#60 The Layer 1 Competition. Web 3 Trends for Enterprises in 2023.
Disclaimer: Everything we write in "The Crypto Insider Report" is an x-ray of the industry as we see it, through the lens of publicly available information. We are not financial advisors.
The Layer 1 Competition
I was going through Paul Brody’s opinion piece in CoinDesk on Ethereum needing competition and figured it would be a good subject to cover in today’s newsletter. The first thing that popped into my mind reading the title was “competition, or more competition?”. That is, I wouldn’t consider all the Layer 1 alternatives out there no competition. Then, if you look at market caps, Crypto as a whole sits right now around 864 billion USD, with ETH claiming 142 billion USD (or about 16% of it). The next smart contracts blockchain down the line is BNB with 48 billion (or about 5.5% of total market cap). So there are several ways to look at it.
Digging into the article, Paul explains what he means, making an analogy to the 20th century when telephone operators were fighting over the market, starting from 6000 players and reaching an almost monopoly of AT&T. At that point, the government intervened and regulated the market in order to promote healthy competition, which led to lower prices and more convenience for the end users.
One of the rules imposed at that time was the mandatory interconnectivity between operators. Makes you think what would happen with the Layer 1 landscape if all “legit” blockchains would have to interconnect with each other. Would this focus the competition on speed and transaction fees, shifting away from growing a private ecosystem of developers? Perhaps. It’s a good thought experiment. We are clearly not there yet and Ethereum is in no way AT&T right now, but as always, studying history is a great source of insights for the challenges we are up against.
If you want to hear more of Paul Brody’s thoughts on this, be sure to watch the podcast our own Vlad did with him.
Mihnea
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Metamask and Uniswap collect your data
Whoever’s in crypto knows no one and nothing is safe from hacks. Bridges, games, lending protocols and much more are hackers’ favorite targets for siphoning a few tens of millions of dollars at once. Although there are still 2 months to include in the graphic (data only includes months up to October), we’ve almost reached last year’s worth of hacks:
But hacks and cybersecurity extend outside of crypto as well. In 2021 alone, McKinsey estimates that organizations spent $150 billion to protect themselves - but the addressable market amounts to a staggering $2 trillion:
Why is this data relevant to today’s newsletter, you may ask? That is because this week’s been a huge one for privacy policy. Consensys, the renowned company which built Metamask and Infura, stated that they collect user data for people who use the combination of the two. Infura, a remote procedure call (RPC), requests data and information from programs running on third-party computers. And using it allows Infura to collect your IP address as well as your Ethereum wallet. What’s more, this data pertains ‘to the user’s contact details, profile information and “other user data”. Not cool, Consensys.
If you’re reading this newsletter, you probably have been around Crypto Twitter even if just for a little. And it goes without saying that the community has been displeased with the news. If you aren’t happy with the latest news, here are some things you can do better protect your data:
I wish this were the end of my part for this week’s edition, but the issue digs deeper. At the same time, Uniswap Labs (the dev team behind the decentralized exchange Uniswap) updated its privacy policy. And yes, you guessed it: they also collect user data, on-chain this time. Surely, this may be well-intended “We do want to make data-driven decisions that improve user experience” but we all know the ethos of crypto! And if even Uniswap gives it up… we may have to go back to the drawing board.
This is not the end of the world, but such big and important teams adhering to data collection may very well set precedent in the industry and others may follow suit. Hackers like money and data just as much, and believing anyone’s safe is wishful thinking. We’re going to keep a close eye on what these moves may start and make sure you’re kept up to date.
Matei
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Web 3 Trends for Enterprises in 2023
A recent report released by Vayner3 highlighted 8 Web3 trends that enterprises should look into in 2023. We summarized our top 3 favorite ones but we strongly recommend you to have a look at the rest of the report.
Web3 Teams are being built with a variety of approaches
With increasing amounts of funding, corporate investment, and consumer demand, Web3-focused firms need a cross-functional workforce. In 2020, non-technical blockchain positions (e.g. Marketing, Management, HR, etc.) made up only 26% of Web3 job postings, but this segment grew to 39% in 2021. As Web3 is not just for engineers and developers this trend is expected to continue as Web3 solutions are commercialized at scale.
Enterprises have also started hiring dedicated Web3 teams. In 2022, we saw F500 announcements of Web3 hiring in all industries - Entertainment, Retail, Fashion, Tech, and CPG - and it is expected that more will follow suit in 2023. These roles and teams will play a significant role in broad Web3 adoption through internal education, evangelism, and community-building at many of the largest organizations in the world.
Organizations building dedicated Web3 competencies have pursued a range of approaches for operating model development and 3 models have been very popular, each coming with pros and cons.
Token Ticketing: a new experiential model
Token ticketing has consistently been described as a clear opportunity for Web3 to bring transparency and value to a fragmented, opaque market. For enterprises, it can also create a new bridge between your brand’s digital and experiential strategy. While major announcements from organizations like Ticketmaster and the NFL have been made, it is believed that mainstream adoption of blockchain-based ticketing may be further off than 2023. Yet, in 2022, we saw early proof points for a range of experiential use cases that drove enhanced IRL activations, deeper engagement with consumers, and new channels for retargeting and post-event community building. It is expected that these early pilots to gain meaningful momentum in 2023, specifically during conference and festival season this upcoming summer.
A Multi-chain Future
Vayner3, tracks and analyzes every major enterprise brand NFT drop, and what they’ve concluded in 2022 is surprising: over the course of the last 3 quarters, more and more brands are experimenting outside the Ethereum ecosystem. In Q1 of 2022, over 50% of enterprise NFT drops were on Ethereum mainnet. In Q3 of 2022, less than 25% were.
Each blockchain differentiates on its approach to pillars like security, transaction cost & speeds, and tokenomics. But, we are seeing the cultural and brand implications play an increasingly notable role in enterprise alliances. Polygon (one of many Ethereum Virtual Machine (EVM) compatible sidechains and Layer 2s) has led the way in mainstream use cases with impressive announcements with Reddit, Disney, and Instagram. Flow, an Alternate Layer 1 blockchain, has continued to be one of the chains of choice in sports with NBA, NFL, and Ticketmaster relationships. Immutable X may be the chain for gaming with Gamestop NFT platform integration and an explicit focus on games.
Evelyne
For more educational crypto content, check out the links below:
The Stakeborg DAO Talks on YouTube: https://www.youtube.com/playlist?list=PLOrFZZifNn4Nx4nSQL3WS52ALPXgrTSVG
Discord channel: https://discord.com/channels/901898461568442458/903006233584341052
StakeborgDAO Quarterly Reports: https://docs.stakeborgdao.com/reports/dao-quarterly-reports
Stakeborg Academy: https://academy.stakeborg.com/
Well done as always ! Keep the spirit & science !
🤝👷🏼♂️🧱🦦thank you🦾