Although the blockchain ecosystem is ever-evolving, there always seems to be a dominant sector at any given time. Decentralized finance (DeFi), for example, received a significant amount of venture capital funding last year, making it the most-invested sector. Further, nonfungible tokens (NFTs), Web3 and infrastructure were the most invested sectors.
Web3 is now the most desired investment sector in blockchain. Cointelegraph Research has revealed that Web3 accounted for 42% of all deals in Q2 2018, while DeFi was second with 16%. Venture capital giants such as Andreessen Horowitz, a16z, have opened billion-dollar funds to invest in Web3 projects.
Wing Venture Capital is also interested in Web3, a Silicon Valley-based investment company that invests in early-stage enterprise tech companies. Wing hosted a virtual Web3 Builders Summit in partnership with Sam BankmanFried, CEO, FTX, as well as Anatoly Yakovenko (co-founder of Solana), to assist early-stage founders in better understanding best practices for building Web3 ecosystems.
Zach DeWitt (partner at Wing) told Cointelegraph that Wing has been investing in Web3 from 2017 and that there is structurally more capital than ever before. “The best time to invest is in bear markets historically. Prices are down and tourists are scared off,” he said.
— Zach DeWitt (@ZacharyDeWitt) July 18, 2022
Web3 remains ambiguous. DeWitt stated that Wing does many interviews with founders and that there are still a few early-stage companies not aware of how to build and scale. DeWitt noted that the Web3 Builders Summit was created to address this issue. “We wanted this virtual summit to focus on building, scaling and founder lessons — things that the early Web3 community can absorb and which will hopefully make the whole ecosystem stronger,” he remarked.
Learning from past mistakes
Wing’s Web3 Builder’s Summit began with Bankman-Fried discussing some of the mistakes he made early in his career. “There were plenty of things we screwed up,” the executive admitted. Bankman-Fried mentioned that he was embarrassed by the launch of FTX. He said that he didn’t think 99% would be a huge achievement at the time.
“I thought this would be damn good, even though 100% would have been better. But this didn’t turn out to be correct, as it turns out that it’s incredibly important for customers to trade whenever they want to trade. It would be horrific if we are down for even 10 minutes every month, so we had to go back and rework some of our systems.”
Bankman-Fried mentioned that FTX initially emphasized product prioritization. However, he also noted that many of the products that were launched at the time by crypto exchanges did not gain traction.
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“When you look at institutional traders, order throughput means a lot. We should have prioritized that earlier,” he said. Bankman-Fried further pointed out that FTX customers were phished during the exchange’s early days. He stated that FTX had security measures that could have prevented this but these were not mandatory. “Many of these features are now mandatory because we realized this was really important for our users. Security can’t be optional,” he remarked.
Yakovenko, who was previously a Qualcomm operating system developer, explained to Cointelegraph that he helped create products like the Amazon Fire phone, and other devices that had failed. With this in mind, Yakovenko explained that he intends to build Solana’s Android mobile device Saga for a small audience consisting of the Solana developer ecosystem and the crypto community. “The initial user target are developers, hard core Solana folks that use Magic Eden NFTs and DeFi. There are already about 2 million monthly active users, but our goal is to reach 50,000 active Web3 mobile users moving forward,” he said.
Yakovenko said that founders of Web3 products should choose their partners wisely during his fireside conversation. Yakovenko said that he met Bankman-Fried in the early stages of his career and that FTX’s CEO had told him that blockchains needed to be made faster. Yakovenko explained that FTX’s engineers then slammed the Solana network, which led the company to develop Project Serum, a decentralized derivatives exchange for Solana. “Early-stage founders need partners who are aligned on their visions and can help execute immediately,” said Yakovenko.
DeWitt said that one of the most important takeaways from Web3 Builders Summit, according to DeWitt was listening to Yakovenko and Bankman-Fried discuss their mistakes. “It’s just awesome to watch those CEOs operate with such humility and transparency,” he said. DeWitt also pointed out that Yakovenko and Bankman-Fried are quick to tweet about platform issues to keep their communities updated. “Twitter is where the core of the crypto community is, which is why it’s important for FTX to use the platform regularly,” Bankman-Fried commented.
Evaluation of the Web3 culture for hiring
The topic of Web3 recruitment was also a hot topic at the Builders Summit. These are important, given that Web3 developer growth is on the rise since 2021. Bankman-Fried first stressed the idea that many companies overhire instead of underhiring. He pointed out, however, that this can lead to lower productivity over the long-term. He stated:
“When running a business it’s easy to fall into a trap where you hire a lot of good people and then end up with a total diffusion of responsibility. You then have too many cooks in the kitchen and no one is sure what anyone should be doing.”
Bankman-Fried also said that companies shouldn’t hire new employees unless they will be entering a team that is already run well but has too many responsibilities allocated. “The current team needs to have been at the company long enough that they know how to do their jobs. They also need to have the management capacity to teach someone new,” he said.
In terms of hiring developers, Yakovenko shared that during the 2018–2019 bear market, this was difficult due to the lack of interest in layer-1 blockchains. “We hosted small events and sometimes I was the only one there,” the founder said. Yet, Yakovenko explained that Solana’s developer ecosystem took off following FTX’s incubation Serum July 2020
The best Web3 uses
Although Web3 is quickly gaining traction, it’s important to recognize the potential behind different use cases. For instance, Yakovenko explained that NFT marketplaces like Solana’s Magic Eden and OpenSea are both generating billions in revenue each year without using any elements of the Web2 economy. “There are no ad exchanges involved or stealing of user data,” he remarked. Yakovenko believes this shows a fundamental shift in business operations in terms of digital ownership.
Yakovenko also mentioned that it’s becoming critical for Web3 applications to operate on mobile devices, noting that crypto has “been stuck on desktops” for years:
“If you look at most of the activity and sales happening on Magic Eden and OpenSea you will see that everything is mainly taking place on desktops. This is crazy, considering that every application now is mobile first.”
Yakovenko claims that this is due in part to the poor user experience of crypto-based mobile applications. He said that app stores still don’t support crypto natively, noting that the newly released Solana Mobile Stack aims to solve these challenges by making “crypto first class citizens on mobile.” Yakovenko stated that Web3 applications built on the Solana Mobile Stack will not require usernames and passwords, as they will be privacy-first by default. “Everything will be designed through a ‘mobile wallet adapter,’ which is a protocol for connecting web apps and native Android apps to wallets on mobile devices. Once developers have the opportunity to build user experiences, we will see apps drive adoption for Saga.”
Web3 mobile experiences can be compelling. Bankman-Fried however pointed out that FTX was interested in blockchain-based social networks. “I think blockchain can help bridge different social media platforms, creating unifying layers of data transfer,” he said during his fireside chat. Bankman-Fried highlighted He posted this case in a detailed Twitter thread on July 16
31) Let’s say that, instead, we put messages on a blockchain.
If you use Blockchain-Twitter, (BT),:
–You type the message in BT’s interface
–BT posts the message to a public blockchain
Your friend pulls out Blockchain Facebook (BF).
–BF will read your message and display it
— SBF (@SBF_FTX) July 16, 2022
Web3 adoption is a priority
Apptopia has the most recent data found that apps with “Web3” in the title or description available for download on iOS or/and Google Play are growing almost 5x faster in 2022 than in 2021. Web3 apps and platforms are still being mainstreamed.
Bankman-Fried believes that the greatest obstacle to mainstream adoption of blockchains is scaling them. “We need to get blockchains up to a million transactions per seconds to support a billion users,” he said.
He also believes that there should be native integrations to mobile devices and point of sale devices that accept blockchain payments. These elements will boost adoption, but Bankman Fried is aware that regulations must be clear in order for these features can be implemented. He said, “Having regulator clarity will allow institutional investors to get involved in this space and feel more comfortable.”
Yakovenko mentioned that product market fit is another challenge facing Web3 growth, noting that it’s been challenging for teams to develop “good products that people want.” Although Yakovenko is optimistic that Saga will revolutionize mobile devices, he commented that Solana’s recent network outages have been the biggest hurdle to overcome.
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While Solana suffered full or partial outages at least seven separate times over the past 12 months, Yakovenko explained that Solana’s recent 1.10 release has helped the network run smoothly. “There are a lot of technologies in that release that we haven’t activated yet to make the network stable from the congestion attacks we have seen,” he added.
Web3 is still very young and Yakovenko and Bankman-Fried are both optimistic about the future of the sector. Bankman-Fried ended his fireside chat by stating that FTX is determined to be a leader in market structure and that the exchange is currently building this out in order to make improvements. He mentioned that FTX is considering creating a payment network.
Yakovenko explained that his victory lap is when a Web3 app becomes compelling enough that consumers purchase Web3-enabled smartphones. “Crypto revolutionized how people use the web, as we’ve seen chrome extensions utilized. If we can prove this in mobile devices, that will be a game changer.”