Recap of Moonshot Commons’ Web3 Fireside Chat at 2023 HashKey Portfolio Demo Day IV

At Moonshot Commons’ Web3 Fireside Chat #24, HashKey Demo Day IV, we invited speakers from financial infrastructure portfolio companies:

BlockMia, Head of Marketing at Mystiko Network; Tony Sun, Co-founder and COO at Range Protocol; Umi Miyahara, Lead of Business Development at Breez; Henry Zhang, Founder and CEO at DigiFT; Bayo, Head of Engineering at Mento Labs; Chris, Core Contributor at StakeStone; Yang, Co-Funder at Fiat24; Huncho, Co-Founder & CTO at Canza; Michael Nowotny, Co-founder and CEO at Krypton Labs.

HashKey Portfolio Demo Day is a showcase platform created by HashKey Capital for its portfolio of invested projects. It aims to help these projects connect with potential investors and partners within the ecosystem.

HashKey Capital is a leading institutional asset manager focused on blockchain technology and digital assets since 2015. HashKey has a strong track record of investing in high-growth companies globally, with expertise in blockchain technologies. This vision and commitment ensure that it stands at the center of the blockchain ecosystem in Asia and globally. HashKey Capital’s portfolio covers a wide range of the blockchain ecosystem, including public chains, protocols, and applications across the globe. The team combines technological and financial market expertise, specializing in digital asset investment for institutional investors. (Visit HashKey Capital for more information)

Mystiko Network is a multichain privacy and connectivity infrastructure via PaaS (Privacy as a SDK). Leveraging zero-knowledge proof with industry-leading “zk of zk” technology, Mystiko Network guarantees interoperability, scalability, and privacy, all at once.

Range Protocol is a comprehensive asset management platform. They link DeFi users with professional money managers, who use advanced quantitative models to analyze historical data, creating non-custodial vaults for various assets and risk tolerances.

Breez enables developers to integrate Lightning and Bitcoin payments into their apps with zero learning curve or technical expertise.

DigiFT is the first regulated exchange for on-chain real-world assets, approved as a recognized market operator with a capital market services license by the Monetary Authority of Singapore. DiGiFT allows asset owners to issue blockchain-based security tokens and investors can trade with continuous liquidity via an AMM (Automated Market Maker).

Mento Labs is a platform that allows users to launch and operate useful stablecoin.

StakeStone is the yield-bearing ETH with a decentralized yield-optimizing service and the most accessible LST (Liquid Staking Token) ready for mass adoption on Layer 2.

Fiat24 is a Swiss Web 3 Bank. They offer cash accounts and payment services to clients, leveraging blockchain technology as a new means in which to book client ledgers, a pioneering way to replace outdated legacy systems and radically improve such core aspects as human error, manipulation, efficiency and manpower.

Canza is an African Web3 Forex Investment Bank. By focusing on cross-border settlement and treasury management, Canza is looking to solve some of the biggest challenges facing Nigerian enterprises that do business internationally.

Krypton Labs is the world’s first DEX that makes trading cheaper than TradFi. From software development to smart contracts and decentralized apps, their experts deliver cutting-edge solutions that drive growth and solve real-world challenges.

Key Takeaways:

1) The shift to non-custodial cryptocurrency solutions reduces compliance burdens for crypto businesses amidst evolving regulatory landscapes.

2) The Web3 financial sector focuses on dealing with regulatory complexities and deploying more innovative solutions to address challenges such as money laundering and integrating auditable transaction features.

3) The emphasis on interoperability in DeFi and CeFi, through advanced smart contract design and cross-chain compatibility, streamlines asset integration and liquidity management across blockchain networks.

4) DeFi projects are advancing through cost reduction, user experience enhancement, mainstreaming Bitcoin, and developing privacy infrastructure aligned with the ongoing compliance-related changes.

5) DeFi market is poised for short-term growth through innovation and user experience improvements, with medium-term stability from clear regulations, advanced instruments, and technological enhancements.

Moonshot Commons:

Could you please introduce yourself and give an overview of the project you’re currently building?

BlockMia:

I’m very happy to be here and share our thoughts and exchange ideas. Mystiko Network is a multichain privacy SDK (Software Development Kit) for DeFi and we’re using ZK (Zero Knowledge) technology to ensure privacy and interoperability to help developers and users get their transaction privacy on the chain.

Currently, we are supporting different chains such as Ethereum, Binance, Polygon, and Avalanche. partnered with the BASE network as well. All developers on this chain will be able to integrate the Mystiko network as the privacy arm.

We are working closely with different bridges such as Celer Network so that in the future, you can see that we also will be able to ensure users enjoy multichain and cross-chain privacy. Other than that, compliance is a key feature of decentralized finance. To balance compliance and privacy, Mystiko also has an innovative feature called auditable to protect privacy.

To ensure the general good, we aim to eliminate any potential for bad actors during critical phases. That’s what we’ve been doing and very excited to learn more about it.

Tony Sun:

I’m the co-founder and COO of Range Protocol. Previously I was the co-founder of Altonomy, and I joined crypto in early 2018. Then the business was acquired by blockchain. com.

This year, we launched Range Protocol to create a universal platform for on-chain asset management. It’s a gateway where investors and users can access systematic strategies, all managed by professionals in a fully non-custodial and trustless way.

We launched six months ago, covering various DeFi asset classes including Spot/AMM, Liquid Staking, Derivatives, RWA, and Borrowing & Lending. So far, we’ve achieved a Total Value Locked (TVL) of 25 million. Our platform continues to evolve, encompassing more features like borrowing, lending, and on-chain derivatives trading.

Henry Zhang:

This is Henry Zhang from DigiFT. I’m the founder and CEO of DigiFT. DigiFT is a marketplace. It is an exchange for digital assets. We are the first regulated exchange for on-chain real-world assets and digital assets. The licenses are from the Monetary Authority of Singapore. We have two licenses called the Capital Market Services and Recognized Market Operator. These two licenses allowed us to do both the primary market issuance, redemption, and distribution, alongside secondary market trading. We settle trades on Ethereum using a lot of DeFi applications for auto-matching.

Bayo:

I’m Bayo, and I lead the engineering team at Mento Labs, a digital asset solutions company. We’re currently developing the Mento platform, a permissionless and decentralized Web3 platform that enables the issuance and operation of transparent digital assets.

Our platform is actively used globally, featuring assets like the USD, Euro, and, most recently, a West African Franc-based stablecoin. We specialize in creating tools that support the issuance of stablecoins, as well as features to secure these stablecoins launched on our platform.

Recently, we introduced an automated on-chain circuit breaker and implemented trading limits to prevent the draining of the protocol. Additionally, our stablecoins are backed by a diversified portfolio of crypto assets.

Chris:

I’m Chris, a co-contributor at StakeStone, an omni-chain liquidity distribution network.

We bring native staking yields and liquidity to Layer 2 and other Ethereum chains in a decentralized manner. StakeStone also innovates in decentralized stacking, ensuring transparency and optimized yields for STONE holders. Notably, STONE is developer-friendly, facilitating easy integration across multichain protocols.

So far, we’ve launched the ‘Yield Bearing Layer 2’ campaign in collaboration with Manta Network, aiming to develop a live Layer 2 solution with native yields. Impressively, we’ve achieved $30 million in liquidity in just the past three days

Huncho:

I co-founded Canza Finance, where we’re developing a Web3 Neobank. Starting as an African OTC focused on digital assets, FX, and cross-border settlements, we’re now expanding to provide B2B solutions for on-ground challenges.

We also created on-chain products for the continent of Africa and emerging markets. We started building DeFi financial infrastructure and innovating stablecoins with a focus on-chain FX. Our flagship DeFi product is Baki, which is an internet liquidity exchange for African currencies.

Michael Nowotny:

I’m Michael Nowotny, the co-founder and CEO of Krypton. My journey began in academia, where I trained as an economist and earned my Ph.D. at UCLA. I spent some time as a math finance professor at Boston University. Currently, I’m addressing longstanding challenges in crypto and Web3, particularly the exorbitant costs of trading. We’re applying academic insights to the finance industry and DeFi to build a decentralized exchange that operates uniquely.

Our platform aims to revolutionize crypto trading, which allows traders to retain their hard-earned gains, free from the hidden costs often seen in traditional finance such as adverse selection. We’re tackling these issues at their core, striving to create a fairer, more transparent DeFi system.

I believe our upcoming decentralized exchange, Krypton, set to launch next year, will revolutionize DeFi trading by being more cost-effective and efficient than traditional finance (TradFi) or centralized finance (CeFi). We’re addressing long-standing financial challenges comprehensively for the first time, and we want to set the stage to move confidently into the future. I’m grateful for the support from HashKey Capital and others. We’re excited to showcase a demo next Tuesday and give everyone a glimpse into what we envision for the future of crypto trading.

Umi Miyahara:

My name is Umi Miyahara. I lead business development at Breez. Breez has been around for the past five and a half years already. We’re a company working in the Bitcoin lightning ecosystem as a lightning service provider. We started early with the inception of the lightning network back in early 2018.

At the core of our company, we believe in Bitcoin as a currency and we want to bring Bitcoin to the masses. We’re thinking that the right way of bringing Bitcoin to the masses is by providing everyone easy access to the lightning network. We also crucially want this access to be non-custodial. We want all our users to maintain their sovereignty while interacting with the lightning network.

Our lightning service operates on two fronts. Firstly, it enables users to develop interfaces that facilitate peer-to-peer (P2P) payments powered by Bitcoin. We do so by offering our Breez SDK. It allows any app to enable lightning payments easily and simply, taking away the complexity of lightning.

You don’t have to be a lightning expert to enable lightning payments through your app or service, and we have an open LSP (Lightning Services Providers) model where we allow any third party to become a third-party LSP in our network and plug in their liquidity and be in the LSP allows you to hold the coin treasury and earn an ROI without relinquishing custody.

We’re here to bring Bitcoin to the world to the masses through the lightning network through our services and are excited to share our journey and anything else in terms of questions that people have.

Moonshot Commons:

Considering the recent Binance case, how do you see regulations in the finance sector evolve? What measures are your project implementing to adapt to these changes?

Umi Miyahara:

There are various views in terms of regulations that are shifting in this space for us. I just mentioned before a key point about our service and what’s crucial to our values and the innate values that Bitcoin has is non-custodial access and non-custodial holdings of your currency, which is Bitcoin.

We are offering non-custodial access to Bitcoin to end users through the lightning network and by being non-custodial, it’s not. The regulations don’t have that much impact on us. It matters in terms of when you’re offering a custodial solution where you must follow the regulations and they do impact your business. But because we’re focused on non-custodial, it doesn’t affect us. It makes our service that much more valuable and important. So, what we’ve seen is several custodial options that are out there in the lightning network space that must pull out of certain markets.

We’ve seen that most recently, a lot of Satoshi, who is a big custodial player in lightning, must pull out of the U. S. market post the Binance case. We’re seeing a lot of people shifting to non-custodial and it’s becoming more and more important. For our project, we’re here to support the growth, importance, and value of non-custodial access to your coins.

Henry Zhang:

First, if we apply blockchain and blockchain-based technologies to assets that are essentially applied to the financial markets. Now we should be aware of the financial market itself. It is in a heavily regulated industry no matter what technology to use. On one hand, people like me, who firmly believe in the value. The implication of this new technology applied to the financial markets can create a lot of true value. But on the other hand, since it has true values, it will be used more and more.

The recent Binance case underscores the unavoidable importance of regulatory compliance in our field. It’s a reminder that collaboration with regulators is essential, rather than ignoring their role. In the crypto world, centralized and decentralized technologies aren’t opposites but complement each other. For instance, at our platform, while we leverage heavily decentralized technology such as P2P settlement, non-custodial assets, and AMMs, we also integrate necessary centralized technologies to enhance our exchange’s functionality.

We’re applying our technology not only to digital assets but also to mainstream financial assets, which are substantial and in need of modernization. Considering this, it’s evident that the crypto and digital ecosystem is still in its nascent stages of growth.

A key focus is on sustainable and healthy protection for investors, operators, and shareholders, which involves understanding and complying with regulations. It’s crucial to work towards being accepted by regulators and to encourage them to evolve and embrace innovation. While we’re ambitious in embracing valuable assets, working within a regulatory framework presents its challenges.

BlockMia:

The regulatory focus on Binance highlights the need for both centralized and decentralized finance entities to adhere to compliance requirements while growing in the industry.

This situation presents a dual perspective: on one hand, it brings uncertainty as major players face regulation; on the other, it offers clarity through well-defined regulatory guidelines for crypto operations. For example, regulations might restrict certain crypto activities, but compliance can be achieved by operating correctly for the right audience. This scenario outlines a clear growth path for projects, including the need to balance operations with compliance.

A key concern, highlighted by the Binance case and actions against privacy-focused projects like coin mixers, is the issue of money laundering. This serves as a guideline for decentralized projects to discern appropriate privacy levels and ensure services cater to legitimate users while incorporating more compliance features.

We at Mystiko hold the belief that privacy is essential for all Web3 participants and aim to provide a solution that is not only sustainable and compliant but also enduring. Following the cash incident last year, we’ve incorporated an innovative feature known as auditable Zero-Knowledge (ZK) into our technical design.

This feature guarantees private transactions when needed, yet allows for specific processes in certain cases, like if there’s substantial evidence of money laundering by a user. In such scenarios, we can balance user privacy demands while preventing illicit activities on our platform. Additionally, we’re enhancing our blacklist mechanisms and collaborating with auditing firms and communities to ensure all Mystiko users are legitimate.

The challenges and compliance landscape highlighted by the Binance case suggest that adapting to regulatory changes can unlock new opportunities, fostering a healthier and more compliant environment for growth and better wealth management. This approach reflects Mystiko’s commitment to compliance and sustainable development in the crypto space.

Moonshot Commons:

How is your platform ensuring interoperability with other DeFi and CeFi projects as well as various blockchain networks?

Bayo:

That’s an interesting question and it’s something that we take very seriously. We do this at multiple levels. At the lowest level, the design of the smart contracts of the protocol. We ensure that the contracts providing the main functionality have clear logical separation, and this makes it easier for third parties (other DeFi protocols or other users) to integrate with them.

As an example, we’ve recently had a squid router integrated with our protocol to allow cross-chain swaps of the stable tokens that are issued on our platforms. At a higher level, we also offer SDKs which are properly documented to allow easier integration.

But on top of that, we have issuers who are using our platform to issue stablecoins. We want to help them support their users by making it easier for them to get in and out of these stablecoins that we’re issuing. One of the projects we’re currently working on right now is a tool that makes it easier for these issuers to offer on and off-rent services to the users of our stablecoins.

We’re building a tool called MATE that allows the issuers who are using the protocol to define certain flows. For example, if they want to buy some USD on USDC on an exchange and then drop that on a specific chain, and then convert that to a stablecoin that they’ve issued on our platform.

This tool simplifies the process by combining multiple steps into a single action, which allows for seamless integration with their platforms and enhances user experience. We address these needs on various levels, and this is among the key initiatives currently underway in our protocol.

Chris:

We consider integration and interoperability with other protocols crucial, especially regarding CeFi, which is vital for StakeStone. Our approach is threefold:

1. Compatibility of Underlying Assets: StakeStone supports a variety of assets underpinning the LST, from staking pools like LIDO, Frex, and Bluechip, to DeFi platforms like Balancer, Oro, and Maverick. This diversity allows us to integrate with a wide range of assets.
2. Cross-Chain Compatibility: Our focus extends to seamless interoperability across multiple chains. We uniquely customize our contracts to facilitate cross-chain price information for STONE without relying on Oracles.
3. Integration of the STONE Token: STONE, a developer-friendly asset, functions as the underlying asset for DEXs, lending, and derivatives, and can be used for collateral, funding fees, or liquidity provision. Its non-rebase mechanism simplifies integration across various protocols.

Recently, we collaborated with a lending company, witnessing a rapid embrace of STONE in the community, highlighting its effectiveness in providing additional yields. These aspects collectively enhance StakeStone’s integration across the crypto space.

Tony Sun:

For Range, we see this effort as to the first level is interesting whereas for us, it’s easy. Just developing strategies that interact with multiple DeFi protocols within those strategies and efforts like enabling our LP token to be taken as collateral to further enhance the capital efficiency.

But to me, the more important level is the interoperability level where our biggest effort is aiming at defragmentation. Right now, the liquidity is super fragmented across different actions and later uses. What we’re trying to do is to solve this problem by building vaults that connect liquidity across different chains in a trustless manner.

The protocols, which have a use case for the token to exist on multiple chains, don’t have to give out loads of incentives to bootstrap liquidity on every single chain. But instead, all the liquidity can be connected. The infrastructure we’re building just in time, liquidity, and RFQ base for balancing will enable us to do that.

Huncho:

Interoperability is a pivotal aspect of our strategy, especially considering my experience in the space dating back to 2015. The blockchain ecosystem, akin to open source culture, emphasizes collaboration and compatibility with multiple blockchains and stakeholders. This forms a solid foundation for our approach.

In terms of interoperability, our focus is on developing default protocols and products that incorporate this principle as a core element. Currently, our flagship product, the Ethereum Virtual Machine (EVM), has undergone rigorous security audits, setting the stage for seamless cross-chain functionality as we progress along our roadmap.

A key component of achieving interoperability is building strong partnerships and collaborations. This involves close collaboration with both internal and external developers and fostering productive relationships with Layer Zero solutions and cross-chain infrastructure providers, such as wormhole mechanisms.

In the context of Africa, it’s essential to address the significant shortage of US dollars. Leveraging stablecoins like USD, USDC, or USDT across various blockchains is a critical aspect of our strategy. We are committed to working closely with bridge solutions and different blockchain projects and ecosystems to ensure that our projects support and enhance the broader DeFi landscape.

Our approach to interoperability is rooted in collaboration, robust partnerships, and a commitment to addressing real-world challenges like the US dollar shortage in Africa while advancing the capabilities of blockchain technology.

Moonshot Commons:

What new exciting features can users anticipate from your platform in 2024? Additionally, what is your strategic vision for the platform over the next couple of years, particularly?

Michael Nowotny:

At Krypton, we’re adopting a slightly different perspective from standard “Economics 101.” This shift is significantly impacting the cost of trading, who bears these costs, their extent, and who can monetize the benefits.

At Krypton, we’ve reimagined the execution of trades. Unlike traditional platforms where trades occur instantaneously, our trades are processed as continuous flows over time at a finite speed. This approach effectively counters toxic trading practices, such as exploiting information advantages, thereby reducing costs for market makers and liquidity providers. Our design also negates the advantage of being first, diminishing the relevance of ‘mine extractable value’ games.

This Tuesday, we’ll showcase how Krypton’s system neutralizes the tools used by toxic traders, making it irrelevant whether you’re a high-frequency trader or a casual investor. Our system is designed to minimize hidden costs like adverse selection and front-running, which have long plagued the trading world.

Krypton’s trading environment is user-centric, providing insights into potential trading costs and savings, and allowing users to modify orders as needed. Our goal is to demonstrate to the world, including traditional financial institutions interested in blockchain trading, that our system is more cost-effective and efficient than existing models.

Tony Sun:

Currently, our platform encompasses a variety of key offerings like liquid staking and RWA. We’re soon introducing a major overhaul of our app interface to simplify navigation and assist users and investors in finding strategies aligned with their risk preferences. Looking at our one to two-year plan, our goal remains to develop a comprehensive platform for asset management, catering to various asset types and user needs, including yield farming and market making in DeFi, as well as Layer 2 staking opportunities.

Understanding the dynamic nature of the DeFi landscape, with its frequent shifts and emerging opportunities, our long-term strategy involves maintaining agility. This approach ensures that our platform remains highly adaptable, enabling us to swiftly respond to market changes and assist users in capitalizing on new opportunities.

Umi Miyahara:

We’re excited about the new features coming to our platform and the Lightning Protocol, particularly what we can offer with our SDK. Our main goal is to surpass the current Fiat user experience, especially when it transitions to the mainstream, whether for Fiat or Bitcoin peer-to-peer payments. We’re focused on enhancing this experience significantly. Two exciting features of our SDK are support for slicing and offline receiving, which are particularly pivotal for the Lightning experience.

We’re observing an earlier-than-expected demand for our SDK, not just from the Bitcoin community but also from the wider crypto community. This demand emerges from various crypto platforms, apps, and users seeking Lightning support. Our vision is to drive the adoption of Lightning in both the Bitcoin and broader crypto spaces, as well as in mainstream applications. We aim to transition Bitcoin from being primarily a store of value to a medium of exchange, leveraging its utility for peer-to-peer monetary transactions.

In the coming years, we anticipate this pivotal shift in Bitcoin’s role and are preparing our technology to facilitate this transition across various applications.

Henry Zhang:

In the forthcoming year and beyond, we at DigiFT are excited to introduce three key areas of innovation in the market, all of which are geared towards expanding our footprint in the digital asset exchange domain.

Firstly, with our formal license for primary issuance, we are set to significantly increase the range of assets available on our blockchain. This initiative is designed to not only attract mainstream financial institutions looking to list high-value assets on-chain but also to broaden our offerings to include a wider range of digital assets. The efficiency and versatility of blockchain trading and subscription stand as key advantages that we plan to leverage, aiming to create a marketplace as diverse and comprehensive as Amazon’s.

Secondly, we are placing a strong emphasis on digital assets, recognizing the substantial demand and potential inherent in native digital assets. Our platform is being tailored to support the origination, distribution, and trading of these assets in a manner that is fully compliant with regulatory standards. This is a critical aspect, as various regulators have begun to classify digital assets under differing categories, some as securities and others under specific regulated domains. While there may be different viewpoints on these classifications, it is clear that a significant portion of these assets will fall under regulated categories. Therefore, it is imperative that our platform and all stakeholders involved — whether they are originators, traders, distributors, or otherwise — operate within the confines of these regulatory parameters.

Lastly, DigiFT is gearing up to play a pivotal role in this evolving landscape. Our platform is not only a compliant channel for listing assets but also an innovative avenue for trading. This approach doesn’t aim to replace existing channels but rather to supplement them by adding a regulatory-compliant option for sustainable growth.

Thanks to our current licenses and established collaboration with regulators, we are equipped to accept both fiat and digital currencies for investment. An example of this capability is the facility for customers to use USD for the purchase of US Treasury tokens and their subsequent redemption in USDC, and vice versa. This flexibility and compliance are central to our strategy as we focus on expansion and evolution in the upcoming years.

With these initiatives, we are committed to exploring and capitalizing on emerging opportunities, maintaining our focus on sustainable growth and stringent compliance, to offer our clients a secure and cutting-edge trading experience.

BlockMia:

I am pleased to share the upcoming advancements for Mystiko Network in the coming years. As a privacy infrastructure dedicated to decentralized finance, Mystiko Network has made significant strides, notably with the launch of a wallet accessible to all users.

Looking ahead, our focus is on enhancing our infrastructure to better support developers across various platforms. To this end, Mystiko Network is in the process of developing a comprehensive privacy SDK service. This service is specifically designed for device developers, particularly those specializing in wallet and exchange applications. It will be compatible with Ethereum, EVM chains, and Layer 2 solutions. Our goal is to cater to the needs of these developers, providing them with the tools and resources necessary to integrate advanced privacy features into their applications.

Furthermore, Mystiko Network aspires to function as a policy advocate for artist developers, offering tailored policies to benefit their users. Our vision is to establish Mystiko Network as the foundational policy infrastructure accessible to all developers and users within the next one to two years.

We invite you to explore the Mystiko wallet and participate in our ongoing campaigns. Your feedback is invaluable to us, and we are eager to learn from your experiences. This engagement will help us further refine our offerings and strengthen our connection with the developer and user communities.

Moonshot Commons:

From your perspective, what are the short-term (next year) and medium-term (2 to 3 years) forecasts that you have for the DeFi market, particularly in terms of liquidity?

Bayo:

In the short term, we anticipate a notable surge in DeFi adoption, primarily driven by product innovation and enhanced user experiences. Recent developments, particularly in account abstraction, are making DeFi more accessible to a broader audience, beyond just those with technical expertise. This accessibility is evident in the emergence of range protocols and DeFi aggregators, which simplify user interaction with underlying protocols through streamlined interfaces. The result is a cleaner, more user-friendly experience, likely to attract a wider user base.

Additionally, significant advancements have been made in user experience design, such as the introduction of wallets supporting peer-to-peer payments with mental stables. A prime example is the recent launch of Opera’s MiniPay wallet, which already boasts over 300 million users. Such innovations are expected to substantially increase liquidity in the DeFi market.

Furthermore, the entry of institutional players into the DeFi space is another key factor that will likely enhance liquidity. As these players integrate DeFi solutions, we anticipate a significant capital influx into the market.

Looking at the medium-term outlook, the DeFi market is expected to mature, characterized by increased stability, regulatory clarity, and the emergence of more sophisticated financial instruments. We are witnessing a trend towards the tokenization of global assets, which will likely fall under regulatory oversight. This progression points to a potential surge in liquidity in the DeFi market, as it becomes more structured and integrated into the broader financial landscape.

Overall, these trends suggest a dynamic and evolving DeFi market, moving towards greater accessibility, sophistication, and regulatory alignment.

Chris:

From our analysis, we identify three major trends that are likely to shape the future of liquidity in the financial markets. Firstly, we anticipate that the cost of liquidity will increase. Liquidity providers, who are becoming more organized and experienced, are gaining significant bargaining power. This leverage is particularly evident when they aggregate substantial amounts of liquidity, influencing both individual platforms and entire blockchain networks.

Secondly, we foresee a shift in the nature of liquidity assets. The trend is moving from non-yield-bearing assets, like Ethereum, to yield-bearing ones, such as LST. This shift is expected to considerably reduce the costs associated with accumulating liquidity, especially during the initial bootstrapping phase of platforms and networks. The adaptability of yield-bearing assets in various use cases further underscores this trend.

The third trend pertains to the location of liquidity. We believe that as certain major Ethereum Virtual Machine (EVM) chains demonstrate enhanced security and reliability over time, they will increasingly attract liquidity. Additionally, as opportunities for alpha on the mainnet diminish, Layer 2 solutions are expected to emerge as significant attractors of liquidity, offering enhanced opportunities for yields. This scenario is not only a natural evolution but also a driving force behind the movement of liquidity towards Layer 2 platforms.

In summary, our prediction for the future landscape of liquidity is threefold: an increase in its cost, a shift towards yield-bearing assets, and a migration of liquidity to Layer 2 platforms and other chains, motivated by rising yield opportunities.

Honcho:

From my perspective, particularly focusing on emerging markets, it’s evident that the majority of digital asset transactions, including the processes of entering and exiting the market (on-ramp and off-ramp), are predominantly payment-driven. This trend is expected to intensify in the future, especially with the various initiatives undertaken by entities like USTC and USCT, along with other stablecoins that are increasingly focusing on the African market. In my view, the upcoming year promises to be quite significant in this regard.

One key aspect that could influence this scenario is the pre-halving period, which I believe will attract more retail and, to some extent, institutional interest. Following this phase, we anticipate a period of heightened activity. Additionally, the upcoming U.S. election next year is likely to add another layer of complexity and interest in the market.

In terms of institutional involvement and job creation driving utilization, we can expect a substantial influx in the market over the next two to three years. Echoing the sentiments of my predecessors, the market is likely to mature significantly during this period, accompanied by more comprehensive regulations. This expectation is based on my extensive experience in compliance and regulatory meetings across various countries, dealing with multiple standards and frameworks.

Looking ahead, I am optimistic about the potential for more integrated and efficient systems like on-chain FX, which could revolutionize the space with more streamlined and effective transaction flows. Overall, the next two to three years in the digital asset market appear to be promising, with the potential for substantial growth and maturation.

Michael Nowotny:

Looking ahead to 2024 and beyond, it’s clear that institutions will play a pivotal role in shaping the future landscape. Currently, the high costs associated with DeFi are a significant barrier for traditional financial (TradFi) asset managers. These professionals, who often aim for a 1 percent alpha per year, find the fees in DeFi, such as those on platforms like Uniswap, prohibitively expensive. The charges, including protocol fees and potential front running costs, can erode their entire yearly gains in just one transaction. This issue is further compounded by the quadratic price impact for larger trade sizes, making DeFi an impractical choice for them.

When considering the trading volumes, DeFi, across all blockchains and protocols, both spot and derivatives, accounts for approximately five billion dollars daily. This figure, while substantial, pales in comparison to CeFi in the crypto sector, which sees daily volumes in the hundreds of billions, and TradFi, where daily volumes reach into the tens of trillions. Despite DeFi offering a broader range of cryptocurrencies and tokens, CeFi’s trading volume is significantly larger.

Initially, my goal was to introduce decentralized, high-tech asset management to the world through DeFi. However, the prohibitive trading costs and the lack of suitable trading venues presented substantial challenges for both my operations and my users. Recognizing these limitations, our focus at Crypton is to establish the first viable DeFi alternative for institutional players. We are committed to shifting not just billions, but potentially tens of billions, and ultimately trillions of dollars in trading volume from TradFi to DeFi. Our aim is to position blockchains and decentralized finance as the global standard in trading.

Moonshot Commons:

What do you identify as the major unresolved challenges or emerging issues in the Web3 financial sector? How is your project preparing to tackle these as the infrastructure layer?

BlockMia:

In the current landscape of DeFi, there are numerous challenges to address, including issues related to liquidity and compliance. Each project on this panel brings unique expertise to tackle these challenges. From the standpoint of a privacy-focused project, we recognize that privacy has always been a critical concern in the DeFi space. While blockchain technology offers commendable transparency for transactions, it also poses a dilemma due to its high level of transparency. There is a consensus that individuals and entities do not desire their transaction and payment histories to be openly accessible and scrutinized.

This concern extends to traders who prefer to keep their trading strategies confidential. Addressing this need for privacy, Mystiko is positioned to act as a multichain privacy layer. We plan to offer this service in the form of an SDK (Software Development Kit), providing a straightforward tool for developers across various chains. This SDK will be integrating privacy features into their protocols without requiring in-depth knowledge of cryptographic techniques like zero-knowledge proofs (ZKPs).

Our approach is focused on making privacy both easy and accessible for all users and DeFi developers. We are in the process of creating a user-friendly and developer-friendly privacy multichain SDK. This tool will allow applications to seamlessly incorporate privacy features, ensuring that such functionalities are readily available to users as needed.

Tony Sun:

At the risk of echoing my previous response, the fragmented liquidity remains a paramount challenge that requires our attention. My background lies in trading foreign exchange (FX), and the difference between executing a hundred-dollar trade in traditional currency compared to a few dollars in Bitcoin is quite evident. While there have been improvements, it’s fair to say that we are still in a phase where liquidity is shifting towards efficiency.

However, this shift comes with a trade-off, as the increased efficiency often leads to greater complexity for the average user or investor. A prime example of this complexity is evident in the evolving landscape of DeFi. Notably, platforms like Ethereum have seen substantial developments, but the user experience has grown progressively intricate.

The overarching trend I observe is the emergence of highly efficient DeFi protocols that offer a high degree of customization. Simultaneously, these protocols become increasingly challenging for the average user to navigate. This is where our role comes into play. We actively engage with various projects, some of which may still be in stealth mode, as they undertake remarkable work.

Our mission is to facilitate the transition to a financial system where assets are professionally managed by sophisticated participants. This transition aims to strike a balance between efficiency and accessibility, ensuring that DeFi remains a viable option for all users.

Umi Miyahara:

It’s evident from the perspectives shared by several speakers that liquidity is a recurring theme in our discussions. This holds true for our focus as well. When we delve into the Lightning Network, we often refer to it as a “liquidity network.” What becomes crucial is the precise allocation of the right amount of liquidity at the right moment and in the right location. With an increasing influx of liquidity onto the network, we ensure a higher likelihood of successful payments.

We’ve witnessed a positive stabilization in this regard, especially throughout the past year. There has been a notable increase in liquidity and the participation of new entrants in the Lightning Network. This has contributed to fostering a robust ecosystem, albeit with its own set of challenges.

In our efforts at Breez, particularly through our open LSP (Lightning Service Provider) model, we aim to democratize participation and empower third-party LSPs to contribute liquidity to the network. Through this model, they can allocate Bitcoin from their treasury to the Lightning Network, all while earning a Return On Investment (ROI) in Bitcoin, without compromising custody. This liquidity influx drives greater demand from the end users of our SDK, resulting in increased payment transactions.

Our business model revolves around creating a virtuous cycle where LSPs supply liquidity, SDKs stimulate end-user demand, leading to ROI for LSPs. We are also actively collaborating with other players in the ecosystem to establish an LSP specification that enables third-party LSPs to participate in various models.

Another challenge we are addressing within the Lightning Network pertains to the off-ramping process, both from Lightning to fiat and from fiat to Lightning. Off-ramping, in particular, remains a complex task. To tackle this challenge, we are leading the development of a specification known as “Fiat Link,” in conjunction with other ecosystem players.

These key initiatives represent our commitment to working collaboratively with Lightning Network participants and the broader ecosystem to address these challenges, ultimately charting a path toward resolution.

Henry Zhang:

When discussing liquidity, I’ll keep it concise. Liquidity is undoubtedly a significant challenge within the realm of Web3. The issue at hand primarily revolves around the insufficiency of available liquidity. The next logical question is how we can enhance liquidity.

To address this, we need to consider a few key aspects. First, there’s the technological dimension. As some of our partners have already highlighted, technological advancements play a pivotal role in making liquidity provision more efficient and cost-effective. Technologies like Automated Market Makers (AMMs) have introduced innovative liquidity mechanisms, which is a noteworthy development. However, it’s crucial to acknowledge that these new methods have their unique features and limitations.

From a technological perspective, continuous improvement is essential to overcome these limitations gradually. Second, we must explore new sources of liquidity, specifically individuals who contribute funds to DeFi and Web3 protocols. While traditional sources remain significant, we should also turn our attention to institutional capital due to its substantial volume.

Lastly, regulatory compliance is a critical consideration. Ensuring that our operations align with regulatory requirements is vital for uninterrupted business growth. It’s essential to proactively address regulatory concerns from the outset rather than dealing with them as post-event considerations. In summary, these points encapsulate some of the key considerations regarding liquidity enhancement.

Moonshot Commons:

Considering the recent positive trends in the cryptocurrency market, do you view this as the beginning of a new bullish phase?

Bayo:

While recent positive trends in the market are encouraging and may suggest the onset of a bullish phase, we must exercise caution given the inherent volatility of the market. At Mento, our primary focus remains on constructing sustainable and robust solutions capable of withstanding market fluctuations. One such example is our circuit breaker system. Regardless of whether the market is in a bullish or bearish phase, this protective measure ensures the stability of any stable assets issued on our platform.

Chris:

In the future, we envision orchestrating strategic conversations and establishing positions aimed at enabling omni-chain liquidity distributions. Our objective is to play a pivotal role in facilitating the entire DeFi space and the broader multi-chain ecosystem by enhancing liquidity and capital efficiency. Central to our vision is the LST and its omni-chain distribution network.

Moonshot Commons:

What brought you all here to Hashkey Portfolio Demo Day and to the AMA? Who are you looking to connect?

BlockMia:

This has been an exceptional session, and we extend our gratitude for orchestrating this gathering. At Mystiko, we are continually enthusiastic about collaborating with blockchain developers, particularly those involved in wallets and exchanges. We are equally eager to partner with any stakeholders interested in integrating privacy features into their protocols.

Beyond that, we maintain an open-door policy for engaging with members of the community. We value staying abreast of the latest trends in the space and exploring how we can provide enhanced support. We extend our thanks once again for inviting us to this panel, and we eagerly anticipate connecting with developers, committee members, investors, and anyone involved in the HashKey ecosystem.

Feel free to reach out if you have any questions or if you wish to explore further discussions with Mystiko.

Tony Sun:

I am genuinely excited about the innovative work being undertaken by MentoLabs and Crypto Labs. I plan to initiate contact for a more formal and comprehensive discussion shortly. There is substantial potential for collaboration and synergies within the Demo Day groups here.

Umi Miyahara:

I’m thrilled to be here, and it’s been a pleasure meeting everyone at Breez. We are actively seeking connections with individuals or teams interested in developing on the Lightning Network using our SDK. Whether you’re a developer with innovative ideas or if you’re considering building something, we’d be delighted to connect.

Additionally, if you are interested in exploring our open LSP (Lightning Service Provider) model and can provide liquidity and generate an ROI, we are open to discussing potential collaborations.

We welcome anyone who wishes to join us on our journey to scale the Lightning Network and make Bitcoin accessible to a broader audience. If you’re interested, please don’t hesitate to reach out for a conversation.

Henry Zhang:

First I want to express my sincere gratitude for organizing this event. I thoroughly enjoyed the discussions and found them highly valuable.

In terms of our interests, we are open to engaging with investors, asset providers, and various stakeholders. The group assembled here today has been truly fantastic, and I have taken copious notes. I am eager to connect with virtually everyone who participated as a speaker in this call.

Given the depth of expertise in this group, I believe there are significant opportunities for synergies among us. I plan to reach out to explore potential collaborations. Additionally, if you are interested in DigiFT as a regulatory-compliant platform for digital assets on public blockchains, I invite you to reach out to us. We would be delighted to continue the conversation. Thank you once again for this opportunity.

Bayo:

I’d like to extend my gratitude for hosting this event, as many others have expressed. We are keen on connecting with investors, but even more importantly, our core mission at Mento Labs is to facilitate the real-world adoption of digital assets. We achieve this by offering a stable, transparent, and robust platform.

If you share our vision and are interested in contributing to our mission, I would welcome the opportunity to connect with you. Additionally, for those who are exploring the launch of their own stablecoins, we are eager to collaborate and learn more about how our platform can assist you in achieving your goals.

Thank you once again for this event, and I look forward to engaging with like-minded individuals who are aligned with our mission.

Chris:

I genuinely appreciate the opportunity to establish meaningful connections here.

We are enthusiastic about connecting with builders and projects across various chains that have requirements for LST. We see great potential in integrating STONE as standard collateral on different blockchains, making it a versatile asset.

Furthermore, we are keen to engage in conversations with investors who share an interest in StakeStone. These discussions could pave the way for exciting collaborations. Thank you for having us here, and we are excited to be a part of this event.

Huncho:

In brief, I’m open to connecting with individuals or entities interested in emerging and frontier markets, developers, stablecoin issuers, as well as FX partners and FX desks with a focus on the Asia Pacific region seeking exposure to Africa. Thank you for your time, and I look forward to potential collaborations.

Michael Nowotny:

Thank you for organizing this Demo Day, and I’m thrilled to have the opportunity to share our progress with all of you, both locally and globally. At Krypton, our primary focus has always been our users, and this remains our unwavering commitment.

While we’ve predominantly engaged with users in Western regions, such as the United States and Europe, through platforms like NASDAQ Trade Talks, Bloomberg documentaries, and keynote appearances at SmartCon and the Avalanche Summit, we are now eager to expand our reach and connect with a broader, more international audience.

In my view, the essence of crypto lies in transcending geographical boundaries and creating a unified global standard for trading. Therefore, venturing into international markets, particularly in Asia, is a natural progression for us.

If you’re curious to learn more about Krypton, how our platform operates, and what we have in store, I invite you to visit kryptonbeta.com. You can sign up for early access and stay updated with our latest developments and news. Additionally, joining our community on Twitter is a great way to stay informed about our progress.

Over the next three to six months, we will be focusing on fine-tuning our minimum viable product and reaching critical milestones. While we won’t be launching a funding round just yet, when the time comes, we will greatly appreciate the support of the community as we continue to innovate and contribute to the DeFi ecosystem.

For those curious about our journey, please join us at this demo day and explore our website for more information. Thank you for your attention, and we look forward to connecting with you.

At the SevenX Ventures Nitro Hackathon AMA, SevenX Ventures invited a distinguished panel of speakers, including Damian, Founder of CheDAO; Tianran, Head of Ecosystem at Mask Network; Bowen, Partner at Smrti Lab; and Aiko, Gamification Alchemist at Folius Ventures. Gua, Co-founder of Moonshot Commons, a subsidiary of HackQuest, moderated the Nitro Hackathon AMA held on Twitter Space. The objective of this event was to gather the leading voices in GameFi and discuss continuous development and future potential of fully on-chain games.

It’s worth noting that Moonshot Commons hosted this particular AMA session via Twitter Space. This article has been curated based on the original Twitter Space post containing the entire discussion. We invite you to follow our official Twitter @buildmoonshot to access the event recording and engage in further interactions with our team.

Key Takeaways:

1) The evolution of fully on-chain games involves five stages: guild formation, innovators exploring Layer2, Loot community expansion, institutional researcher engagement, and enthusiast interest in on-chain gambling.

2) Fully on-chain games face challenges such as transaction costs and playability issues but present opportunities for innovative revenue models and game design improvements.

3) Success in fully on-chain games hinges on three vital design factors: AA wallet integration, enhanced playability on par with Web 2 games, and inventive player incentives.

4) The current state of fully on-chain games mirrors the early days of DeFi, characterized by infrastructure development and experimentation.

5) Social games and endless gameplay formats like Parking War are considered well-suited for fully on-chain games, while resource-intensive simulators pose challenges.

6) Attracting funding for fully on-chain gaming infrastructure necessitates a focus on profitability and the cultivation of developer interest. The ecosystem’s commitment to values and technology innovation is a distinctive trait.

Moonshot Commons:

What are your thoughts on the inception and evolution of fully on-chain games?

Aiko:

Last year, Jason (my team lead) and I dedicated approximately three months to crafting a technical stack design for a fully on-chain game, encompassing every facet of gameplay. In the end. However, we realized that the game could probably attract no more than 6,000 players at best, and it didn’t align with our investment strategies. Although my position didn’t get involved deeply into the investment side of our team, I can offer an observer’s perspective on the state of fully on-chain game development.

In my view, the evolution of fully on-chain games can be broken down into five distinct stages, each marked by a gradual expansion of its target users.

The initial stage revolves around Dark Forest’s player guild, a globally certified entity by Dark Forest, boasting around four guilds. In China, Guild W guild emerged, comprising a niche group of individuals who initially harbored an interest in fully on-chain games.

Last year, I observed a few notable trends. For instance, Layer2 solutions like Starknet attracted creative innovators such as guiltygyoza, the founder of the Topology project, who began discussing the potential of fully on-chain games. Due to the high demand for developers in the Cairo ecosystem and Layer2 at the time, and with the enthusiastic support of fully on-chain game founders, the concept of fully on-chain gaming gained broader recognition. It appears that these visionaries collectively contributed to its growth and prominence.

The third wave includes the holders of the Loot community who are now focusing on different facets of the growing Loot ecosystem, driven by the continued success of the Loot project.

Following that, the fourth wave features institutional researchers, including myself, Bowen, Tianran, and others, who initially ventured into fully on-chain games. Their involvement has extended into a broader institutional landscape, with these researchers actively publishing articles and participating in discussions centered on fully on-chain games.

Finally, the fifth wave encompasses enthusiasts who have an affinity for strategic gaming or on-chain gambling. Upon encountering the concept of fully on-chain games, they often draw parallels to familiar games like the classic “Wolf and Sheep” game. Since the latter part of the year 2021, we’ve witnessed the emergence of fully on-chain gambling game platforms that have collected substantial interest from gaming enthusiasts.

Bowen:

Aiko mentioned that after completing the game design, the team conducted potential user volume forecasting, estimating only around 6,000 users. Aiko’s user volume forecasting result has raised my question: What factors contribute to the success of fully on-chain games?

Let’s take Dark Forest as an example. It launched in 2020 during the DeFi Summer with just about 300 players. The game, however, was quite challenging and could often be frustrating for users. Compared to mainstream games like Candy Crush, Doodle Jump, Honor of Kings, or Battlegrounds, Dark Forest falls short in terms of playability. Addressing this challenge will probably require developers and teams to possess a profound understanding of social dynamics.

From 2017 to the present, including the eras of US DICE, Wink, early attempts of Zilliqa, and even Cryptokitties’ endeavors to integrate NFT cats into racing cars, there have been at least three to four hundred teams experimenting in this field. A prominent concern has been the elevated costs associated with on-chain gaming, where each transaction carries a gas fee. This leads to a less-than-ideal user experience, especially for newcomers, and has largely been endured by loyal members of the community.

Creating an on-chain game that’s genuinely fun, less frustrating, and fosters teamwork is quite challenging. This is particularly evident when you consider that historically, on-chain games have tended to be relatively simple, with Satoshi Dice serving as a prime example.

As of now, fully on-chain gaming resembles the early days of DeFi back in 2016 and 2017. It’s a phase where the infrastructure is still under development, ERC20 Stablecoins are absent, initial DEX offerings are yet to emerge, and the 20–80 pool distribution model is yet to take shape. Unfortunately, this phase has gone relatively unnoticed by game developers, and those in the crypto space have limited familiarity with the gaming sector. Serena on our team has created a release calendar for numerous on-chain games. Most projects, including one led by Yisi Liu, CTO of Mask Network, won’t be available until year-end or early next year. Currently, everyone is in the early stages of laying the groundwork for what’s to come.

To truly captivate users, I believe there are three essential design factors to consider:

1. AA Wallet Integration: Game developers could implement AA wallets to predict revenue from each game release. Similar to Lilith, Hypergryph, or miHoYo, budgets for advertising could be allocated to AA wallets, generating a wallet for each user. This way, users could benefit from social recovery and have the ability to convert their earnings into US dollars or Chinese yuan, allowing them to make purchases in the Apple Store for credits.
2. Enhanced Playability: Achieving the same level of playability as current Web 2 games, whether on mobile or web platforms, is crucial.
3. Innovative Player Incentives: The core of DeFi summer was to incentivize players to come on board through methods like token issuance, linear token issuance, or halving issuance. Is there another possibility, perhaps something similar to Matrix memberships or StepN’s shoe sales, to create a fresh revenue model and initiate a new paradigm, just like what we saw during DeFi summer?
4. These three elements are the challenges we must overcome as we envision a future with millions of on-chain games and users.

Tianran:

In terms of timeline comparisons, I find that 2023 bears a striking resemblance to the state of DeFi in 2019. I recall that in the summer of 2019, Compound’s “C Loan” was introduced. The mechanism involved depositing funds into Compound, which yielded a 3% annualized return for example, and receiving a token with a matching 3% annualized yield. These “C tokens” generated returns and could combine with other items for various application scenarios. Developers quickly realized how versatile these loans were, leading them to create loans labeled from “a” to “f.” With such a proliferating trend, these developers might find themselves needing more than just the 26 letters of the alphabet to name these loans! The surge in developer interest in fully on-chain games over the past few months carries a similar vibe of that time.

Regarding specific milestones, V1 of the model was created in October 2022, followed by an interview between Optimism and Minecraft. The first MUD game then emerged, inviting participants to become MUD residents, and a series of hackathons took place. One of these events in May was particularly impressive, with 109 fully on-chain gaming projects. During this period, I was overseeing the operations of a fully on-chain gaming group, and the discussions within our community were incredibly active. I’m delighted to note that 8 out of the 109 fully on-chain gaming projects were crafted by members of our group. In May, I also attended a fully on-chain gaming summit in Portugal. Although the conference had only 50 attendees, it brought together influential founders from various segments of the industry.

However, we should not draw an absolute equivalence between the emergence of fully on-chain gaming and DeFi. DeFi and CeFi are fundamentally different. With CeFi, individuals often rely on token symbols and entrust their assets to platforms like CoinSafe or OKX. However, in DeFi, transparency is key, and the exchange cannot manipulate the numbers. In the case of Gamefi, in its initial years, people found the gameplay intriguing and hot. However, it became clear that only items like NFTs are on the blockchain, while the specific components of the gaming logic are still housed within the respective game servers. This falls short of full integration.

As we entered a bear market, questions arose about the robustness of GameFi. On one hand, MUD embarked on the task of abstracting a comprehensive fully on-chain gaming framework with the introduction of Dark Forest. They began this work in the first half of 2022 and unveiled the initial version in the latter half.

On the other hand, Loot attempted to manually craft a fully on-chain game, but they soon realized that this was a hard task to take. Later, Loot noticed that the framework developed by MUD appeared to be quite promising. Therefore, by the end of 2022, Loot decided to fork this framework, and now it’s almost ready for use. They are now calling on various individuals to start developing it.

Regarding attributes, the shift from DeFi to CeFi was marked by key characteristics like openness, composability, and interoperability. I see a parallel in GameFi’s transition to fully on-chain gaming, with these same attributes taking center stage. This comparison resonates with me and my fellow developers and gives us hope that this concept can thrive. In 2019, DeFi’s introduction of yield farming triggered a market frenzy, resulting in a growth of Compound and Uniswap clones, culminating in a dramatic and tumultuous DeFi summer.

I believe fully on-chain games are currently experiencing a similar phase where developers are brimming with excitement. However, 2C (to-customers) users primarily consist of venture capital firms and product managers dipping their toes in the water. The lingering question is whether the playability of fully on-chain games has reached a point where mainstream adoption is possible. It seems like it’s not at this point yet, I think we’re still on the verge of a potential breakthrough.

Moonshot Commons:

So, at this current stage, will dedicated game developers opt for fully on-chain games?

Damian:

Honesty, game developers tend to be highly practical. Take some developers in China, for instance; they enthusiastically pursue avenues like TikTok if it promises profitability. Over the past decade or so, there have been many successful projects going global from China, which also demonstrates how much importance everyone places on this market.

I agree with Bowen’s point that the current market landscape is not persuasive enough. The current business models in the market lack innovation, and while some value-driven developers have exclusive resources and commendable goals, the overall business environment isn’t sufficiently attractive. During this bear market, we must focus on the economic aspects of our products. This will set the stage for more developers to succeed when the bull market returns. As one developer starts profiting, it will naturally draw more developers into the ecosystem. These games, together, will lead to innovative approaches to fully on-chain games.

The truth is, that many Web2 game developers are still stuck in conventional game design paradigms, which may appear ineffective. Competing with industry giants such as Lilith, Hypergryph, or miHoYo is undeniably challenging. In the end, the success and appeal of a project often boil down to its profitability.

Bowen:

During a dinner with Lilith CEO Xinwen Wang in Singapore last November, he presented an intriguing perspective: if a project couldn’t foresee generating 10 billion RMB in annual revenue, it wouldn’t be worthy of investment. He even shared an experience of attempting to create an Ethereum-based game with a small team of around 15 people, ultimately abandoning the project once he realized its incompetency to monetize.

Prominent industry leaders like Tencent, NetEase, and Perfect World have started blockchain-related initiatives, both through investments and internal incubation. Nonetheless, these initiatives frequently faced obstacles stemming from the uncertainty of the project outlook. At the core of this uncertainty is the absence of a sustainable and dependable revenue model that extends beyond the initial value of the investment token.

Moonshot Commons:

Which game genres do you believe are well-suited for fully on-chain games?

Bowen:

I’m confident that there’s a diverse range of games that can thrive on the blockchain. Let me draw from my own experience in 2018 when I played an NFT game about country naming. In this game, each country was treated as an NFT, and players could bid against each other to change the name of a country. This concept closely mirrors the gameplay of popular games like Parking War or Happy Farm during the RenRen and Facebook web game eras.

This model aligns perfectly with our current era, where it can operate efficiently on the blockchain at 24-hour intervals. It not only caters to the demands of Layer 2 and Layer 1 but also attracts on-chain users, or as we refer to them, real data-active users. Furthermore, it promotes gaming sustainability by encouraging daily engagement, where players return to play, collect, and participate in crafting activities.

Hence, I firmly believe that social games such as Parking War, and even Friends For Sale, are exceptionally good matches for this blockchain-based approach. Expanding on this idea, it could potentially encompass games like Snake, known for their endless gameplay. We are currently in a phase full of low-cost investments, extensive trial and error practices, and continuous refinements.

Aiko:

In a recent SubStack article, I shared my preferences for a fully on-chain game. To start, I’d steer clear of casual games like Facebook’s H5 games or WeChat’s Mini Program ecosystem. These games often rely on strong social networks, which might not align with the current user base in the blockchain space.

Sandbox games like Minecraft may not be the best candidates for fully on-chain integration, primarily because their core appeal hinges on the freedom to build and destroy without the burden of cost constraints. Incurring costs and resource limitations on the blockchain could potentially dilute the margin of utility of sandbox gaming.

Additionally, simulators like Dwarf Fortress, with their intricate worlds, pose challenges for blockchain adaptation. They demand significant GPU and CPU computing power, and it’s questionable whether the performance of Ethereum or other Layer 2 solutions can match that of Nvidia.

In that context, there’s an intriguing game on Steam known as “Screeps: World.” It falls under the category of programming games, and I saw great potential in aligning its logic with blockchain technology. What caught my attention was its utilization of timestamps: within the game, each realm and dimension operates with finite resources. The act of migrating between these realms often leads to epic stories, driven by resource thresholds. Players also engage in captivating narratives involving hindrances to each other’s migrations. I consider this game an excellent candidate for fully on-chain integration, given its programming-oriented gameplay.

In addition to my thoughts, I’m thrilled to see game development teams separating into two compelling concepts: the time engine and the logic engine, sometimes referred to as the social contract engine.

The time engine, which capitalizes on blockchain’s timestamp capabilities, ensures events unfold in chronological order. As an example, I remember a team that crafted a 5D chess game, distinguishing itself from traditional chess by enabling players to revisit previous timestamps and alter the positions of pieces they had previously moved. I believe the time engine holds substantial promise within the realm of fully on-chain games. To draw a comparison, its potential mirrors the impact of Zelda’s formidable physics engine, especially in the context of an open-world environment.

Concurrently, the notion of a social contract or logic engine is gaining ground. Teams like Curio are actively advancing this concept, and I’ve also heard of two teams in China exploring logic engines. The goal is to consolidate diverse rules and contract permissions into a unified system, effectively constructing an engine. I find this development exceptionally intriguing. These are facets that, in my view, possess strong potential for practical implementation in the fully on-chain gaming landscape.

Damian:

In the previous discussions within our team, we’ve explored various games from the Web1 and Web2 eras for inspiration. However, our focus has now shifted towards the challenge of determining which game genres are a natural fit for the fully on-chain gaming ecosystem. It’s become a bit of a puzzle. When Angry Birds burst onto the scene, it was created by a small Finnish team taking their first steps into game development. Similarly, think about Candy Crush, which was developed by King, a Swedish company that had previously concentrated on building online dating sites. Crafting thrilling games for the fully on-chain gaming universe truly calls for some game design genius.

Back in the early days, the iPhone’s triumph, along with the rise of Android, drove the widespread adoption of Unity as a game development platform. But now, when we evaluate the infrastructure behind fully on-chain games, it seems a bit lacking. Even if a brilliant game designer comes up with a fantastic idea today, turning it into fully on-chain games can be a tough nut to crack. The primary challenge here lies in the absence of comprehensive tools or tech platforms that could streamline the game development process for designers. In contrast, with various low-code and no-code solutions, token issuance is way more accessible compared to developing fully on-chain games.

This is where the Loot ecosystem stands out. Loot features a vibrant community, innovative game concepts, and captivating intellectual property that entices developers to get involved. I’m eagerly anticipating the potential for a game-changing moment in the realm of fully on-chain games, similar to the rise of the Bored Ape Yacht Club. Maybe, shortly, the infrastructure supporting fully on-chain games will undergo a significant transformation, just like the evolution of game engines in the 1990s. This combination of factors could attract more experienced designers, breathing life into ideas that currently seem beyond imagination.

Moonshot Commons:

How can we attract funding to develop the infrastructure? Are the current fully on-chain gaming developers profiting?

Damian:

I think it’s essential for us to figure out how to get that revenue stream in our industry today. We could start to see more exciting games popping up only when our infrastructure is solid. Right now, in the world of fully on-chain games, we lack a sufficient number of game developers, profit-generating opportunities, and engaging content. So, what we should focus on is getting more people to make money and attract more developers. When we have more developers, we’ll naturally have more games, and that’s when more investment will start flowing in.

While many discussions about fully on-chain games revolve around incorporating game logic into the blockchain, I believe there’s even greater potential in finding innovative ways to fully integrate the entire business model into this technology. This is a great opportunity, and this is something we shouldn’t miss out on.

Tianran:

Making substantial profits in a challenging environment is not easy. There’s a half-joking sentiment that the Ethereum community is quite “naive” in being super value-driven. They seem to prioritize technology and decentralization over centralized profit-making endeavors, but this is genuinely a powerful belief.

Looking at it from the perspective of an ecosystem, many individuals held a strong focus on technology and crafted high-quality games without spending substantial expenses.

Although these young developers had the potential to issue tokens and potentially amass hundreds of millions or even billions of dollars, they still pursued a value-driven route instead of immediate monetization. The team then evolved into projects like MUD and 0xPARC, predominantly relying on donations and funds from the Ethereum Foundation.

A similar narrative unfolds in the Loot ecosystem, which commenced as a vibrant yet underfunded community. Despite encountering financial constraints, it tenaciously persisted and expanded into other meaningful projects.

I truly believe that cost-cutting alone is not the sole path to achieving remarkable outputs. What truly sets the successful teams apart is their unwavering dedication to technology and their values. I am confident that their immense potential and value will become increasingly evident as time goes on. Putting financing on top of everything could potentially lead the developers away from the fundamental mission.

Aiko:

We can keep an eye on Telegram’s Unibot, and there’s no need to rush. In this ecosystem, although developers may not have raked in substantial profits yet, there are already individuals earning money, primarily driven by increased traffic. Many developers are brimming with innovative ideas that resonate with investors, creating a favorable financial environment.

Take, for example, the founder of MatchboxDAO, who excels in business acumen. MatchboxDAO opts to outsource the development of fully on-chain games, positioning themselves more as organizers of esports tournaments. This strategy allows them to generate revenue throughout the process. A blend of business savvy and an open-minded approach is crucial in this landscape.

At Moonshot Commons’ Web3 Fireside Chat #22, HashKey Demo Day AMA, we invited speakers from leading infrastructure and middleware projects: Zooey, Co-founder and CEO of Dataverse; Mathew Sweezey, Chief Strategy Officer at Smart Layer; Burnt Banksy, Founder of Burnt (XION); Nicolas Biagosch, Co-initiator of the Q protocol; Mark Rydon, CEO and Co-founder of Aethir, and Greg, Chief Product Officer at ChainSafe.

HashKey Portfolio Demo Day is a showcase platform created by HashKey Capital for its portfolio of invested projects. It aims to help these projects connect with potential investors and partners within the ecosystem.

HashKey Capital is a leading institutional asset manager focused on blockchain technology and digital assets since 2015. They have a strong track record of investing in high-growth companies globally, with expertise in blockchain technologies. This vision and commitment ensure that it stands at the center of the blockchain ecosystem in Asia and globally. HashKey Capital’s portfolio covers a wide range of the blockchain ecosystem, including public chains, protocols, and applications across the globe. The team combines technological and financial market expertise, specializing in digital asset investment for institutional investors. (Visit HashKey Capital for more information)

Dataverse specializes in data infrastructure, empowering users with data ownership. Their platform, DataverseOS, serves as an internet data operating system that simplifies the creation of sovereign data apps.

Smart Layer is dedicated to developing toolsets for token-centric architectures. They offer Smart Pass, a growth-focused suite of tools that have successfully grown their community to over 2 million members in just 120 days.

Burnt (XION) aims to streamline the blockchain user experience with XION, serving as a modular Generalized Abstraction layer that abstracts away complexities like gas fees, cross-chain interoperability, and payments.

Q protocol pioneers a universal governance layer for the Web3 ecosystem. Q Protocol’s infrastructure accommodates complex governance decisions in a decentralized manner, eliminating the reliance on admin keys.

Aethir specializes in decentralized cloud infrastructure for the gaming and AI sectors. Aethir addresses the critical challenge of scaling low-latency, globally deployable GPU cloud solutions, essential for industries requiring resources for AI applications and cloud gaming.

ChainSafe stands out as one of the rare multi-chain research and development companies, playing a pivotal role in advancing the decentralized web.

Key Takeaways:

1) Web3 infrastructure is still in its early stages, presenting significant opportunities for innovation and growth.

2) Advanced technologies such as governance security and user-friendly experience are creating new avenues for business models and driving user adoption in the Web3 ecosystem.

3) Web3 infrastructure encompasses various untapped areas, such as gaming, where agile builders have the potential to make a significant impact as the ecosystem continues to evolve.

4) Middleware challenges, including standardization and seamless Web2-to-Web3 transitions, present collective hurdles for the Web3 industry to overcome.

5) Projects within the industry contribute unique innovations, ranging from data monetization to decentralized cloud infrastructure, thereby enriching the overall Web3 landscape.

6) Emerging Web3 projects actively seek partnerships and fundraising opportunities while the robust growth of Web3 project communities reflects the industry’s continuous expansion and evolution.

Moonshot Commons:

Welcome to the HashKey Demo Day AMA. Before we begin, I’d like to invite each speaker to briefly introduce themselves and provide an overview of their project to our audience.

Zooey:

Hello everyone, I’m Zooey, the co-founder and CEO of Dataverse. Our platform, DataverseOS, is a pioneering data infrastructure designed to give users ownership of their data. At its heart, it functions as an internet data operating system, simplifying the creation of sovereign data apps. It offers developers essential technical modules such as decentralized storage, data encryption, access control, and data monetization, which are the building blocks for a variety of applications — from content platforms and social networks to toolkits and dataset marketplaces for AI models.

DataverseOS also serves as a bridge for everyday users to enter the world of cryptocurrency. With multiple applications on our system, users can engage and generate data that is securely stored in their private space, linked to their wallets, and fully transferable across identities.

Our system enables users to take control of their data in an encrypted environment, equipping them with the tools to manage and monetize their information securely and efficiently.

Mathew:

I’m Mathew Sweezey, the Chief Strategy Officer at Smart Layer. We specialize in developing toolsets for creating token-centric architectures. Currently, we’re highlighting our newest offering, Smart Pass, a suite of growth tools designed to help Web3 projects expand.

We’ve successfully leveraged Smart Pass to grow our community to over 2 million members in just 120 days. We’ve also recently introduced an NFT to our community, which has garnered over $450,000 to date. We’re excited to collaborate with other projects that seek to tap into this potent growth mechanism to kickstart their ventures.

Burnt:

Hello everyone, I’m Burnt Banksy, the founder of Burnt. The inspiration for our name traces back to an unconventional event two and a half years ago when I purchased a Banksy artwork, set it ablaze, and then sold it as an NFT. Today, we’re at the forefront of innovation with XION, the first modular general abstraction layer designed to deliver frictionless experiences to users.

At Burnt, we’re pushing the boundaries beyond account abstraction. Our vision is to obscure the complexities of blockchain technology — everything from gas fees to cross-chain interoperability, pricing, devices, and payments. We aim to appeal to a Web2 audience by creating a user experience so seamless that they remain unaware they’re interacting with crypto products.

We’re currently operating on our live XION Testnet, which has seen an impressive uptake of just under 350,000 wallets in a little over a month. I’m looking forward to discussing the future of Blockchain and the Q protocol with you all.

Nicolas:

Hello, I’m Nicolas, co-initiator of the Q protocol. We’re pioneering a universal governance layer that provides shared governance security for the Web3 ecosystem. Imagine a system that transcends the limitations of transaction security, which, as you’re aware, ensures that coded transactions are secure and immutable.

More than 90% of critical business decisions are not binary or deterministic; they require nuanced interpretation, something beyond the scope of traditional coding. That’s where the Q protocol steps in, offering an infrastructure that accommodates these complex decisions in a fully decentralized way, effectively mitigating the risks of centralization prevalent in the DeFi space.

Our protocol allows for code upgrades without any admin keys, thereby eliminating the dangers of admin key centralization. We make system-critical decisions for DeFi, including determining eligible assets, in a completely decentralized manner. Additionally, we provide DAOs with the tools they need to establish a legal structure that includes a set of rules akin to a constitution, and we facilitate integration with the International Chamber of Commerce for dispute resolution.

We’re actively seeking partners to onboard and utilize these governance features, thereby securing an instant security upgrade. Whether it’s DeFi or DAOs, or any entity that manages code upgrades, our system is designed to remove the risk of admin keys.

Having been on the mainnet for one and a half years, we’re backed by several VCs, Deutsche Telekom, and supported by legal and academic experts from prestigious institutions including MIT and Stanford along with several European universities.

Mark:

I’m Mark, CEO and co-founder of Aethir. We’re at the forefront of creating a decentralized cloud infrastructure tailored for the gaming and AI sectors. At Aethir, we address a critical challenge: scaling low latency, globally deployable Graphic Processing Units (GPU) cloud solutions.

This is crucial because both emerging AI industries and established gaming giants require low-latency GPU resources to enhance their core technologies. Without an increase in these resources, we risk hitting a significant bottleneck that could hamper industry growth.

To put this into perspective, consider the vast amounts of capital being poured into AI training infrastructure since the AI surge earlier this year — billions invested. Yet, the question arises: what about the infrastructure for the application phase that follows AI training? The needs for training infrastructure and application infrastructure are distinct, and that’s the gap Aethir aims to bridge.

Aethir is creating the infrastructure that allows latency-sensitive services like AI applications, which are destined to be a core part of our future economy, to scale effectively in the cloud. Beyond AI, we’re also looking at transformative technologies such as cloud gaming. Aethir enables cloud-based gaming experiences that bypass the need for high-end hardware, potentially opening up the world of gaming to the 3 billion people without access to such equipment.

In essence, we’re constructing what we believe to be the vital decentralized cloud backbone for the gaming and AI industries of tomorrow.

Moonshot Commons:

I’d like to invite each of you to discuss how your projects are contributing to the scaling and application layers within the Web3 infrastructure, and what impact you foresee on the broader growth and evolution of Web3.

Mark:

Although Aethir might not fit the typical mold of Web3 scalability solutions, we leverage the Web3 application layer to enhance our Web2 infrastructure. To clarify, decentralized GPU cloud infrastructure, which is our specialty, is one of the few areas where Web3 inherently offers a scaling advantage over Web2.

Aethir’s core belief is that decentralized cloud infrastructure could benefit from the natural scalability of Web3, marrying it with the advantages of edge computing alongside traditional cloud benefits. This hybrid method establishes a robust infrastructure that exceeds current standards in Web3, and also redefines excellence in the Web2 realm. Our cloud solution, unique in its approach, offers unparalleled benefits, irrespective of individual perspectives on Web3.

This innovative infrastructure is attracting projects that hadn’t previously considered Web3 solutions, which leads to new possibilities. As we onboard more clients and users into this space, we’re excited to facilitate a transition that could significantly influence the adoption and growth of Web3.

Nicolas:

Our project, the Q Protocol, strengthens Web3 by enhancing security and decentralization. We focus on eliminating centralized components such as admin keys and centralized decision-making processes. Our innovation lies in enabling fully decentralized, non-deterministic decision-making.

This is crucial because most business decisions — upwards of 90 percent — are non-deterministic and require nuanced judgment. This has been a barrier for complex financial models, like insurance and pensions, to fully integrate with blockchain technology. With our governance security layer, we can support traditional business models transitioning onto the blockchain, fostering new decentralized opportunities in sectors like insurance, pensions, and more advanced DeFi systems.

Our infrastructure caters to applications and Layer 2 solutions, mitigating centralization risks and opening the door for sophisticated, decentralized business practices. This, in turn, paves the way for a new wave of business models to emerge and flourish in the decentralized ecosystem.

Burnt:

One of the core issues our industry faces, as you might imagine, is adoption. The reality is that we’re quite limited to users familiar with wallets and traditional crypto methods. We’ve inadvertently erected massive barriers to entry, which have stymied expansion beyond our current user base.

In terms of scaling, we’re addressing this from a consumer perspective by making it incredibly easy for developers to create applications that, to the end-user, feel like the Web2 experiences they’re comfortable with but are underpinned by a Web3 backend. This strategy is important as it allows us to expedite the adoption process and scale even further. Our approach isn’t merely about building infrastructure; it’s about reshaping the user experience to invite broader participation in Web3.

Mathew:

I love this question. Like Burnt said, our objective is to expand the ecosystem by welcoming more participants. Our Smart Pass system is designed to engage Web2 users with Web3 functionalities.

We’ve introduced a concept called questing, which allows users to earn points through a variety of channels and use those points to tailor experiences within the ecosystem. This approach shifts the focus towards mass onboarding, breaking down barriers to entry and making the transition to Web3 seamless and rewarding.

Our role in scaling is about community growth — we aim to facilitate a comfortable and intuitive connection for Web2 users to cross over into the Web3 space.

Zooey:

Pioneering the effort, we are essentially expanding the application layer to welcome more developers by simplifying their experience on the Web3 infrastructure. Dataverse harnesses a multitude of Web3 tech stacks, forming a unified data layer that’s integral for today’s privacy-focused and ownership-driven digital landscape.

By merging data networks with decentralized key management and accounts — think of protocols like ‘signing with Ethereum’ — we’ve crafted a private, user-centric storage solution. It’s designed to be incredibly intuitive, offering developers an out-of-the-box, powerful tool.

We also allow users to regain control over their data. The Dataverse Cloud serves as a personal Omni Cloud drive, which overlays the application landscape. Here, data pods facilitate consensual data sharing, and enhance user experiences through personalization. Furthermore, our team constructs a universal indexing and curation protocol. We aim to organize and increase data value across Web3 applications and to strengthen the overall ecosystem.

Our key thesis moving forward is to make Web3 infrastructure more approachable and weave a network of applications that operate in harmony for the benefit of the entire community.

Moonshot Commons:

The next question is about the maturity of Web3 infrastructure. Recently, there’s a prevailing sentiment that the rapid maturation of Web3 infrastructure could potentially reduce opportunities for new entrants. What’s your take on this? Do you see room for innovation and new entrants in the infrastructure space?

Nicolas:

I have to disagree with that claim. When we take a hard look at the Web3 infrastructure landscape, it’s clear that we’re not dealing with a space that’s maturing and shutting doors on new players. We’re staring at gaps that are crying for innovation. Think about it: right now, our potential is hamstrung by what we can squeeze into deterministic code.

Now, here’s where it gets exciting — with what we’re bringing to the table, governance security, we’re not just tweaking existing models; instead, we’re opening the floodgates for a wave of new business models. And it’s not just about new opportunities; it’s about reinforcing our existing foundations, making them more robust, and stripping away the growth barriers.

Just imagine unlocking the next trillion-dollar layers of value in Web3 — and that’s no exaggeration. When it comes to the current infrastructure, let’s be real; we’re far from maxing out. Transaction security and scalability. We’ve been somewhat stagnant, not due to a lack of effort but because we’ve encountered a complex obstacle. It’s been a few months, perhaps even two years, of incremental rather than revolutionary progress.

To wrap it up, anyone who says we’ve hit peak maturity in Web3 infrastructure has it all wrong. We’re on the ground floor with an elevator that’s ready to soar — we just need to crack the right code.

Burnt:

I agree with Nicolas. The idea that we’ve hit some sort of maturity in the Web3 space just doesn’t hold water. We’re far from it, and frankly, the slowdown we’ve seen recently — even before the downturn, and throughout what was a bull market — is evidence of that. It’s exactly this rawness, this unrefined state of things, that’s got us all here today, discussing, debating, and innovating.

Let’s be real — the user onboarding experience in Web3? It’s a pain point. The overall user experience? Far from seamless. We’re grappling with these issues at every layer, which is both a challenge and an opportunity. It’s a paradox. If the ecosystem were perfect, this conversation wouldn’t be happening. None of us would be on this stage, pushing for progress.

This friction we’re facing, it’s the engine driving us all forward. So, while it’s frustrating, it’s also thrilling — because it’s not just about the problems we’re solving. It’s about the journey, the collective push towards a goal we’ve not yet achieved. That’s the exciting part — the process, the grind, the shared ambition. That’s what makes this space so dynamic and so ripe with possibility.

Mathew:

I’m going to double down and add my support to that last comment from Burnt. That’s exactly where we are. When we consider the timeline, history shows us that early entrants in a marketplace usually aren’t the ones to come out on top in the end. Take Facebook, for instance, it didn’t emerge until 2006, well after the dot-com crash in 2000. This suggests we’re years away from discovering the killer applications that define maturity in this sector.

Yes, we have solutions for the problems we’re aware of, but we’re only seeing a sliver of the Web2 world starting to engage with Web3. We haven’t even scratched the surface of understanding what their needs or problems might be, despite having some foundational infrastructure in place. In essence, we’re far from what could be considered mature in Web3.

And for those looking to innovate, a multitude of problems still need solutions. The existence of solutions doesn’t preclude improvement. If you can build something better, then absolutely go for it. So, in my view, we’re very early in the game.

Zooey:

I believe one of the biggest problems in today’s Web3 infrastructure is the lack of adoption. As a developer, the good old times have passed; we can’t just finish writing code and expect users and adoption to follow while comforting ourselves with the notion that Web3 is the future and the situation will improve as time passes. Such thinking doesn’t cut it anymore, especially in a bear market.,

We need to explore uncharted use cases like front-end technology and other innovative applications. From another perspective, the maturity of Web3 infrastructure offers greater opportunities for newcomers. The infrastructure is now more user-friendly, stable, and powerful than it was years ago. Developers have access to many infrastructure tools to check compatibility and create innovative combinations. This may set the path for fresh ideas and solutions.

We can’t deny that building a Web3 application is much easier today than it was five years ago. Web3 technologies are evolving towards a more user-friendly experience, a more scalable technical foundation, and an open infrastructure that empowers newcomers to build anything they want.

Mark:

We all agree that Web3 infrastructure is in its early stages. Building a Layer 1 or Layer 2 now needs a top-tier product, narrative, and team to stand out, which isn’t as easy as before. Infrastructure encompasses more than just layer ones, twos, and threes. I’m not stirring controversy by stating that much of Web3 hasn’t yet achieved product-market fit.

There have been numerous project failures, and that’s the nature of a bear market. However, this is a prime opportunity to learn from those failures. With case studies to analyze, we can enter the market with well-conceived solutions to the complex problems we’ve observed.

Consider the unexplored territories in Web3 such as gaming. It’s a trending space, but no Web3 game has broken into the mainstream — though we expect that to change soon. This breakthrough will trigger a wave of infrastructure projects to support a new cohort of gamers. It doesn’t make sense to build much of that infrastructure now without understanding their needs, but agile builders who can quickly adapt to service the first successful Web3 games will likely prosper.

In summary, we are still at a stage brimming with opportunities for learning and growth, and there is ample room for new builders to contribute and make a significant impact in Web3.

Moonshot Commons:

Greg, great to have you here. We’re discussing whether Web3’s fast growth limits newcomer opportunities. What’s your opinion, and do you think there’s still space for innovation and new entrants in the sector?

Greg:

Thanks for having me. At ChainSafe, we deal extensively with Web3 infrastructure through various software development kits (SDK). Currently, infrastructure is abundant, but there’s a race to zero in monetization which we see in remote procedure calls (RPC) and indexing services. Indexing, especially custom solutions, remains unsolved and unstable, affecting user experience, particularly in the gaming and NFT sectors.

The maturity of infrastructure development is progressing, yet existing solutions still lag in maturity. Interoperability remains critical, as highlighted by discussions on layer one, two, and three protocols.

However, the most glaring issue is developer experience (DevEx), which is notably underfunded. Despite advances, integration at the developer level is cumbersome; most time at hackathons is spent on documentation rather than actual development, a stark contrast to platforms like Firebase which offer quick and intuitive setups. This gap in usability and ease of integration is where the maturity of Web3 infrastructure truly falls short. We see this consistently, where developers struggle to understand and utilize these technologies effectively, and that’s where we need to focus on making improvements.

Moonshot Commons:

I want to leave some time to let Greg say hi to us as well and then give a self-introduction and product overview.

Greg:

I’m Greg, the Chief Product Officer at ChainSafe. I’ve been a developer in the space for quite some time, contributing to web3.js and initiating Lodestar, the Ethereum consensus client. At ChainSafe, my focus has been on creating interoperability, gaming, and ecosystem tools. ChainSafe is an R&D firm that conducts research and develops innovative solutions. Our core expertise has been in building consensus clients for platforms like Ethereum, Polkadot, and Filecoin, alongside developing developer tools such as web3.js and web3.unity. I’ll keep this brief so we can continue with our discussion.

Moonshot Commons:

Regarding the middleware challenges, what are the critical issues that remain unsolved or might emerge as the infrastructure layer matures? How are you preparing to address these challenges?

Zooey:

I’ll focus on one point: standardization. There are numerous middleware solutions and protocols, and their number continues to grow. Establishing common standards and best practices is essential to enhance compatibility between systems and prevent fragmentation within the Web3 ecosystem.

Mark:

For us at Aethir, we recognize our cloud network generates too much data to effectively handle on-chain currently. We’re actively looking to progressively increase the amount of data we bridge onto the blockchain until we can operate almost exclusively on-chain. This is our long-term goal and a significant focus, and we’ve made strategic development choices based on what and when we push on-chain. Currently, we’re interested in middleware solutions that better address off-chain data interaction and off-chain write capabilities. These might include more effective real-time Oracle solutions or a better way to bridge data on-chain from the off-chain resources we need to utilize.

Mathew:

For us, middleware is crucial in bridging Web3 projects with the Web2 environment, merging the user experience of Web2 with the utility of Web3. Smart Layer acts as that intermediary, facilitating a seamless transition between the two worlds. We anticipate operating in a Web2.5 world for the foreseeable future, recognizing the importance of Web2’s persistence. Our role is to enable projects and enterprises to deliver a Web2.5 experience, combining the functionalities of Web3 with the user experience of Web2.

Burnt:

Mathew, we should speak after this; our perspectives are extremely similar. There are two key issues: the first is the fractionalized middle layers in crypto, which lack standardized common core practices, and the second is the need for a Web 2.5 middle layer to bridge to the real world. This challenge is something we tackle daily at Burnt and it’s thrilling for us. I believe we’ll be operating in this Web 2.5 world extensively, and I’m eager to see how others will contribute to achieving this shared objective.

Nicolas:

We’re addressing this challenge in two ways. We first all agree with Mathew and others that there’s a limit to what can be done on-chain. However, we’re committed to finding ways to decentralize operations that can’t be fully managed on-chain to mitigate legal and regulatory overreach stemming from centralization in organizations managing decentralized technologies. This is the primary source of current regulatory pressures.

Second, we’re exploring how to bridge Web2 and Web3 with real-world assets. We aim to create solutions that connect real-world assets or decisions, such as arbitration rulings from the International Chamber of Commerce, with on-chain execution and enforcement. Our goal is to increase the overall decentralization within the space.

Greg:

This is a compelling topic as it highlights the dichotomy in building middleware infrastructure. Many see an API and assume centralization, yet as discussed, for onboarding and mass adoption, we must develop scalable solutions beyond on-chain capabilities, as mentioned with Oracle services and data management.

A future is envisaged where middleware largely consists of off-chain-based computation. It’s crucial to provide verifiable and secure off-chain computation to ensure user safety. As the visions of Cosmos and Polkadot unfold, we may see a shift away from direct interactions with L1 blockchains. The emerging trend favors dual-chain architectures. In these systems, one chain manages value while another handles high-throughput applications, with transactions settled between them

This brings us to a crossroads: How do we balance decentralization? Gaming could be the first sector to demonstrate that a hybrid of decentralized and centralized systems is not only feasible but beneficial, leading to future developments in the field.

Moonshot Commons:

We discussed opportunities and challenges in fraud, middleware, and the evolving space. I’d love to hear how you’re tackling them specifically. What distinguishes your project from others, and can you highlight any unique technical innovations?

Burnt:

We are currently focusing on generalized abstraction. We’re originating from a place where everything is protocol level, aiming to eliminate the complexity of middle layers and competing standards. Looking at the tech stack, we’re breaking it down from user interaction to direct chain interaction. Our technical innovation over the past 18 months has been about integrating everyday payment methods like credit and debit cards on-chain, making gas fees payable in USDC, and enabling signature-agnostic signing among other advancements.

There’s a lot to cover in this brief update, but I encourage you to look at our documentation for more information on our innovative initiatives. Ultimately, the real innovation comes from what we enable, such as onboarding users with Face ID and allowing transactions to be signed with Face ID right from the protocol level without the associated MEV (Maximal Extractable Value) extraction or security risks, cutting out the middle layer of risk.

Mathew:

Our uniqueness in the market comes from our approach to growth. The Smart Path ecosystem enables any Web2 user to engage with Web3 environments without the concerns of wallets or on-chain transactions, using off-chain tokens and cryptography.

To grow the project, we break down growth elements and integrate them into any part of a user’s experience. This includes incorporating quests directly within the token, making the token interactive, or integrating these elements into any product or user journey.

This approach is omni-channel and supports ecosystem expansion by leveraging insights on users’ activities, levels, and roles to create greater value across the ecosystem. Rather than centralized questing on Smart Pass, it’s about enhancing users’ value by offering a Web2-focused, seamless integration with Apple Wallet or Google Wallet, cross-chain capability, partnerships, and ecosystem growth.

Greg:

Specifically in gaming with Web3 Unity, we focus heavily on building robust failover mechanisms for users. Web3 Unity is modeled after web3.js or Ethers.js as a standalone SDK, meaning you don’t have to depend on a given service for it to function. In building it, we were meticulous about integrations, integrating services like social login or relay so that they don’t rely on us. If we were to disappear, their game should not be interrupted and can be quickly restored with minimal changes.

We support third-party services that share a similar philosophy of independence. We aim for solutions that are permissionless, ensuring continuity even if one infrastructure player disappears. We encourage other teams to adopt this approach, creating products that are self-sufficient to safeguard against the integration challenges in our space, like smart contract audits and high lead times.

We recognize the risk that users could leave, but if the service is good enough, they’ll stay. Our priority is to set people up for success, building not just for ourselves but for the community at large. This approach of empowering users and developers has been working well for us.

Nicolas:

Thank you. We see ourselves as possibly the only ones enabling projects to set complex, discretionary rules and enforce them on-chain in a fully decentralized manner. Disputes arising from these are resolved through the ICC International Court of Arbitration, the world’s largest arbitration court, with outcomes enforced on-chain. This method offers an external anchor for governance security, not reliant on governance tokens alone, which traditionally secure a project similar to trusting bank managers with your money.

Our services extend beyond traditional governance by offering external security measures, allowing protocols or projects to have a legal structure that is decentralized and independent of any nation-state jurisdiction. We enable DAOs to make nuanced decisions necessary for sophisticated governance models, such as those needed for life insurance or pensions.

We also stand out by providing decentralized decision-making capabilities for non-binary decisions required in complex governance scenarios. We’re unique in enabling discretionary slashing, not based on simple code logic but rules set by the community, backed by an independent enforcement mechanism we provide.

Zooey:

Dataverse might be the unique data middleware that addresses all three critical aspects of the Web3 data era. Our approach is multidimensional:

Firstly, regarding data storage, our system leverages a combination of decentralized networks. We utilize Filecoin and Arweave for durable backups and the Ceramic Network for decentralized graph database capabilities.

Secondly, data accessibility and permission control are central to our system. We’ve designed a data wallet to safeguard users’ secret keys, which act as the data gatekeepers.

Thirdly and most importantly, we address the origin and generation of data. We’re devoted to incentivizing data production through our comprehensive solution for data monetization. This system is flexible, fully programmable, and developer-friendly.

Our cloud functions as a hyperstorage, providing an isolated data sandbox for each application. Just imagine how each application has its own Dropbox functioning as a cloud database.

Monetization is key when it comes to data ownership and control. Imagine posting content on a social platform and being able to retrieve it from your private data space, just like a local file. Here you can manage and monetize your data. This process involves encrypting the data, transforming it into an on-chain asset, and then selling the access rights. Essentially, one would purchase an NFT as a certificate to unlock the data’s content.

This monetization mechanism means that users don’t just own and control their data; they can also profit from it. Our system encourages people to create data by showing them how they can make money from the information they generate. This is the core of our product offering.

Mark:

What distinguishes Aethir? Consider the challenge of scaling cloud gaming as a case for our decentralized cloud infrastructure. Major tech companies have struggled to extend cloud gaming into developing markets, despite having success in North America and Western Europe. These regions can support the service through subscription costs. However, the irony is that cloud gaming would benefit economically disadvantaged users the most, yet these individuals are often the ones left out.

Aethir has addressed this by successfully scaling our cloud gaming service in regions like Latin America and Southeast Asia. With over 200,000 online gamers in developing markets, our decentralized cloud infrastructure has overcome scalability challenges that legacy tech giants could not, marking a significant point of distinction in our capabilities.

Moonshot Commons:

As we approach the end of the AMA session, let me pose perhaps the most critical question I should have asked from the start. What brought you to the HashKey Demo Day? Who should reach out to you? We’d also appreciate insights into your fundraising efforts and the partnerships your project is actively seeking.

Mark:

HashKey is one of our investors. We value our close work with them and appreciate the invitation. I’ll dive into some of our partnerships to provide context before concluding with an invitation.

At Aethir, we’ve partnered with notable projects, primarily in the gaming sector, as we deploy our cloud gaming infrastructure in Latin America and Southeast Asia. Our partners include Bybit and their Yeeha gaming platform, where we’re cloud-enabling Bybit’s venture into Web3 gaming. We’ve also collaborated with MixMarvel, a Web3 content incubation platform, and gaming portals such as GAM3S.GG, previously known as Polkastarter. These partnerships allow for browser-based gameplay accessible to anyone with an internet connection, without the need for advanced hardware.

We’re working with Yield Guild Games (YGG) and other gaming guilds on similar initiatives. Additionally, we’re engaging with major Web2 studios on projects that we’re excited to announce soon.

While we’re not currently fundraising, we plan to open a round in December and welcome investor participation. For those interested in the Aethir ecosystem, follow our account for updates on our upcoming token launch at the end of Q1, 2024.

Zooey:

We’re here to explore partnerships and fundraising opportunities, particularly with social protocols for Web3 applications and account solutions like AA (Account Abstraction) wallets or MPC (Multi-Part Computation) wallets to streamline the onboarding of Web2 users.

We’ve recently partnered with Sismo, which offers a ZK (Zero Knowledge) proof-based SSO, and we’re keen on collaborating to develop a trustworthy reputation system. We aim to integrate diverse technologies into our platform.

We’re also hosting an online hackathon with Phoenix and TLSNotary, called Rebuild Ownership 2.0, available on DoraHacks. Phoenix leverages fully homomorphic encryption, while TLSNotary combines TLS protocols with multi-party computation for private data’s selective disclosure, and Tableland offers a decentralized database. We are mainly looking for data infrastructure and cryptographic tools. If your project aligns with these, we’re open to discussing potential collaborations in market technology or products.

Greg:

We’re on the lookout for those interested in expanding into interoperability or the gaming sector, particularly Unity developers. If you have developers eager to create in this space, that’s our target. Short and sweet — thanks for having us back.

Mathew:

What brings us here today is the support from HashKey, our investor — thank you for that. We’re currently seeking Web3 projects interested in innovative growth strategies. Our Smart Pass, a new offering from Smart Layer, has successfully expanded our community by over two million in four months through onboarding and questing features designed for user growth. If you’re curious and looking to adopt this technology, drop us a direct message to explore a partnership.

Burnt:

We’re deeply appreciative of HashKey, our early investor, for their support. For users interested in what we’re developing, our test net is available for you to explore. Developers will find a robust and growing ecosystem with over 75 partners and 15 native projects already integrating with our test net. We’ll be launching a campaign on this soon.

On the infrastructure side, we’ve partnered with major Web2 services like Stripe, Checkout, and Stitch to enhance the user experience. We’re open to discussions to further strengthen our infrastructure and provide the best possible experience for our users. We’re truly delighted to be here and to share our message with all of you.

Nicolas:

Thank you to HashKey for hosting us. We’re currently expanding our ecosystem, particularly among partners and projects that leverage the robust governance features we offer. There’s been significant demand from DeFi projects and DAOs seeking to safeguard their treasuries and implement code upgrades without admin keys.

We achieved regulatory clearance in Germany and Liechtenstein two years ago, affirming our expertise in these areas. We’ve also seen positive responses to our liquid staking solutions and are looking for projects to support reducing centralization risks.

We are also in an active fundraising phase. If you are interested in us and want to dive deeper, you can learn more at q.org, our website. We aim to enlarge our community as we gear up for a token launch slated for next year.