2 years ago
Around the Block from Coinbase Ventures sheds airy connected cardinal trends impacting the crypto ecosystem. In this edition, the Ventures squad provides an update connected Coinbase Ventures enactment successful 2021-Q3, and cardinal learnings from astir the industry.
Coinbase Ventures (or “Ventures”) has grown into 1 of the astir progressive VC investors successful crypto by woody count. In Q3, Ventures made a grounds 49 investments, averaging a caller woody each ~1.8 days. This is up from 28 investments made successful Q2, and 24 successful Q1. As of Q3 2021, the Ventures portfolio size stands astatine implicit 200+ companies and projects.
On a cumulative basis, 90% of the superior invested by Ventures has been deployed successful 2021 YTD, reflecting the accelerated gait of Coinbase Ventures successful its 4th twelvemonth of operation. 50% of the caller unsocial “logos” successful the portfolio person besides travel successful 2021.
Motivation & philosophy
Coinbase Ventures superior mandate is to enactment the increasing crypto ecosystem. As such, we put broadly crossed the abstraction successful beardown entrepreneurs driving crypto forward. We privation the crypto ecosystem to bloom and are not focused exclusively connected circumstantial outcomes (as is emblematic with firm task capital).
Ultimately, we spot crypto arsenic a rising tide, and maturation successful the ecosystem lifts each boats — Coinbase included. Traditional strategical benefits, specified arsenic commercialized partnerships and imaginable M&A, are great, but we presumption them arsenic icing connected the cake.
Investment Categories
Coinbase Ventures investments scope from six-figure effect deals to multi-million dollar maturation rounds. There are galore ways to portion our investments, but astatine the highest level we interruption down the marketplace crossed the pursuing categories: Protocols + Web3 infrastructure, DeFi, CeFi, Platform + Developer Tools, NFT / Metaverse, and Miscellaneous.
Our existent organisation of full investments by institution is arsenic follows:
*Coinbase Ventures portfolio company
In our astir progressive 4th to date, we saw dense improvement crossed centralized concern (CeFi) successful the United States, Layer-1/Layer-2, cross-chain protocols, arsenic good arsenic Web3 tooling. Here’s immoderate of the large themes we observed.
Regulators and centralized players waded deeper into the crypto waters
Regulatory bodies made their beingness much wide known successful Q3, arsenic the SEC and Treasury Department successful the US, and the Financial Action Task Force (FATF) internationally, each stepped up engagement crossed the crypto ecosystem. This has introduced immoderate forms of regulatory hazard for aboriginal signifier protocols and teams. On the flip side, the largest headdress plus scored affirmative tailwinds successful the signifier of the BTC Futures ETF support which we judge volition let latent superior to participate crypto markets, starring to important volumes, inflows, and interest.
Web 2.0 companies similar Square, Twitter, Stripe, and Tik Tok besides expanded their crypto strategies successful Q3. Square announced a Bitcoin based level for fiscal services, Twitter revealed aboriginal BTC Lightning and NFT integrations, and Stripe announced its instrumentality to crypto with a caller dedicated crypto team. Tik Tok announced a concern with ImmutableX* to motorboat a creator-led NFT collection.
Meanwhile, banks, fintechs, and broker dealers moved to further integrate crypto into their merchandise offerings, enabled by Coinbase Prime, Coinbase Cloud and different 3rd enactment platforms. All successful all, the crypto manufacture made tremendous strides with respect to maturation and organization adoption implicit the quarter.
The multichain ecosystem deed its stride
Following years of improvement connected solutions designed to alleviate bottlenecks connected Ethereum, scaling is yet present with a scope of Layer-1 and Layer-2 ecosystems taking off. The bulk of the existent traction is connected solutions leveraging EVM (Ethereum Virtual Machine) compatibility, allowing users and developers to migrate to caller environments with comparatively debased switching costs. Users tin entree EVM compatible L1s similar Avalanche, oregon sidechains/L2s similar Polygon*/Arbitrum*/Optimism* with their existing wallets. Solidity astute contracts tin besides beryllium mostly transcript + pasted to immoderate EVM compatible L1/L2, which has led to implementations of fashionable DeFi applications crossed aggregate chains.
As CeFi exchanges person been dilatory to integrate with these caller L1s/L2s, we saw traction crossed recently launched cross-chain bridges. These bridges facilitated the question of billions successful funds from Ethereum to assorted L1s/L2s.
While EVM compatible applications written successful Solidity saw the astir traction connected L1s and L2s successful Q3, different ecosystems are bringing much expressive programmability to the table. New primitives focused connected much acquainted programming languages similar Rust (Solana, Polkadot), Golang (Cosmos), and Move (Facebook Diem*, Flow*) whitethorn usher successful a question of caller Web 2.0 developers to the industry.
Better Web3 UX is connected the way
In Q3 we saw further improvement of Web3 tooling that volition simplify the acquisition of Web3 interactions. XMTP* is spearheading a messaging modular crossed Web3 addresses. Spruce* is standardizing “OAuth” (open authorization), which volition let users to securely stock integer credentials, backstage files, and delicate media with Web 3 applications. Snapshot* is making it elemental to entree governance forums and decisions crossed Dapps.
Meanwhile, a tremendous magnitude of enactment is being done to make added information for Web3 applications. OpenZeppelin’s decentralization effort, Forta*, is making advancement connected real-time information monitoring of astute contracts with the extremity of providing much transparency astir astute declaration codification execution, detection of bugs, and eventually, the prevention of hacks successful real-time. Similarly, Certik* is providing a “fast-and-easy” automated audit instrumentality to assistance Dapps go-to-market much quickly.
Simultaneously, the DAO tech stack continues to evolve, with the method and ineligible enactment of on-chain communities opening to instrumentality hold. Syndicate* (among others) aims to beryllium the “AngelList of crypto” done the instauration of a decentralized investing protocol and societal network.
NFT 2.0 & crypto gaming took flight
Q3 besides saw a ton of improvement focused connected NFT creator tools that volition yet broaden the scope of NFT usage cases and audiences portion creating caller societal features.
Meanwhile, NFT based gaming continued to accelerate led by Axie Infinity, arsenic its play-to-earn model took clasp successful emerging markets (Philippines, Brazil, India among others) attracting 2M DAUs and generating implicit $2B successful revenue. Loot Project besides captivated the manufacture by introducing an inverted exemplary for crippled development. This was done by archetypal releasing NFT based crippled assets to the nationalist successful bid to bootstrap a assemblage and incentivize further development.
Stay tuned
Stayed tuned for much insights and updates from the Coinbase Ventures squad successful the future. Also cheque retired erstwhile editions of Around The Block that you whitethorn person missed:
English (US) 