-based social media platforms. “I think blockchain can help connect different social media platforms and create a unified data transport layer,” he said in a fireside chat. Bankman-Fried also highlighted the use case in a detailed Twitter post on July 16.
31) Suppose we put the message on the blockchain.
So if you use Blockchain-Twitter (BT):
–You enter a message in BT’s interface –BT publishes the message on the public blockchain –your friend pulls out Blockchain-Facebook (BF) –BF reads your message and displays it
— SBF (@SBF_FTX) July 16, 2022
Driving Mainstream Adoption of Web3
The latest data from Apptopia found that apps with “Web3” in their title or description, available for download on iOS or/and Google Play, will grow almost 5x faster in 2022 than in 2021. But mainstream adoption of Web3 platforms and applications is still underway.
According to Bankman-Fried, the biggest barrier to mainstream adoption is scalable blockchains. “We need to get the blockchain to a million transactions per second to support a billion users,” he said.
Additionally, he believes there should be native integration with mobile devices and point-of-sale devices that can accept blockchain payments. However, while these elements will help increase adoption, Bankman-Fried also recognizes that clear regulation is required to enable these capabilities. “The regulatory clarity will allow institutional investors to step into the space and feel more comfortable,” he said.
Yakovenko mentioned product-market fit as another challenge for Web3 growth, noting that it has always been a challenge for teams to develop “good products that people want.” While Yakovenko is optimistic that Saga will revolutionize mobile devices, he commented that Solana’s recent network outage is the biggest hurdle to overcome.
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While Solana has had at least seven complete or partial outages in the past 12 months, Yakovenko explained that Solana’s recent 1.10 release helped the network run smoothly. “There’s a lot of technology in this release that we haven’t activated to make the network immune to the congestion attacks we’re seeing,” he added.
Fortunately, Web3 is still in its early stages, and both Bankman-Fried and Yakovenko are optimistic about where the industry is headed. Bankman-Fried ended his fireside chat by sharing that FTX is focused on being a leader in market structure, noting that the exchange is currently working to build on this to ensure improvements. He also mentioned that FTX is considering creating a payment network.
As for Yakovenko, he explained that his victory circle occurs when Web3 applications become so compelling that consumers buy Web3-enabled mobile devices. “Encryption has revolutionized the way people use the web, as we’ve seen with chrome extensions used. If we can prove this on mobile, it’ll be a game changer.”