Posts from Web3

What Happened In 2021

As is my custom here at AVC, I like to end the year looking back and start the year looking forward.

This post will be the look back and I started by revisiting my look forward into 2021 that I wrote on New Year’s Day 2021.

In my typical optimist fashion, I was dead wrong about how quickly the pandemic would fizzle out. I predicted that vaccines plus immunity from those who had been infected would end the pandemic by mid-year 2021. That was obviously totally wrong and I am sitting here isolating with my own Covid case (seven days in now). I can’t imagine a more appropriate “punishment” for getting that one wrong.

I got the rest mostly right and when I look back at 2021, what I see is a world that is changing before our very eyes; becoming more digital (leading to metaverse fever in tech), less tethered to a job and place to work (and live because of work), warmer, more prone to natural disasters, and tribalizing along different dimensions than what has divided us in the past.

In truth 2021 was a deeply troubling year and no wonder that mental health issues abound among all of us, but particularly our young. Nothing seems right anymore. We must face that and then fix it.

Of course, 2021 was a great year for the financial markets, both stocks and blockchain assets. Even with a big year-end selloff, which I believe was mostly tax-driven (we will see soon if I am right about that), investors who owned tech stocks and blockchain assets saw huge gains in 2021. USV was no different. We had a banner year.

But that also means that it is on us who have benefitted the most to work harder and invest to address some of these troubling issues. We are doing that with our first climate fund, which we have been investing aggressively and we hope to have a second one to invest before the end of 2022. We are seeking to both invest in technologies/companies that can mitigate the climate crisis and that can help us adapt to the changes that are permanent and we must accept that many will be.

I want to return to the pandemic before I wrap this year-end post. Sitting here with a mild case but isolating so I don’t pass it on brings home for me that our society has really struggled to find the right balance between what is right for the individual and what is right for society during this pandemic. We can’t agree on anything. Vaccines, masks, lockdowns, schools, offices, etc. Those who have a high tolerance for risk believe that we have gone way overboard in trying to manage this pandemic when we never could. Those who believe in government, public health, etc, believe that those with a high tolerance for risk are putting all of us at risk. And I think the truth lies somewhere in between. This pandemic is a metaphor for the broader inability of society to find a way to move forward together.

Beyond climate or covid, it is this plague of dissension, doubt, fear, disrust, hate, and worse that is our biggest challenge and one that is very much raging across our world right now. That’s what 2021 brought home for me.

#climate crisis#Current Affairs#VC & Technology#Web3

Why Web3?

Over the last month, there has been a ton of debate and conversation about web2 vs web3 with many leading voices raising doubts about web3. Debate and doubt are healthy. And web3 enthusiasts, particularly on Twitter, remind me of missionaries trying to recruit the unwashed to their belief system. Frankly, it is all too much for me.

However, the debate is important, the pushback is healthy, and ultimately web3 will have to deliver on its promise which means teams building things that provide new unique value to society. If that doesn’t happen, then web3 will turn out to be the snake oil that some are suggesting it is. I am confident that won’t happen, but it is important to understand that the proof is in the pudding and talk is cheap.

With that backdrop, I want to point everyone to a post my partner Albert wrote yesterday that explains why we at USV believe that web3 will allow teams to build new things that provide unique value to society.

It all comes down to the database that sits behind an application. If that database is controlled by a single entity (think company, think big tech), then enormous market power accrues to the owner/administrator of that database.

If, on the other hand, the database is an open public database that is not controlled and administered by a single company, but instead is a truly open system available to all, then that kind of market power cannot be built up around a data asset. As Albert says in his post:

It is difficult to overstate how big an innovation this is. We went from not being able to do something at all to having a first working version. Again to be clear, I am not saying this will solve all problems. Of course it won’t. And it will even create new problems of its own. Still, permissionless data was a crucial missing piece – its absence resulted in a vast power concentration. As such Web3 can, if properly developed and with the right kind of regulation, provide a meaningful shift in power back to individuals and communities.

You can already see this effect at work in the most developed areas of web3, like decentralized finance (aka DeFi) where literally hundreds of financial applications have been built on top of Ethereum that all share the same database and users can move from application to application, keeping their data (and their login credentials stored in their wallet) as they go.

But until teams build the same experiences for a wide swath of consumer and business applications, we will continue to have this debate. As we should. The good news is there are literally tens of thousands of teams building new things on a web3 stack now. Some of the best entrepreneurs and developers have moved over. The tooling is getting better. It reminds me of the early days of web2 in 2001/2002/2003, when we started USV. That was also a time of great cynicism. We almost did not get our first fund raised. Nobody was buying the story we were telling. But of course, that story turned out to be true. And I am confident this one will too.

#Web3

Swapping NFTs

We own a fair number of NFTs that I have collected since 2017 when I was buying Rare Pepes and CryptoKitties. We have accumulated a nice collection of Top Shots and a bunch of other NFTs as well.

But I don’t want to sell our NFTs. We also don’t like to sell the art we have collected over the years. We also don’t like to sell the crypto assets we hold.

But I am very interested in swapping NFTs for other ones.

Here’s how I would imagine an NFT swapping service would work.

1/ I visit the swapping service and connect with a wallet.

2/ I list the NFTs that I own that I am willing to swap.

3/ I browse the service to see the NFTs that others have listed to swap.

4/ I find an NFT I would like to swap and I make a swap offer to the owner.

5/ The owner accepts, declines, or proposes a different swap.

6/ If a swap is accepted, it is processed on-chain.

I could imagine that swaps would not need to be one NFT for another NFT, although you might start there. Over time, you could end up with multiple NFTs for a single NFT, or possibly one NFT for another plus some crypto to sweeten the deal.

I have been asking around to find a service like this and have not found one yet. If you know of such a service, pls let me know via email or Twitter. If there isn’t one, maybe someone should build it.

#Web3

Buying Crypto Assets

A number of friends have been asking us how to buy crypto assets. This is not the first time we’ve gotten this question and it won’t be the last.

When I first started getting this question, my answer was “open a Coinbase account and buy Bitcoin.”

Then there was a period when my answer was “open a Coinbase account and buy Bitcoin and Ethereum.”

Today, my answer is “open a Coinbase account and buy a diverse set of crypto assets.”

A diverse set of crypto assets would include Bitcoin, Ethereum, the other major layer one blockchains (Solana, Flow, Avalanche, Polkadot, Algorand, etc), the major Defi protocols (Uniswap, Aave, Compound, etc), storage protocols (Filecoin, Arweave, etc), telecommunications protocols (like Helium), some layer two protocols (like Stacks, Polygon, etc), some gaming assets (like Axie, Decentraland, etc), a maybe some NFTs.

That last paragraph is not meant to be specific. It is meant to be illustrative. And that list contains assets that I own and USV owns as well as many assets that I and USV do not own. I am not recommending any specific assets here. I am recommending a diverse portfolio and those are some good examples of what might be in one.

I do not believe the web3/crypto opportunity can be captured by simply holding Bitcoin and Ethereum anymore. You must own a broader set of assets because the market is expanding beyond the OGs now and you need to be exposed to more of it.

I believe there will be index funds that can do this for you someday. But today your options are limited unless you have the wealth and access to the premier token funds and that is hard to achieve.

Finally, I have no idea where we are in this bull cycle we are in (that is leading to so many people asking us this question right now), so I would be conservative and dollar cost into crypto. If you want to put $10,000 into crypto, I would put $1,000 a month each month for the next ten months, for example. It is hard to be patient like that when prices are rising so fast, but they can fall even faster so it is best to be careful and conservative with an asset class like this.

Finally, these are very long-term investments. If you want to buy crypto assets, you should think of them as a ten-year buy-and-hold portfolio (or longer). That will help you make better decisions as you invest in this exciting new asset class.

I wrote this mostly to send to friends who ask but figured I’d share it with everyone else too. Good luck, be careful, be patient, and have a long-term view when investing in high-risk assets.

#crypto#Web3

Dapper Collectives

Our portfolio company Dapper Labs, creator of CryptoKitties, the Flow Blockchain, and the NBA Top Shot collectible game, is announcing Dapper Collectives today.

Dapper Collectives comes by way of an acquisition of Brud, a company that has been developing “community-owned media and collectively built worlds” for the last five years. Dapper Collectives will be led by Trevor McFedries, the founder and CEO of Brud and the co-founder of the FWB DAO. Trevor is also an LP at USV.

Dapper Collectives has a mission to “bring decentralized organizations (“DAOs”) to the mainstream”. The initial efforts of Dapper Collectives will include:

  • Bring community ownership and collective building to Dapper Labs products –– starting with Lil Miquela and her 10 million fans;
  • Build and release open source tools to help other mainstream communities engage in decentralized ownership and governance on Flow blockchain;
  • Help the most forward-thinking “web 2” companies decentralize their operations, engaging at the CEO and Board of Directors level to assist in tokenomics as well as technical implementation.

DAOs are quickly becoming the preferred organizing model for crypto projects, community efforts, and investing activities in Web3 and Dapper Collectives will energize these activities on the Flow blockchain.

#crypto#Web3