Multicoin Capital - Investing in Web3 Credentialing

WRITING
JANUARY 25, 2022
Today I’m excited to announce that we are co-leading a $10M strategic round in Project Galaxy with Dragonfly Capital. This is our second investment in the project. We are extremely excited to back the team, and to support their vision of creating a universal Web3 credentialing network across many public chains.  

Web3 Credentials

There can be many kinds of credentials that denote certain achievements or contributions by people. Historically, credentials are shared via resumes, and usually manifest as certificates from institutions such as universities, governments, or training programs.

Web3 credentials, on the other hand, live on-chain. While they are similar to traditional credentials that are earned via proof of work, the “work” for these credentials could be someone’s on-chain contributions, such as the length of time they provided liquidity to a pool or the number of Snapshot votes they participated in within a community. They could also be useful off-chain data brought onto a blockchain, like contributions to community proposals or the number of forks they’ve created on Github. One of the most well-known Web3 credentials is POAP (Proof of Attendance Protocol), which issues NFTs that mark provable participation in important community events. (Note: that the “credential data” we are referring to in this article is all public data. There are other forms of credential data that may have private or semi-private data involved. Project Galaxy has plans to offer privacy-enabled options in the future.) 

There are several ways in which credential data can be used today. Here are a few examples:
 
  1. People who actively use certain defi protocols could be eligible for a larger voting power per unit of tokens than passive token holders;
  2. People who have helped promote an idea or proposal on twitter (e.g., retweet or comment) during a certain period of time could also get priority in a new token offering; 
  3. People who have interacted with certain contracts could be eligible for rewards in a targeted growth hacking campaign; and
  4. People who have accomplished certain achievements in a game could be eligible for fast-track recruitment in some guilds. 

Web3 credentialing creates new ways to bootstrap flywheels and other organic growth for Web3 applications that wasn’t possible before. Beyond the amount of tokens that one owns (which naturally represents more power to the whales), Web3 credentialing represents qualitative data (the value of which has historically been ignored) that helps describe the profile of an address. The democratization of credential data effectively introduces a new (and better) way to assign power to community members than token-based voting alone. With the non-quantitative behavioral data—especially data that lives off-chain—the power-weighing mechanism can skew status and rewards toward the “true fans” in a community, despite the fact that they are often not the largest token holders.

The Galaxy Network consists of two core components: the credential network, and network modules that help users to interact with the credentials. Modules are pre-configured to serve different functions, such as targeted airdrops, task-based giveaways, access to gated communities, or sybil-resistant token distribution. 

The workflow to interact with Galaxy Network is simple: curators permissionlessly contribute credentials to Galaxy network, which grows the available universe of audience cohorts, and then users of Galaxy Network (i.e., the Web3 protocols and communities) can run credential-based campaigns based on selected sets of credentials using Galaxy Network modules. They can also include Project Galaxy’s credential oracle as part of their smart contract so that it is always targeting the latest and most qualified credential cohort. By separating the credential oracle from the NFT badge issuance, users of the Galaxy Network can map credentials to the right people without restricting the transfer and speculation of the NFT badges. The oracle will push the latest state of the credential whenever a protocol requests for that data, and the NFTs are issued for the presentation purpose as a snapshot of the credential. Once credentials are contributed to the network, the more a dataset is used, the more the corresponding curator can earn. 

The Credential Flywheel

As I mentioned above, this is our second round of investment into the project. They have come a long way since our first check. 

Before working on Project Galaxy, Harry and Charles worked together as the co-founders of Lino Network and DLive. I met the team in 2018, and they struck me as one of the most capable, hardworking, and ambitious teams in Web3. As the infrastructure wasn’t quite ready for a decentralized social platform in 2019, Lino / DLive ended up being acquired by Bittorrent. Two years later they continued building their vision, this time via credentialing.  

A credential network does not come together magically by simply plugging a query middleware onto a blockchain. It is difficult to build a credential network, especially at scale, because of the fragmented nature of the data required to create effective credentials. Fortunately, this community has been working on these problems for a long time, and in the process has amassed one of the largest Web3 credential sets in the world. It now has subgraph queries, on-chain snapshots, governance history, proof of attendance, and a database of interactions with Web2 applications. Throughout the process of running different campaigns, Project Galaxy was also able to identify the commonly demanded engagement modules, and continuously add missing modules to the Galaxy suite. The combination of the network today and all of the pre-built modules makes it far easier for anyone to conveniently pick a target credential dataset and create a campaign for it. 

This creates an organic flywheel: 1) with the richest data and the easiest-to-use engagement modules, Galaxy is now the go-to-resource for projects to engage users; 2) as more users are rewarded based on credential data, others follow suit (resulting in desirable activity) and create more credential data; and 3) this growing usage of Galaxy Network will credential curators to contribute more credentials to the network because the likelihood of their credentials being used (and thus the curators being paid) is higher, which comes full circle and attracts more projects to use Project Galaxy.  



Powering Web3 Identities with the Galaxy Credential Network

There are two ways to build Web3 identities: top-down and bottom-up. Top down identities are typically granted by institutions, such as your government-issued ID card. Bottom-up identities are created by taking the sum of prior actions, such as one’s personal brand representing the sum of their tweets.

Project Galaxy is going after this opportunity next. They will allow people to associate their credentials on different chains to one single Galaxy ID. 

Project Galaxy’s bottom-up approach is powerful in a few meaningful ways: 
  1. No single, authoritative definition of a standard. For example, any decentralized application is free to define their own scoring system with the underlying credential data in the Galaxy network. One ID could have multiple scores (say one by AAVE and one by Compound), and different applications can choose the score that fits their requirements the best or they trust the most.
  2. Powering the Web3 LinkedIn. The Web3 tasks (e.g., quests in Web3 applications and play-to-earn games) can find their best match based on the users’ past activity and achievements on different chains. The Galaxy Network provides the data for anyone to curate a customized resume they need for the recruiting of a specific task: one could show the earning history in a play-to-earn game for getting into a guild, and could present all the engagement badges from a community to get selected as a community ambassador.      
  3. Changing the paradigm of targeted marketing. Web3 applications can bootstrap adoption by targeting the right audience using existing Web3 credentials to offer incentives for certain behaviors. It is much harder to replicate these kinds of targeted campaigns in a Web2 setting without public behavioral data. 

Credential networks and on-chain digital identities are a core component of the Web3 stack. Until recently, they simply weren’t possible due to the sheer complexity and lift required to bootstrap these networks. With this round of funding, Project Galaxy is now in a position to serve the entire crypto ecosystem across all chains. As Web3 continues to grow and more complex applications get built, we expect that it will play a core role in not only application development but also frontier marketing campaigns that interact and engage their users in new, truly crypto-native ways. 

Project Galaxy is hiring, so if you’re interested in the area that they are working on, please do not hesitate to reach out!
 
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Important Disclosures: Multicoin has established, maintains and enforces written policies and procedures reasonably designed to identify and effectively manage conflicts of interest related to its investment activities.
"The DeFi Stack" by Multicoin Capital "The DeFi Stack" by Multicoin Capital
"The DeFi Stack" by Multicoin Capital "The DeFi Stack" by Multicoin Capital
"The DeFi Stack" by Multicoin Capital "The DeFi Stack" by Multicoin Capital
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