We are thrilled to announce our participation in Metal’s Seed Round, led by Swift VC and with support from Y Combinator.

The team is building a production-ready, fully-managed, artificial intelligence and machine learning developer platform that includes:

• Data transformation, indexing, and storage

• Easy-to-use APIs and developer-friendly tools to query and consume data

• Vectorized semantic search and embedding fine-tuning

• Observability for applications usage and performance

The aim is usability. With Metal, developers can implement AI applications without writing their own infrastructure, indexing pipelines, or model deployments. You just need a Metal account and an API key.

We envision AI as a technology that benefits everyone, rather than winner-take-all or monopolized by a select few. Metal paves the way for wider access to large language models, making them easier to use, more bespoke, and more intuitive. With developers and enterprises able to leverage Metal's infrastructure, we believe everyone wins.

Meet the team

Metal’s co-founders Taylor Lowe, James O'Dwyer, and Sergio Prada bring distinct skills and leadership to the team. Taylor has years of product management experience. James and Sergio, both engineers, offer deep technical expertise. Together, they offer an in-depth understanding of the challenges posed by building and implementing machine learning infrastructure.

This team is seasoned builders; having a proven track record of successful startups. They met while working at Kustomer, a customer service CRM platform that Meta acquired for $1 billion. Beyond this achievement, they have proven experience from their time at leading tech companies, including Meta, Spotify, Datadog, Carta, and Sprig.

Where can you learn more?

If you are a developer building large language models, or a company looking to leverage the potential of LLMs to extract value from your data:

• Check out Metal’s website

• Read the documentation on their Github GetMetal

• Follow Metal’s Twitter @Metal_io.

Or you can reach out to the team directly on Twitter DMs: Taylor, James, Sergio.

We’re thrilled for the team and look forward to being a part of Metal’s journey!

In September 2022, Ethereum’s consensus mechanism switched to proof-stake which will be a contributing factor to the scaling of the Ethereum Virtual Machine. ETH is now more secure, less energy intensive, and overall a better playground for new decentralized software.

The transition to proof-of-stake began with the Beacon Chain on December 1, 2020, and we are just weeks away from the Shanghai upgrade when 16 million ETH becomes liquid.

A decentralized system cannot scale to the likes of Visa or fintech infrastructure without a robust base layer. Liquid staking derivatives represent a completely new market in crypto that has been growing at a rapid pace since Ethereum’s consensus migration. Liquid staking protocols have become the fastest-growing DeFi sector over recent months and network effects are becoming clear.

By decentralizing proof of stake models, investors can convert their staked assets into fluid capital that lowers the opportunity cost of staking to secure the network. Ethereum needs its community to stake ETH to secure the distributed ledger from a global standpoint, however, users should never give up their power or custody of assets in return for the work provided to this decentralized blockchain.

These are only some of the problems that ether.fi is on a mission to solve, by being the first ever fully decentralized staking protocol that will create a business through its services layer (developer infrastructure built on top of its modules). Currently, $10.7B (42.7%) of staked ETH is participating in liquid derivatives which is less than 6% of the total ETH supply.

We, Chapter One, are thrilled to announce that we have co-led the seed round of ether.fi alongside our partners at North Island Ventures, with support from a multitude of strong funds such as Node Capital, Version One, Arrington Capital, Purpose Unlimited, and many influential angel investors.

At Its core, ether.fi will give the power back to the stakers and empower individuals to retain control of their keys while delegating their powers to node operators. The use of NFTs is very impelling to us as each validator will own and store their keys through a digital representation. This is just the start.

Once the protocol is operational and past its initial growth stage, there will be a services layer aimed at supercharging trustless node operations and becoming a foundational development layer for Web3 projects who need access to data and node infrastructure.

One step further, ether.fi will issue its liquid staking derivative token (”eETH”) which will allow all ETH stakers to utilize their staked positions across DeFi and build a monetary system around this composable and transferrable tokenized yield representation.

The ether.fi team is very impressive to us and we believe that the founding team is positioned very well to take on this growing ecosystem and build a community for all Ethereum participants to engage in.

Mike Silagadze was the founder and CEO of TopHat for over 10 years where he raised over $230M across 8 rounds, exiting in 2021 to a private equity firm. Mike and his previous VP of Sales at TopHat, Rok Kopp began a crypto-focused hedge fund called Gadze Finance which ultimately led them to the decision of creating a retail and institutional-focused liquid staking protocol.

This is a big week for ether.fi at ETH Denver, the world's largest Ethereum conference.

The protocol will launch on March 4th, 2023 (this Saturday), and expect to see a phased launch over the next several months.

We are at the forefront of DeFi and we expect to see a lot of innovation happening within liquid staking over the coming years. We believe that ether.fi will play a vital role in scaling Ethereum with its trustless while efficient strategy, and we could not be more excited to support the ether.fi community alongside its mission.

Time to build --

Jack Lipstone, Investment Partner at Chapter One

If you would like to attend their launch event in Denver, you can register here.

If you would like to join their Discord, you can join here.

Follow their Twitter here and view the website here.

Squid lets its users swap and transfer tokens between blockchains and buy NFTs on any chain with any currency. With just one click on your preferred wallet, you can effortlessly swap tokens from Ethereum to Polygon, buy an NFT on Avalanche from Arbitrum, and access value on various application-chains, amongst other actions. 

At Chapter One, we believe connecting blockchains together is the future of decentralized finance and the route toward opening its value to mass consumer use. Cross-chain infrastructure and interoperable protocols free users from being limited to applications or opportunities on one blockchain alone and will hasten the adoption of protocols and services that are more bespoke, specialized, and molded towards specific consumer needs and problems. 

The key here is the shift away from Ethereum, a trend already visible across the market. Ethereum's share of total locked value in DeFi dropped to 60% in 2023 from 96% in 2020, highlighting the importance of interoperability in expanding the reach and accessibility of DeFi.

As a liquidity and messaging router, Squid will play an essential role in this transition by unlocking liquidity and applications between blockchains – ultimately driving cross-chain adoption and advancements that we envision. 

Chain support and partnerships

Squid’s technology is accessible through API and SDK, and can be integrated into any decentralized exchange or wallet. Decentralized exchanges such as QuickSwap, Pangolin, SpookySwap, and Trisolaris have announced their integration with Squid, and wallet partners include BitKeep.

Squid’s mainnet launch supports interoperability across 25 chains, including Ethereum, Binance Chain, Avalanche, Arbitrum, Polygon, Fantom, Celo, Cosmos Hub, Osmosis, among others. 

Meet the team

Squid's co-founders, Fig and Christina, are cross-chain experts, with Fig’s writings on the cutting-edge of research: 

• Cross-chain security models, compared

• Cross chain security part 1— A framework for understanding cross-chain systems

• Axelar is the herald of IBC

Prior to founding Squid, Fig had a background in traditional finance, while Christina was the Head of Community and Ecosystem Development at Vega Protocol.

Where can you learn more?

If you are a developer, decentralized exchange, or wallet looking to use or integrate cross-chain infrastructure, check out Squid’s website, swap tokens with their front-end application, read posts on their Medium, and follow Squid’s Twitter @squidrouter.

Smart Contracts and Blockchain Technology Need Safeguards

The headlines do not sugarcoat how devastating the failures of smart contracts can be. DeFi in particular has seen several billions of dollars wiped out from novel smart contracts due to exploitable code. While smart contracts are crucial to financial transparency, the attack vectors also increase when code is made fully public to the community.

The tradeoffs between closed source and open source are designed to be disrupted with an open financial ecosystem, however, security is not prioritized enough. Security focus must be deepened throughout pre-launch processes of smart contracts to scale the industry to billions of users and trillions of institutional capital where the risk of attack is mitigated.

Unfortunately, the security auditing practice is difficult for teams in the following ways:

• Tier-1 auditing firms have long lead times, requiring LOI months in advance of a scheduled date: Code can be outdated by the time the audit begins. New code that has been developed in the months leading up to the audit will be taken through the scheduling process once again, creating a feedback loop where auditors dictate the pace of product shipping.

• Tier-1 auditing firms are extremely expensive: Teams who are self-funded simply cannot afford a security audit. Teams who are in the process of raising funds cannot pay auditors until the fundraising is complete.

Surprisingly the bear market also plays a role in the security auditing practice. Lead times have dropped and the demand for audits has decreased, but it’s crucial to focus on the security needs of teams and develop tooling to create efficient work streams.

Hexens Overview

Hexens, founded in 2021 by Sipan Vardanyan and Vahe Karapetyan, specializes in security services across blockchain security, security advisory, full-scale pen-testing, and cyber investigations.

The Hexens team placed second in Paradigm’s recent Capture The Flag, an online competition for smart contract hackers. Before going all in on Web3 security, the team has been recognized as world-class cybersecurity experts for over 10 years in the technology industry. Hexens now has a team of 22 employees with expert auditors and developers creating tools to increase the safety of this industry.

In addition to auditing, Hexens has a focus on investigations and has already returned over $13M in assets to hack victims by identifying and de-anonymizing individuals who have taken advantage of smart contract exploits.

Hexens is currently auditing Polygon’s zkEVM and more information on their relationship can be found here.

“Polygon zkEVM is being audited by two security firms, Spearbit and Hexens. An advantage of two auditing teams working independently is that the results each produces is made more robust in aggregate—Hexens’s feedback will be checked against Spearbit’s and vice versa.”

In addition to auditing previous projects for Polygon and now zkEVM, Hexens is also trusted by 1inch, API3, Azuro, and several other blockchain-based projects.

Hexens is also fortunate to have Mudit Gupta, CISO of Polygon, as well as Tyler Robinson, a reputable cybersecurity expert who has a history of successful research and vulnerability findings.

Meet Hexens

Learn more about Hexens by visiting their website here.

Follow Hexens on Twitter.

Secure, reliable, and fast APIs power the tech world that we live in today. They are even more important in the Web3 ecosystem as the next evolution of software is being constructed at record speeds and rely on blockchain-based information.

The Solana ecosystem has proved out its thesis through a strong eye for design and speed, but the ecosystem has displayed a need for a fast-scaling business to provide underlying infrastructure that other chains take for granted. API indexing and low-latency webhooks will be the backbone of all innovation and development technology stacks.

Web3 developers are constantly looking for new tools to create efficient breakthroughs to enable teams to focus on what they do best and leave the data parsing and abstraction layer to the partners that do this best.

What’s so exciting about this infrastructure focus area is that the new internet that we call Web3 will be able to reach its potential at a much faster pace by relying on data providers that have built bundled products with node access, querying support, and one-click code solutions.

Where does the next wave of API products shine?

It is clear that there have been several ecosystem leaders but they’ve become more and more generalized as the space has matured. Whether it’s technical debt or overwhelming priorities, current providers are struggling to meet client demands. The need for specialized APIs is in high demand.

Why Solana?

Solana is seen as one of the highest performant blockchains, steadily processing over 2,000 transactions per second. Since Solana is not the most developer-friendly L1 compared to the EVM stack, there have been few leaders that specialize in the data programming side of the business.

Why Helius?

Helius aims to solve these problems by reverse engineering all transactions & accounts on the Solana blockchain and exposing them via highly queryable APIs and low-latency webhooks — which the team is releasing today. Currently, developers and teams spend hours, weeks, or months setting up costly indexing infrastructure and transaction/account decoders to build on Solana. With Helius, developers can spin up powerful applications & workflows on Solana within mere seconds.

Since announcing a closed, invite-only alpha two months ago, Helius has already served almost 400 developers and 20M API requests, with over 1500 others waiting for open beta access on the waitlist. Some notable teams utilizing Helius in production today are Crossmint, Formfunction, Famous Fox Federation, Netrunner, and some large hedge funds.

Meet the Team

In addition to the strong vision that Helius holds, the founding team is extremely unique and positioned very well within the ecosystem. Not only is the co-founding team Mert, Nick, and Liam tightly integrated in the Solana ecosystem, but they also hail from strong engineering backgrounds at Coinbase and AWS where they have specialized in API infrastructure for several years. They’ve spent their careers identifying areas of improvement for this space and they are ready to realize these solutions at Helius. We at Chapter One could not be more excited to back them.

How can you get started?

If you are a developer looking for decoded transactions, NFT APIs, flexible querying, webhooks, websockets, and powerful RPCs, head over to the Helius website to get started.

Welcome to the Chapter One family, Helius!

LFG

Jack Lipstone

Investment Partner, Chapter One

By Jeff Morris Jr.

Every few years, an important new platform emerges as the new go-to-market strategy for consumer founders. In the crypto world, the popular GTM (go-to-market) has been to own the Twitter narrative and be noisy online, which creates the right awareness to pump your project.

In a bull market, the strategy focused on getting a wide audience to share your airdrop, mint, or waitlist — the noisier, the better. People aped into your project without thinking twice because there was financial incentive to move quickly and not ask questions. This GTM strategy made many founders and crypto Twitter people wealthy, despite most of the products not having true Crypto Market Fit.

There is something sobering about a bear market, where Twitter noise feels more shallow as the world falls apart. We are all searching for real conversations that feels authentic and real (and maybe some alpha too, but does that exist?)

Why do so many of your highest quality conversations happen on Telegram, WhatsApp, and in iMessage groups, and basically anywhere but public forums? Because you can talk about real things without people shilling things or toxicity. Twitter is no longer the place that conversations happen and Facebook is obviously not it.

In Q4 2022, we want conversations instead of noise, and we have time to understand new technologies entering the zeitgeist instead of mindlessly fomo’ing into every mint or airdrop that trends on our timelines.

The most under appreciated part of a bear market is that we all have time to get smarter because crypto deal pacing, the broader venture capital ecosystem, and the public markets are largely at a standstill.

In the middle of a cold crypto winter, the web3 community has discovered the perfect product at the perfect time — Farcaster. So much of a successful product release is capturing a zeitgeist at the right time (see: Product Zeitgest Fit) and it appears that Farcaster is that product for crypto right now.

Farcaster is the opposite of hype beast crypto culture and rewards thoughtful conversations, with a community that has a shared passion for cryptocurrencies and emerging technologies — and generally kind to each other.

Techno-optimism is in fashion again. We are all tired of depressing news and there is a lot of really cool shit happening in crypto and the broader tech world, despite what your social media timelines and spot prices tell you.

Scaling Quality

Farcaster is “a sufficiently decentralized social network” that is designed to feel smaller and rewards high quality conversations instead of likes.

The big question for Farcaster that so many consumer social founders have faced is how to keep the community strong and grow. The best part of Farcaster so far is that like much of crypto, a small network can be extremely valuable (see my Crypto Market Fit essay) and the growth playbook of a web3 social network are just different.

Built by Dan Romero, formerly an early employee and VP at Coinbase, Farcaster has been in beta for over a year and has been built at a deliberate pace, even during the insane bull market.

How many consumer crypto founders resisted public launches during the crypto hype cycles of Q3/Q4 2021 and Q1/Q2 2022? Dan chose to stay heads down and build for a small community while onboarding high quality users.

I asked Dan how he plans to solve the “scaling quality” challenge and in a very Farcaster way he created a screenshot essay open sourcing the strategy, which he titled Scaling Quality:

**Protocol **We’re planning to keep the protocol invite-based for the first 1 million accounts. Currently, this is “DM dwr on Twitter”, but the plan is to move to community-driven invites soon. We’ll likely start with a small number of active users to test the community-driven approach and expand from there. If we feel like quality is declining, we’ll adjust.

Additionally, we’d like to keep growth consistent but not overwhelming — ideal is +5% DAUs every week. (This gets harder with compounding!). This should also allow us to incrementally adjust our strategies for maintaining quality without suddenly being overwhelmed by a spike in sign ups.

**Initial client **The deliberate growth strategy will allow us to iteratively adjust the defaults for the initial client: what shows up in your feed, who to follow, etc. We’d like to make product improvements that emphasize actual conversations which we believe is the behavior that will most benefit the Farcaster protocol. We also plan to nerf engagement farming.

**Client diversity **After Farcaster v2 is shipped on mainnet, our focus for the protocol will be to make it straightforward for other developers to build new clients. Think open source libraries and UI components, as well as tutorials (imagine a Farcaster version of the famous DHH build a blog engine with Ruby on Rails in 10 minutes).

By making it easier to build a new client, developers will be able to permissionlessly experiment with different algorithms, novel UI/UX mechanics, content types and subgroups of users. Here are a few examples of what a developer might do to maintain (or improve!) quality:

1. A client with an algorithm that’s just focused on URLs being shared, with a special emphasis on URLs from blogs or other indie / niche websites.

2. A client focused on Q&A or AMAs

3. A client focused on UX for displaying visual content like images or NFTs

4. A client that is only accessible to users with certain on-chain characteristics like sent an Ethereum transaction before 2018 or was in the first 10,000 users on Farcaster.

Product-Led Protocol Development

One other fascinating roadmap strategy that I’ve had to wrap my head around as a product person who believes in very focused roadmaps is building an application as you build a protocol.

I remember talking to Dan in early 2021 about this approach and thinking that this would be a prioritization challenge for the tiny engineering team, but I now realize I have to evolve my own frameworks for product roadmaps in crypto.

In web2, building a consumer application as a standalone product and engineering effort is a remarkably hard challenge and the odds of success are low. Most people fail with the application, so why would you be crazy enough to try building an application before the protocol? This felt like a suicide mission to me.

But Dan knew that developers, especially in crypto, are being wined and dined by Developer Relations teams from every L1, L2, and protocol with marketing, grants, and incentives. Developers in the crypto ecosystem are still a relatively small community — we have 5300 WAU developers execute on-chain commits last week, so the bottleneck is real (the number is higher in reality as there is off-chain development happening but there are 24 million developers in the world… so we have ways to go).

If you’re going to build a new protocol, you likely have to either offer developers financial incentives or build a network of high quality users. Financial incentives are not sustainable and do not attract longterm builders who want to find Crypto Market Fit.

With Farcaster, Dan and team built a platform that has already attracted many of the highest quality and most influential community members in crypto, so longterm oriented developers (i.e. revolutionaries, not mercenaries) now are incentivized to build on the network.

Dan describes product-led protocol development in a screenshot essay that I predict will become the roadmap prioritization playbook for the entire crypto community — and potentially even web2 teams who need to attract developers too:

If your goal is to build a new decentralized social networking protocol, start from the end goal— internet-scale protocol like DNS, HTTP, SMPT—and work backwards.

1. A protocol is only as good as the number of independent and thriving clients, applications and businesses on it. A protocol with a lot of users but one dominant client is just an app with open APIs (for the time being). Practical alternative clients —not theoretical— matter for exit with interoperability. (Note: Farcaster is not here yet! Why we’re still in beta / testnet and spending so much time on making Farcaster v2 great for other developers, e.g. enabling read/write clients.)

2. Developers care far more about addressable daily active users (qDAUs) more than tech stack. A protocol with a lot of high quality qDAUs an slightly worse technology will attract more developers than a protocol with better technology but few qDAUs. Quality defined as not bots or accounts that sign up and immediately churn (creating a ghost town effect).

3. Users don’t use protocols, they use apps. So if your goal is to build a protocol, you should build the initial app that’s high quality enough to earn the attention of enough qDAUs that developers start finding building on the protocol interesting.

 Lastly, it’s easy for people to fall into the Field of Dreams fallacy for protocols — “if you build it, they will come.” Can’t expect others to spend the time and effort to build high quality products if you’re not willing to do it yourself.

qDAUs (quality daily active users) is the term that stands out to me in this strategy and aligns with my premise that we need new metrics to define product market fit in crypto, which I’m trying to define through explorations of Crypto Market Fit. This is a crypto-native metric that I’ve never heard in a FAANG product meeting.

We are already seeing a vibrant developer community build their own applications with the Farcaster protocol, so it’s easy to imagine a world where the Farcaster network creates thousands of intimate social networks that maintain the same ethos of quality > quantity. At some point, I’ll do a deep dive on the Farcaster protocol itself, but that feels like a different essay.

A product-led protocol is a tightrope act that very few teams will be able to execute against, as delivering on the application before the protocol is incredibly hard. Only the best product and engineering teams will survive (and Dan and team are world class).

Most projects will struggle to develop a strong enough community for developers to care, so proceed with caution if this is your roadmap strategy. You might never get beyond the application stage.

Farcaster is solving the chicken-and-egg of retaining high quality community members in the early days, and they have many talented developers building on the protocol.

Farcaster Go-To-Market

Crypto founders are recognizing the power of the Farcaster community as the new GTM for reaching perhaps the most valuable community in crypto. We’ve seen Chapter One portfolio companies build early awareness on Farcaster in powerful ways:

Daylight a product that helps you “never miss a mint, airdrop, or token-gate” - launched on Farcaster and their access pass NFT quickly became #1 on Farcaster’s trending NFT Mint list. They built a huge wait list and now have strong awareness in the crypto community.

Kyle McCollum (Daylight, CEO) saw the Farcaster community rally behind their product:

”Farcaster’s user base is cryptonative and a strong fit for a product like Daylight. Opening up our closed beta to that community resulted in high quality feedback (new friends were sending in Loom videos and Google Docs full of suggestions!) and high retention users. A positive spillover effect started happening where people outside of Farcaster saw Farcasters minting the Dawn Pass and wanted in, too.”

Coherent is building a web3 developer kit and has found similar success with organic growth. In the Farcaster typed words of Carl Cortright (Coherent):

Perl — a “wisdom treasure hunt” launched on Farcaster and has early community love. The same project likely would not have stood out on a platform like Twitter. In the words of Alex Kwon (Perl):

Will the quality scale? Will Farcaster qDAUs (quality daily active users) become lesser quality DAUs as the network grows?

Our product minds are trained to ask these questions like we’re trying to sound smart in a job interview, but let’s instead celebrate the fact that a tiny piece of the open Internet exists where people want to be friendly, and optimistic, and explore new ideas.

**Farcaster is where the highest quality public crypto conversations are happening. ** And in a bear market where “nothing in crypto is working”, this masterfully roadmapped application/protocol is capturing the crypto zeitgest and giving us a reason to feel optimistic again.

Disclosures:

1. Farcaster is a Chapter One portcolio company. Dan did not ask me to write this article, but I did bug him for feedback and research help. You can ask him for an invite on Twitter, but I have no idea how he is going to keep up with the requests.

2. Daylight is a Chapter One portfolio company and they’re some of the most productive builders in crypto right now. Very methodical like Dan and Farcaster. The product is also extremely cool and helps you find free internet money you’re eligible for so I recommend signing up.

3. Coherent is also a Chapter One portfolio company — and we do love their APIs, so if you’re building a portfolio tracker, dapp or wallet, go check it out.

The Evolution of DAOs and DeFi Tokens

DAOs have changed the way in which communities participate in public goods, but token issuances and preservation mechanisms are nowhere near from perfect.

Liquidity mining was one of the first examples to incentivize on-chain liquidity for native governance tokens but began to show its faults as markets matured. Due to a lack of direction and fast-paced inflation models, DAOs have given up large allocations of their treasuries with no clear path to sustainability.

The DeFi ecosystem has been looking for a solution to the liquidity crisis that many DAOs face. Bond Protocol is in the process of launching a bond marketplace where protocols can issue fixed-term (ERC-1155) or fixed-expiry bonds (ERC-20) that aim to be fully composable within the broader ecosystem.

While macroeconomic conditions have certainly applied pressure to both new and existing DeFi protocols, Bond Protocol is positioned to be the support layer for DAOs that are eager to raise capital on-chain and fully take control of their liquidity in the most decentralized way possible.

The Bond Protocol success thesis has been proven over this last year through Olympus DAO’s initial implementation which saw consistent usage even throughout the high volatility periods.

DAOs are consistently managing a stream of priorities all at once and managing a large pool of capital can become unsustainable. Yet, managing a treasury properly can be one of the most important factors in DeFi as the community funds have the ability to incentive and power the future growth.

Olympus Dao’s Innovation to Help DAOs Backstop Their Token Supply

“The moment liquidity incentives dry up, the token becomes more resistant.” The game was changed in September 2021 when Zeus, the founder of Olympus DAO, released the whitepaper for Olympus Pro, a mechanism to provide bonding to token projects in exchange for protocol-owned liquidity.

OlympusDAO's bonds-as-a-service platform, Olympus Pro, serviced 50+ partners and processed $150M in total bond volume across 7 chains in less than one year of adoption. The adoption and traction were impressive.

Meet Bond Protocol: “Bonding-As-A-Service”

Bond Protocol is improving on-chain capital raises to solve broader market challenges of token issuance, treasury diversification, and capital inefficiencies from renting Pool2 liquidity.

Bond Protocol’s improvements to Olympus Pro have the ability to represent a larger opportunity to activate $7.5B in idle treasury assets, as well as open new verticals for vested governance tokens.

Bond issuers launching via Bond Protocol’s permissionless architecture have immediate access to create, configure, and launch bond markets that allow community members to purchase governance tokens at a discount.

As protocols acquire their liquidity and diversify treasury holdings, their success is less dependent on inflationary liquidity rental programs and the price action of their native tokens.

How does Bond work today?

Bond Protocol is in the process of launching their “Beta” version this week with two close launch partners: ShapeShift DAO and Olympus DAO. ShapeShift and Olympus will soon be operating their bonds directly through Bond Protocol and are on their way to diversifying their treasury in a non-custodial manner.

Bond Protocol has extensive plans to hyper-scale with new bond types, auction mechanisms, blockchain deployments, and platform integrations. “Bonding-As-A-Service” will be the architecture that DAOs rely on moving forward for token liquidity management.

Chapter One Partners with Bond Protocol

At Chapter One, we believe in decreasing the barriers to accessing crypto and also empowering communities with the power of decentralized finance. We could not be more excited to back Bond Protocol and its team.

We are very fortunate to be working closely with the founding team at Bond Protocol given their strong & powerful previous backgrounds as core contributors at Olympus DAO. While at Olympus, they constructed the initial MVP and were extremely successful with adoption across the broader landscape.

At Chapter One, we believe that for Olympus DAO to scale, it was necessary for Bond Protocol to fulfill Its spinoff and we could not be more excited to support the team and community on product, hiring, community growth, relationship building, and so much more.

Bond Protocol is becoming its own DeFi primitive that DAOs will rely on for their on-chain treasury needs. Given Bond Protocol’s customizable approach and fully permissionless environment, the opportunities are endless.

Time to Get Started

Over the next several weeks, Bond Protocol will be opening up the protocol to more launch partners such as OlympusDAO and others, along with a packed roadmap that includes permissionless bond issuances and various bond types.

Do you represent a DAO that may be interested in using Bond Protocol? Join the Discord to get started here.

How To Get Involved

To learn more about Bond Protocol, check out the site and docs and join the Discord Community.

To start bonding, check out the dApp (now live in beta) or the primer on bonding.

To contribute, reach out in the Discord! Bond Protocol will post new roles on the site as they open up.

For prospective Partners, please reach out in Discord or to partner@bondprotocol.finance

For press inquiries, please contact PR@bondprotocol.finance

Since the beginning of the consumer internet, investors and builders have regarded Product Market Fit (PMF) as the north star for any startup. A startup isn’t actually a company until they find PMF. Instead, they are a founding team who are hypothesis testing and proving a set of assumptions to be true.

Before finding PMF, founders are lab scientists preparing, testing, and evaluating new reagents and controls. After finding PMF, these scientists masked in Warby Parkers graduate from the lab and are immortalized as real entrepreneurs, upon which they enter the pearly founder gates of Silicon Valley.

But PMF is not a single victory; it’s a constant war. Once you win the first PMF battle, competition will arrive and you will be battle tested every day. Your competition dreams of unseating you from your PMF throne and finding victory at your expense — or so this was the war that we fought in web2.

In 2021, the term “web3” became part of internet vernacular. The decentralization ethos and community focus suggested that finding PMF through your actual product was just a small part of the early stage founder journey. We were introduced to new growth levers including tokens, airdrops, and DAOs with composability and ownership at their core.

Many of the most successful projects in crypto have had very low usage in terms of how we define success metrics in web2. As an investor and builder, I’ve had to ask myself what PMF actually means in crypto, and consider whether the term itself is outdated and requires a new definition for crypto products.

I’ve staked my career and our entire venture fund on crypto finding mainstream adoption. But I often question whether mainstream adoption is actually required for the space to achieve its mission, and for founders and investors to succeed. My belief is that we need a new success metric for the space altogether: Crypto Market Fit.

Crypto Market Fit (CMF) is PMF for web3-native products judged by web3 metrics and mechanics rather than web2’s old standards.

The structure of a language determines a speaker's perception and categorization of an experience. Because web3 is a new experience, we sometimes need to make up a few terms here and there.

Apples and Oranges: Web2 v Web3 Metrics

Coming from a web2 product background at Tinder, my framework for PMF was attached to very specific metrics focused on consumer software. At Tinder, our dashboards were designed for us to think of our users as representations of DAU/WAU/MAU. We thought about our top-of-the-funnel in D1/D7/D30 methodology.

If our business metrics dropped overnight, the Tinder fire alarms rang (or at least our pagers buzzed). We would race to sit in crowded conference rooms with engineers for debugging sessions, like real-life firefighters putting out a raging summer blaze. We were trained to look at graphs like the one below and compare our own metrics:

A quick glance at the above graph and you’ll see that most of the web2 social products that hit PMF have a WAU/MAU ratio that exceeds 70%. But Uniswap isn’t a consumer social app like Tinder. Many of the best examples of PMF in web3 are highly financialized use cases, which have completely different engagement patterns than swiping right on Tinder or scrolling through Instagram.

Uniswap will never have the DAU of Tinder and it shouldn’t be expected to.

Crypto protocols are not social networks. But industry pundits are still very critical of user base populations sizes within crypto.

There is a new breed of influencers who have built large followings by questioning whether crypto has any legitimate use cases, largely because they see smaller DAU/WAU/MAU numbers and assume there is no value creation or utility. Look at Uniswap financials and you will realize this isn’t the case.

So let’s move away from my home territory of Tinder and look at KPM for web2 financial consumer apps that undoubtedly display PMF: Coinbase and Robinhood. We’ll compare these to Uniswap, the behemoth DEX that has definitely hit PMF (and maybe CMF).

Because it’s up to companies to choose which statistics they disclose in public filings, it’s impossible to truly standardize this process. Alas, let’s give it a go.

Coinbase Comp:

Let’s take a look at MTU (monthly transacting users) and Trading Volume for Coinbase’s Q2 2022 to Uniswap V3 data via msilb7’s Dune dashboard.

With 2.3% of the monthly transacting users of Coinbase, Uniswap did 79% of the trading volume. Mindblowing, right? This is a pattern you’ll begin noticing.

Web3-native financial apps like DEXs can have massive financial success with a fraction of the user-base compared to a web2-native trading platform or even a CEX. Uniswap doesn’t need to do Super Bowl ads to attract millions of users because the whales are already using them.

Perhaps, instead of trying to go for the moon, we should settle for the stars. Yes, it’d be great if web3 achieves full adoption, but let’s be honest - we’re living in web2.5 and we might be here for awhile.

In the long term, a DEX like Uniswap’s mere 208,500 MTU will rise to the millions. Then, what will that trading volume look like?

Robinhood Comp:

Would you rather have quality users or a high quantity of users?

Robinhood hasn’t shared their DAU since Q1 2021 so I’m using that data rather than Q2 2022.

You’re probably saying that Robinhood with a DAU/MAU ratio of 48% has far more PMF than Uniswap with a DAU/MAU ratio of 11%. But this is where the definitions of PMF (Product Market Fit) and CMF (Crypto Market Fit) diverge in web2 and web3.

Robinhood had 8.5M DAU in Q1 2021. Let’s examine what DAU means to Robinhood though. In their Q1 2021 S-1 Form, Robinhood defined DAU as:

A “Daily Active User” is a unique user who makes a debit card transaction, transitions between two different screens on a mobile device while logged into their account or who loads a page in a web browser, at any point during the relevant 24-hour period. A user need not satisfy these conditions on a recurring basis or have a Funded Account to be included in DAU.

Transitions between two screens? Welcome to web2 vanity metrics.

Robinhood can get DAU when a user opens their account and swipes around with no transaction. Uniswap’s DAU requires users to swap crypto assets. Web2 product managers created vanity metrics like this and web3 has stripped them away (for now).

So while Uniswap’s numbers are lower, they mean more. Uniswap metrics are based on higher intent actions (i.e. financially interacting with the protocol to perform a financial action). Uniswap, the application, does not yet offer a browsing experience which may increase their DAU/MAU ratio, but let’s look at the data.

Web2 trained our product teams to report DAU/MAU exactly how Robinhood framed their data in their SEC filings. As a product manager, if I can convince a user to tap on a push notification and click between two screens, I have won the earliest part of the DAU/MAU battle.

The product needs to monetize the user at some point, but the product manager is rewarded for moving one very important metric by playing engagement games. In crypto, the metrics are of far higher intent. There is money spent.

Crypto Market Fit Is Different

Call this capitalism or entrepreneurship, but fighting for PMF is like playing capture the flag.

In web2, PMF is incredibly rare to find and even harder to maintain once you’ve found the promised land. But if you’ve ever found PMF, you know that waking up every morning means opening up your laptop and discovering a new competitor wants to kill you.

In our next Crypto Market Fit essay, we’ll analyze crypto and web3 projects that have shown signs of early PMF, many of which have had extraordinary financial outcomes for founders and investors.

We’ll then ask ourselves whether their early success, and more often their subsequent downfall, can offer us a definition of CMF. We’ll discuss growth tactics like tokens and airdrops and how they relate to CMF.

We’ll explore how the web3 premise of composability, interoperability, and community-led products means that maintaining crypto market fit is even harder after building a successful early web2 product.

Thank you Jamesin Seidel (Investor & Data Science at Chapter One) for your contributions to this research.

Foundational technologies like the computer and the Internet have fundamentally shaped the way we live, work, interact, transact, and communicate. The list goes on.

Technological innovations bring about disruption, with second and third-order effects that are hard to predict. Tools like Discord and Telegram allow us to coordinate with people all over the world in seconds. The Graph and Etherscan enable us to access unfathomable amounts of information and ideas for free. Companies like Rabbithole and Wonderverse enable a global, liquid labor force to learn new skills and contribute to digital collectives. We can become professional creators from our bedrooms with platforms like Fanhouse. Centralized groups have the power to single-handedly halt trading of internet meme stocks while decentralized groups can band together and rally behind a cause to try and purchase the Constitution. Technology goes both ways, but we believe it bends towards optimism.

Our technologies will continue to evolve at an increasing rate – as will their intended and unintended consequences – requiring even more thoughtfully architected products with deeply human-centered design.

Through it all, what enables the magical moments of speed, human connection, and learning are the products we use and how they are designed. Broader acceptance of innovative new technologies often starts with a single, groundbreaking, yet unrealized product opportunity accessed through intuitive, elegant, and familiar-feeling user experiences.

Since 2017 we’ve invested in Web3 innovators who have shaped entire categories of technologies. Dapper Labs’ novel, tech-first approach to consumer collectibles with Crypto Kitties and NBA Top Shot paved the way for the explosion of interest in NFTs. Compound Finance’s developer-first, automated market making technology laid the foundation for a still nascent, but already many-trillion-dollar decentralized financial system that can run entirely on the Internet, all over the world, 24/7/365. We strongly believe many other Chapter One companies – like The Graph, Rabbithole, Syndicate, Lolli, MoonPay, Alt to name just a few – will look similarly revolutionary in hindsight.

Onboarding the next billion users to Web3 will require thinking from first principles, encouraging exploration, abstracting complexity, prioritizing usability, and clearly demonstrating utility. To spread and succeed, Web3 needs to feel familiar, lovable, and desirable. It doesn’t today. But Web3’s next chapter is around the corner.

Groundbreaking technologies and principles underlying Web3 create massive financial, social, and cultural opportunities for everyone. Overly complex products and uninspiring user experiences are bottlenecks for mainstream Web3 adoption.

The spread of ideas depends on their ability to be understood. The adoption of technology depends on its utility and usability. Enabling the rest of the world to harness the power of Web3 requires both product and design excellence similar to how Web2 platforms have monopolized the concept of the Internet.

At Chapter One, we’re on a mission to make Web3 widely adopted. This requires rethinking the role of venture capital from first principles. So we’re building a product and design-focused startup that also happens to invest.

Core to our operator-first mindset, we are building a multidisciplinary team modeled as a high-output product org. Jeff Morris Jr. started Chapter One after leaving Tinder as VP of Product & Revenue. Mene Mazarakis joined as first hire and Investor/Chief of Staff after working in product at Novi (Meta crypto team) and Instagram. Jason Marder joined as a founding Design Partner after leading large design teams and projects at Stripe and Gusto. Doug Dyer joined as CFO after working in private equity and as a limited partner investing in funds at the Texas Children’s Hospital. We will continue to build our full-stack product team to include Data Science, Engineering, and Community.

While we have been investing in crypto since 2017, today we are going all in. We are excited to announce a $50 million fund to continue investing in generational founders who will  make crypto more accessible around the world.

Web3 products and platforms we use will need to prioritize product and design if we want to onboard the next billion users. True to our product and design focus, we will operate with a broad investing mandate. From the expanding worlds of DAOs, NFTs, and DeFi, to protocol infrastructure and gaming. We are eager to back founders that believe product and user experience are foundational to their project’s long term success.

To date we’ve made 5 investments across DAO infrastructure, NFT experiences, learn-to-earn, and are actively looking to support projects that improve usability and accessibility (say hello!).

Our small yet nimble team will help with areas such as product strategy, design sprints, go-to-market, and more.

Our Success will be based on our community’s success and the impact that our companies have towards a Web3-enabled future.

Our north star is to push the internet forward by investing in exceptional founders, products, and communities. These products will live in Web3 and we could not be more excited to continue building alongside the community. We will continue building in Web3, contributing to networks, and empowering fellow builders.

If you’re building in Web3, we’d love to chat!

Come visit our new Chapter One website. It will be a homepage for Web3 resources and content, geared towards both crypto curious and crypto native people who want to build and contribute.

In the coming months we will be launching a Web3 accelerator, a media arm focused on Web3 education, and resources for developers to build in Web3.

If you believe in pushing the progress of the Internet forward and are building in Web3, let’s build.

Wagmi,

Chapter One, Page Two