There is no shortage of headlines about the beginning of the “crypto winter”. Amid a growing pile of bankruptcies, one of the industry’s hottest startups, NFT marketplace OpenSea, announced a major layoff today.
Behind the scenes, however, many founders and VCs are doubling down on the promise of largely decentralized, blockchain-based outfits, and to that end, one of the “most interesting parts of crypto right now” can be found at “the intersection of social messaging and the web3.” In short, he believes that current messaging tools are not enough and that there will be new opportunities for crypto-native startups to do well.
Gil has already made an early bet, leading a $4 million starting round in Lines, a startup whose three co-founders studied philosophy at Harvard and whose CEO, Sahil Handaboasts that the fledgling company will become the “messaging platform of web3,” although he and his former classmates are still developing the technology.
That it is still a work in progress apparently suits the backers of Lines, which also includes well-known angel investors Naval Ravikant, Balaji Srinivasan, Gokul Rajaram. What they uphold is a vision. There is “a growing number of people using cryptographic pseudonyms to buy digital currencies, trade NFTs, vote on proposals and manage treasuries,” Handa says. “But when someone tries to communicate with another person in this network, there’s no way to know if they’re talking to the right person.”
Meanwhile, Lines is working to allow users to send wallet-to-wallet messages and participate in group chats based on token ownership. Indeed, Handa paints a picture of a communication layer that is both ambivalent about the underlying blockchains and the particular crypto wallet a person uses, and therefore offers users a wide variety of ways. For example, they can find the owner of a particular NFT they want to buy, discover like-minded people based on the tokens they’ve acquired, or contact potential new contributors to a DAO (a sort of “group chat with a bank account”, as the DAOs were called).
Gil certainly thinks the time is right, as more and more people are organizing and transacting as a group online. Previously, he notes, “Your bitcoin or crypto asset and mine were identical, so I’d have less reason to ping an anonymous user through their wallet. But with DAOs, there’s a need for coordination with different members that go further. going beyond just using Discord. In the web3 world, he says, users want “to be able to identify and interact with people for governance, rewarding contributions, airdropping, etc. With NFTs and other collectibles:” I wish I could ping you to buy, sell or trade, so there are other incentives for a communication layer to be useful,” he adds.
The question is whether enough people agree that Lines offers exactly the right solution. As with all messaging apps, its value is largely determined by the number of people using it. And the number of people using it will determine whether the startup is able to partner with platforms like OpenSea that needs it.
In the meantime, Handa and its co-founders — who have yet to decide on a business model — will soon compete with other messaging apps trying to take over Twitter, Telegram, or Discord where people live today. Because it is nearly impossible to verify that people are who they say they are, phishing attempts and other scams are commonplace.
Gil himself says he is already aware of “several teams working on identity, social strata and communication alongside web3”.
Most of them are still flying under the radar, but some are starting to show up publicly. Last month, for example, a crypto analytics platform called Nansen rolled out a messaging app that it claims will allow users to log in with a crypto wallet and then log in to groups based on their crypto assets and NFTs they demonstrably own. Like Lines, the company describes the app as a “crypto-native communication hub” for web3 communities.
An NFT marketplace, Rarible, separately announced a wallet-based messaging feature last year.
Of course, Lines insists she has an edge over the others. In fact, Handa says that while he and his friends are building for web3, they have enough distance to build an app that both crypto natives understand, but people new to web3 can easily pick it up and use it too.
“We’re really focusing on client-side use cases, rather than decentralizing the messaging protocol itself,” said Handa, who is two credits away from graduation and plans to graduate. (“My thesis is about web3 identity and communication, so it’s not much of a distraction right now,” he offers.)
He says he “thinks it helps that we haven’t been in the crypto space in 10 years” and therefore “don’t be super ideological about how we build the platform. We really do it based on what makes sense from a consumer perspective.” and from a community perspective, so many crypto products are not thought through from a consumer perspective,” he continues, “so we try to find that first use case, build a compelling product, and eventually, if other platforms want to integrate, [with us]they can.”
Other investors in Lines’ round include Scalar Capital, Volt Capital, Caffeinated Capital, Consensys Mesh, Hash3, Mischief and many others, including Figma CEO and co-founder Dylan Field and entrepreneur-investor Scott Belsky. Handa says Lines is using the capital to recruit and is currently looking for three more engineers.