Early-stage Web3 projects that lay the foundation for a decentralized Internet continue to attract capital

WWe’re still years away from making Web3 mainstream, but the investment landscape for Web3 continues to grow. Venture capital funds and angel investors are becoming increasingly aware and less skeptical of this disruptive technology.

According to a report published by Cointelegraph Research, total venture capital inflow into the blockchain industry reached $14.67 billion in the second quarter of 2022 Web3. Of these, Web3 startups have bagged around 42% of all capital chasing single deals. This is underscored by the fact that seven out of ten of the most active venture funds have chosen Web3 as their preferred investment path.

Additionally, new funds continue to spring up to support Web3’s growth, including a16z’s $4.5 billion fund for crypto, blockchain and Web3 startups, the $500 million funds by Immutable to encourage adoption of Web3 games; and Felix Capital’s $600M funds to develop tools for crypto and Web3. Not to mention, ABCDE Capital has committed $400 million for Web3 developers, Binance Labs has committed $500 million to promote Web3 and blockchain technology, and crypto investment firm CoinFund has committed $300 million Dollar fund launched to support early-stage blockchain funds.

Why investors are so optimistic about Web3

This surge in Web3 investment has been fueled by a desire from a growing number of mainstream brands to join the Metaverse. World-renowned brands like Nike, Adidas, Gap, and Gucci, to name a few, have already dipped their toes into Web3 and Metaverse, sparking investor interest.

It’s important to understand that with traditional equity-based investing, investors typically have to wait for a liquidation event (such as an IPO) to receive a payout. Although there is a secondary market for buying and selling private stocks and takeovers by private investors are quite common, the whole process is unnecessarily complex and is viewed by many investors as illiquid.

In contrast, most early-stage Web3 projects issue tokens to their investors. These tokens can be traded across exchanges at any time. Additionally, these tokens can also unlock additional revenue through activities such as staking, yield farming, and liquidity mining — avenues unavailable in traditional investing.

The transparency aspect of these initiatives is also striking. Compared to Web2 projects and startups, Web3 projects keep all the records in the chain. The data is publicly available, which means the project’s key metrics are more transparent than in Web2.

In addition, there is the potential to open up new use cases that will contribute to the further development of Web3 and Metaverse. Take, for example, the novel approach to enabling socialization via blockchain without centralized control developed by Web3 startup Decentral Games. The platform single-handedly routes more than 60% of existing traffic to the Decentraland metaverse, offering players the opportunity to play casual and competitive poker games and earn in-game currencies, NFTs and much more.

Web3 startup Snook proposes a slightly different angle for interaction by allowing players to experience a multiplayer Snake IO game on the blockchain through a more radical application of NFTs. Currently, NFTs are typically valued based on their rarity and driven by speculation and buzz.

On the other hand, Snook has implemented a concept where each NFT is scored directly based on the owner’s (player) individual skills and achievements in the game. The platform recently rolled out its new game mode called Big Boys Table (BBT) – a brand and token-driven infrastructure where brands can interact with their community, host events and tournaments, and customize their virtual spaces, among other things.

However, despite the influx of venture capital and the emergence of new players in the Web3 space, the industry must overcome some fundamental issues before it can continue to expand.

What can be done better?

For Web3 to be truly embraced by mainstream audiences, it needs to be as convenient and easy to use as existing Web2 services. There must be a solution that connects Web2 to Web3 and vice versa, enabling a seamless transition for businesses and consumers to the changing standards of the Internet.

Existing Layer 1 blockchain technology still lacks some crucial features to enable this transition, making them largely incompatible with Web2 applications and services. Despite billions of dollars pouring into the Web3 ecosystem, it’s hard to deny that Layer 1 chains are sluggish and often struggle to connect the decentralized applications (dApps) built on top of them to existing Web2 databases.

Accordingly, the transition from Web2 to Web3 will not happen overnight. Even as dApp developers create futuristic solutions, limited on-chain data is not enough to optimize these applications and protocols to meet Web2 standards and achieve mass adoption.

Existing solutions usually load the requested data into the underlying smart contract without trust. This involves some kind of consensus across the network. As a result, the end user or smart contract does not receive the requested data immediately. Depending on network congestion and the amount of data requested, this process can take hours and result in poor user experience.

A new solution that aims to fix this problem is Boba Network. As the first multichain Layer 2 blockchain, Boba offers unique features to help Web3 developers build the dApps of the future. With Boba’s Hybrid Compute, Web3 developers can call external APIs that perform heavy computation on a separate backend (away from the main web) and get the results back in a single atomic transaction. Simply put, all workload is handled by Boba Network’s smart contracts, resulting in zero latency for the end user or the requesting smart contract.

This solution allows Web3 developers to take advantage of the best features of Web2 and Web3. They can build rich DeFi applications and protocols, play-to-earn games, NFT solutions and more by communicating with off-chain services via external Web2 APIs without additional traffic on the Layer 1 chain add or pay unnecessarily gas.

Web3 is still in its infancy and there is still much to be done. However, increased investor appetite for early-stage Web3 projects underscores the potential this emerging ecosystem will bring to the mainstream market in the future.

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