Interview with Blockchain Capital: What Web3 sectors are you bullish on in 2023?
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Interview with Blockchain Capital: What Web3 sectors are you bullish on in 2023?
What verticals might take off in 2023, frameworks for investing in verticals, and tools that make it easier to build in Web3?
Navigating Web3 tides with focused insightsWritten by: Revelo Intel
Compiled by: TechFlow
In this podcast episode, host Jason Choi speaks with Blockchain Capital partners Kinjal Shah and Yuan Han Li about verticals that may take off in 2023, frameworks for investing in verticals, and tools that make Web3 development more accessible.
Below are our notes from the podcast.
Introduction
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The collapse of FTX demonstrated the need for decentralized systems.
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Kinjal Shah joined Blockchain Capital in 2018 after working in TradFi, focusing on consumer infrastructure within the investment team, particularly in NFTs and DAOs.
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Yuan Han Li has been with the Blockchain Capital team for eight months, focusing on scaling and decentralized infrastructure.
Exploring Consumer Verticals
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Focus is on consumer infrastructure and providing foundational tools to make it easier for users to access applications in the space.
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NFT infrastructure is well-developed, with companies like Stardust and Upshot focusing on NFT pricing data, and WorkDAO addressing compliance challenges.
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Crypto markets are not yet ready for consumer-facing applications such as Airbnb or ride-sharing platforms.
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Wallet user experience needs improvement, and developers require smoother integration of in-game assets into their games.
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The focus should be on taking initial steps to improve infrastructure and prepare for consumer adoption.
Account Abstraction Improves Wallet UX
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Account abstraction is a concept within the Ethereum community focused on reducing the importance of private keys in the blockchain ecosystem.
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It aims to find ways to make private keys less critical—such as programmable accounts controlled by multiple keys or other security mechanisms.
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This approach can make blockchains more user-friendly and accessible while preserving the core value of self-custody.
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Account abstraction enables programmable wallets with features like key rotation and multiple keys with different permission levels.
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Private keys remain a major barrier for new users entering crypto, and account abstraction may be the best solution to reduce their significance.
Unlocking More Use Cases for NFTs
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The concept of dynamic NFTs holds potential to unlock a range of new use cases.
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Dynamic NFTs introduce programmability, allowing metadata to change over time—enabling evolving appearances or financial contracts with expiration dates.
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Data tracking, indexing, and specialized infrastructure—for example, Uniswap V3 positions—are important sub-sectors.
Applications Building Their Own Chains and Rollups
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There are trade-offs when choosing between chains and rollups, including sacrificing composability, sovereignty issues, and fee capture.
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Ultimately, rollups will prevail, and applications will choose rollups to gain greater autonomy.
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Some projects, such as Ethereum and Solana, due to being constrained by their roadmaps, would benefit commercially from having more control over value capture and product experience.
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Using app-specific chains makes more sense for gaming.
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Ultimately, the choice depends on the specific application and project deciding between these two models.
Making Web3 Development More Accessible
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Blockchain is not yet ready for a no-code era.
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The technology should be easy to use to encourage application development.
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The blockchain space is now ready for Web2 developers to build on top of it.
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Zksync, Scroll, and Polygon are willing to help Web2 developers choose the right solutions and assist with development.
Layer 1 Landscape and New Developments
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The future of the blockchain industry lies in modularity.
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Building rollups allows innovation at the virtual machine level without compromising security and decentralization.
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Starting fresh on a new Layer 1 blockchain—building new trust networks and VMs—is seen as unnecessary extra work. People underestimate the time and effort required to bootstrap a new L1—it's difficult and takes around five years.
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Once L2 tokens launch and gain attention, developers on new L2s will recognize the benefits of building on rollups, enabling them to innovate within their specialized domains.
Value Capture for dApps vs. Protocols
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A key debate in crypto consumption is whether to build applications first and then bootstrap protocols, or start with protocols and attract developers to build apps on top.
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The application layer is crucial for future consumer growth.
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Applications have the potential to generate more economic value than protocols, which could shift incentives away from pure protocol development.
Projects to Watch in 2023
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WorkDAO helps DAOs and Web3 companies legally pay contributors, enabling participation in Web3 without worrying about how token earnings cover rent.
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Zksync is user-friendly and fully EVM-compatible, allowing developers to deploy their applications with minimal changes.
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