Taiko raises $37 million to build Web3 infrastructure for censorship-free internet

Image credits: drum

Amid speculation and volatility in crypto land such as casinos, there is still a segment of individuals who support blockchain’s potential to decentralize various aspects of human activity for the greater good. . Taiko founder Daniel Wang is one of these idealistic founders.

Wang, a serial entrepreneur, initially wanted to bring decentralization to social platforms. He believes decentralized networks like blockchain can help resist censorship through decentralized data storage and community-based content moderation.

“I hope the next generation will grow up free and be able to say anything on the internet,” he told me at the Ethereum developer conference in November. “Without the freedom to criticize, there can be no progress.”

Wang originally planned to build a decentralized app on top of Ethereum. Co-created by Vitalik Buterin, blockchain enables developers to use “smart contracts,” or lines of computer code that automatically execute predetermined conditions, to enable cryptographic applications that go beyond mere stores of value. It fascinated me.

However, after conducting extensive research, Wang realized that none of Ethereum’s “layer 2” solutions, which are primarily designed to scale transactions on the network, are truly decentralized. .

“Creating decentralized apps on top of a centralized blockchain is problematic,” he told me in a subsequent email interview.

Ethereum’s current processing power is around 15 transactions per second, which is impractical for many applications. As a result, “rollups” have emerged as a layer 2 solution by offloading Ethereum transactions to a secondary chain and then logging them back to the main chain in batches, reducing network congestion and transaction fees.

The problem with most rollups, according to Wang, is that they achieve scalability at the expense of decentralization, which undermines the spirit of Web3. Convinced that the infrastructure layer for his app was missing, he decided to fill that void, leading to his founding of Taiko in March 2022.

Over the past two years, rollups have emerged as a popular investment theory on web3, and Taiko has ridden the wave. The two-year-old startup has raised $37 million in three funding rounds so far. The company just closed its Series A round with $15 million in funding, led by Lightspeed Faction, Hashed, Generative Ventures, and Token Bay Capital.

Other investors participating in the new round include Wintermute Ventures, Presto Labs, Flow Traders, Amber Group, OKX Ventures, GSR, WW Ventures, and more. In the nascent cryptocurrency space, it is not uncommon for a long list of investors to participate in one round, and the right relationships can be the difference between success.

A Taiko spokesperson said certain investments in this round remain subject to regulatory approval.

The company’s past investors include more established venture capital firms such as HongShan (formerly Sequoia Capital China), which were early bets on Asia’s Web3 scene. BAI Capital and GGV Capital.

This funding will be used to prepare Taiko for its mainnet launch. The company recently announced that it will allocate $30 million in grants to developers, and its latest testnet, which went live last month, has accumulated over 1.1 million wallet addresses and over 13 million total transactions to date. (Wallet addresses provide a rough estimate of user activity on Web3 services. However, as with Web2, one person can own multiple wallets, and bots on his account are still prevalent.) (This is a problem.)

“We aim to be like Ethereum, where no one owns the network. We aim to become a public good,” says Taiko, comparing Taiko’s corporate structure to Ethereum’s. However, Wang said. Most crypto projects operate a nonprofit development arm that fosters community building and decentralized governance, and a for-profit entity that hires talent and raises venture capital funding.

A true decentralized social network

For Wang, Taiko provides the key building blocks of a social network that users truly own. He argued that many existing social networks that claim to be decentralized often fail to deliver on that promise.

“Lens and Farcaster, for example, run on infrastructure that can be more decentralized (compared to traditional ones). [ones] (based on rollups), Damus runs on multiple centralized servers rather than a fully distributed infrastructure,” he said.

The ideal decentralized social app, despite significant technical challenges, allows for the following: Content Ownership and Control. 2. Data Privacy and Security. 3. Resistance to censorship…and freedom of speech. ”

One of the biggest challenges facing decentralized social apps is content quality and safety. Web2 social networks select content to attract users, but in decentralized social networks, the absence of curators can lead to the creation of low-quality or objectionable content.

Wang suggested that there should be a middle layer, or “relay,” between the decentralized content and the users. Each intermediary can attract a diverse user base by filtering content that reflects the “unique perspective” of the underlying decentralized social network. “We are still waiting for this approach to be effectively implemented,” he said.

But how do apps encourage users to create desirable content? This poses another challenge.

“For the Web2 social network, the objective is often to gather a large user base and generate advertising revenue, which could lead to the company going public,” Wang suggested. “However, in the Web3 domain, where teams do not have ownership, it is important to build in token incentives within the system. This need moves us away from developing truly useful products to prioritizing profit generation. It can distract your attention.”

“We are still 10 years away from mass adoption of cryptocurrencies, but all technologies build on existing technological achievements,” he added.