By Callais Team
What is Web3?
Relatively bullish on the space, Web3 is an exciting vision of the future where each user has control and a level of anonymity of their own data, verified by a blockchain ledger. Crypto assets have a collective market cap of near $2 trillion dollars today with over 17,00 cryptocurrencies and 24 hour volume of $58 billion of trading. This technology is revolutionizing decentralized decision making, finance, art, digital real estate, gaming, metaverse, and notably supporting secure ownership records for digital and non-digital assets from everything from medical records, ownership of real assets, supply chain and operational use cases to personal collectibles. Many of these use cases can change the way how organizations, governments, and business operate, but there are also some significant scalability challenges and “nice-to-have” features that are having a moment.
One concern with Web3 is that the decentralization of the internet will eventually be consolidated, acquired, and turned into the next big mega corporation. Jack Dorsey sure thinks so. Many large institutional investors and crypto institutions are investing billions of dollars into companies and applications that support the development of the space. Another concern is that computing power of today’s supercomputers can and will compute data and information more rapidly in the future. This speed could jeopardize blockchain ledgers by instantaneously being backtracked, wiping out the promise of security. Additionally, there are some scalability concerns for each of the crypto systems such as Ethereum, Bitcoin, Solana, Ripple, Cardano, and many others.
Blockchain and Crypto
Will our future be written with blockchain technology on a public ledger? Jockeying for position in the space are many blockchain platforms that offer a range of benefits; reliability, security, speed. Yet all of them, as I’m writing this article, tend to be really great at one or two, but not all three. Bitcoin transactions are slow and Ethereum is known for its very high transaction costs or “gas fees.” Solana is significantly faster than the last two in terms of transaction speed and cost, but it doesn’t share the same scale of development as Ethereum. Many blockchain companies also rely on Proof of Work “PoW” mining, too, which can be considered the new coal with the extensive computing power required to verify transactions and support a growing worldwide platform, that in some cases requires extra computing power for smaller amounts of bitcoin to be mined. To solve these issues, layer 2 blockchains were created that sit on top of existing layer 1 chains such as Ethereum which allow for applications to be built that can work around some of these issues of high transaction fees or scalability issues. Notable examples are Polygon, Loopring, Skale, and OMG Network.
There are also blockchains being built that no longer use Proof of Work mining to help fix the high environmental impacts. These blockchains utilize Proof of Stake “PoS” mining like Solana. PoS utilizes much less extensive computing power by using staked assets by users to which gives them the right to check new blocks of transactions and add them to the blockchain and earn rewards for doing it.
It is appealing to consider every user having the power to control their own online presence; get compensated based on your own data produced vs a third party profiting, or participating in a self-sustaining system to manage data in a lower cost way without the need for a middleman. By assigning each individual their own unique digital token for all assets, a “ledger” is created to verify your assets and identity without exposing you to malicious activities. But there’s a long way to go and lots of easy money flowing into this space in get rich quick projects that will ultimately fail, so it requires a significant investment of your time prior to jumping into this new wild west for investing. Not all projects are equal and there’s still a lot of shaking out of bad projects, regulations, and changing fortunes of various platforms before any becomes ubiquitous. various layer 1 and layer 2 blockchains and NFTs have risen and fallen in importance already and there’s extreme volatility in this space. But it’s clear that blockchain technology is here and it’s so important to understand it.
Notable Companies:
- Kraken – one of the largest exchanges in the world
- The Graph is indexing data from blockchain transactions and activity to create useful insights much like a company like Google does with your data
- OpenSea is the largest NFT platform to buy and sell your NFTs which allows artists to keep a residual fee on every future sale
- Basic Attention Token – compensates you for your data as you scroll around the internet – unlike a Google or Facebook.
Before mass adoption of Web3, startup companies need to provide verifiable proof that a new system is better than the previous one. Many companies have failed in proving the viability of a new hope, but a few companies have successfully used blockchain technology to reinvent the system. Symbiont is a decentralizing finance company using its technology in practice today supporting Vanguard and State Street with over $2.3 billion dollars of assets running on its blockchain as a real world success to save money by verifying transaction data securely without the need for intermediaries. The company is also operates platforms to revolutionize margin calculations, foreign exchange settling and swap contracts, and much more. Callais Capital Holdings made a non-fund related seed investment back in 2016.
Are you a startup founder in the Gulf Coast? It’s never too early to reach out to us, even if it’s early in your fundraising process. We know that companies take time to turn a profit and find their product market fit. But we would love to hear from you.