(4th September) The on-ramp to community-first venture capital
Also: Pantera Capital investment perspective on Pinata
Welcome to the 41st edition of the Geeks Of The Valley (GOTV) Newsletter, where we curate exciting ideas/insights on web3 + interesting early-stage/pre-funded companies every 1-2 times per week. If you enjoy and want to keep abreast with insights and interesting early-stage startups before they go big, subscribe to this newsletter ✌️.
Geeks of the week
Startup name: Seed Labs
One-liner: The on-ramp to community-first venture capital.
Founder(s) background: Harvard grads, led hardware projects @ Tesla Autopilot, Venture @ Open Scout (acquired by Stonks).
Tractions:
Since that announcement, they’ve doubled their waitlist of communities looking to operate on their protocol.
Working with a bunch of well-known syndicates, venture firms, and venture DAOs.
Raised $$ / backed by: NA
Startup name: Ora
One-liner: The search engine for blockchain data.
The problem they are solving:
Right now, most users can't understand what's happening on-chain - simple questions like "how much did I pay Magic Eden in fees last week?" require complex solutions (e.g. indexing an archive node or running SQL queries).
Raised $$ / backed by: NA
Into the 🐰🕳️
In this edition of “Into The Rabbithole,” we’ll feature an interesting web3 investment memo made by a VC firm.
Investing in Pinata
(This article was initially written by Lauren Stephanian, Nathan Russell, Franklin Bi from Pantera Capital)
The web3 hosting problem
As NFTs surged in popularity during the Summer of 2021, creators and blockchain developers quickly recognized a need for a robust file hosting service that could easily integrate into Web3 applications. The problem was that they were seemingly forced to choose between relying on decentralized (expensive and difficult to use) or centralized (censorable and potentially mutable) infrastructure.
First, blockchains are incredibly inefficient at storing data. For example, a calculation done in June estimated storing 1 GB of data on Ethereum Mainnet would cost a whopping $79 million. Nearly $80 million to store a file the size of a smartphone picture is far from ideal for NFT projects minting thousands of high-definition pieces. Luckily this is not necessary, as NFTs can just point to a link hosting the file in its metadata. Extracting this is what makes it possible to view an NFT, but the data still must be stored somewhere off-chain.
For off-chain storage, people explored using centralized cloud-based storage options like Dropbox or AWS, but they found these services are not ideal for NFTs because they don’t guarantee authenticity and can be taken down. First, centralized services use location-based addressing, meaning that they store a file at a particular URL, but that URL has no relation to the actual content being hosted. This means that if someone uploaded a new image with the same name to that URL it would appear exactly the same. For an NFT project this issue is important, as it means your NFT can be changed without your knowing and isn’t guaranteed to be authentic. Second, in a centralized system one can simply remove images from hosting services or these services themselves could shut down or decide to stop hosting a particular file.
The magic of IPFS
Given the above problems, the InterPlanetary File System (IPFS) became the obvious choice and industry standard for hosting NFT projects as it both verifies authenticity and uses a decentralized model that ensures the service doesn’t go down. When a file is uploaded to IPFS, it is given a unique content identifier (CID) in the URL. If the content of the file changes, so does the CID, making the system easy to detect fraud or tampering – this CID can also be used to verify the authenticity of the linked file in the NFT. Second, because IPFS is a distributed system it is almost impossible for it to go down, and files will be available so long as even one node has the file pinned. The behind-the-scenes is slightly more complicated and a file being on IPFS doesn’t guarantee it will be there forever, but this more decentralized model has still emerged as a far superior option to traditional hosting services for Web3 companies. Despite these benefits, IPFS still ran into the issue of being difficult to use. It is rather complicated to upload files directly, and the service requires running your own node in addition to lots of other backend work.
The opportunity
Pinata co-founders Kyle Tut and Matt Ober saw the potential to make this technology far more accessible for Web3 media all the way back in 2018, and created what is now the industry-standard tool for blockchain companies and NFT projects to host and manage off-chain data using IPFS. Pinata originally launched as a very simple IPFS API, but they have since added dedicated gateways, submarining, custom previews, and even a URL shortener. Still, Pinata’s greatest appeal comes from its simplicity and ease of use both for casual users and serious developers at large blockchain companies – uploading and managing files in IPFS is now as easy as using Google Drive.