Amid the speculation and volatility of the casino-like land of cryptocurrencies, there is still a subset of individuals who embrace blockchain's ability to decentralize various aspects of human activities for the greater good. Taikoo founder Daniel Wang is one of these exemplary founders.
Wang, a serial entrepreneur, initially wanted to decentralize social platforms. Decentralized networks such as blockchain are believed to help resist censorship through distributed data storage and community content moderation.
“I hope the next generation grows up with the freedom and ability to say anything on the internet,” he told me in November at an Ethereum developer conference. “There will be no progress if there is no freedom to criticize.”
Wang initially planned to build the decentralized application on Ethereum. Blockchain technology co-created by Vitalik Buterin has attracted a flood of developers who are using “smart contracts,” or lines of computer code that automatically execute pre-defined conditions, to enable cryptocurrency applications beyond simple storage of value.
However, after some extensive research, Wang realized that none of Ethereum's “layer 2” solutions, which were designed primarily to scale transactions on the network, were truly decentralized.
“It's difficult to build decentralized applications on centralized blockchains,” he told me in an email interview.
Ethereum's current ability to process about 15 transactions per second makes it impractical for many applications. As a result, “blocks” emerged as a second-layer solution by offloading Ethereum transactions to secondary chains and then recording them back to the main chain in batches, reducing network congestion and transaction fees.
The problem with most clustering, according to Wang, is that they achieve scalability at the expense of decentralization, which undermines the spirit of web3. Convinced that there was no infrastructure layer for truly decentralized social applications, he decided to fill the void, which led to the creation of Taiko in March 2022.
Over the past couple of years, pooling has emerged as a popular investment thesis in web3, and Tyco has ridden the wave. The two-year-old startup has so far raised $37 million across three funding rounds. Its Series A round, which just closed with $15 million in funding, was led by Lightspeed Faction, Hashed, Generative Ventures, and Token Bay Capital.
Other investors who participated in the new round include Wintermute Ventures, Presto Labs, Flow Traders, Amber Group, OKX Ventures, GSR, WW Ventures, and more. It's not uncommon to see a long list of investors join a single round in the emerging cryptocurrency space, where the right connections can make or break success.
A Tyco spokesman said some investments in this round remain subject to regulatory approval.
The company's previous investors include more established venture capital firms that were early to bet on Asia's Web 3 scene, such as Hongshan (formerly Sequoia Capital China), Bay Capital and GGV Capital.
The funding will be allocated to prepare for the launch of the Taiko mainnet. The company recently announced $30 million in grants to developers, and its latest testnet, which launched last month, has collected more than 1.1 million wallet addresses and more than 13 million total transactions to date. (Wallet addresses provide a rough estimate of user activity on web3 services, although as on web2, a single person can own multiple wallets and bot accounts remain a prevalent problem.)
“We strive to be like Ethereum where no one owns the network. We aim to be a public good,” Wang said, comparing Taiko's corporate structure to that of Ethereum. Most cryptocurrency projects run a non-profit development arm to promote community building and decentralized governance, and an entity Commercially to employ people and raise venture capital funds.
A truly decentralized social network
For Wang, Taiko provides an important building block for a social network that is truly owned by users. He said that many existing social networks that claim to be decentralized often fail to deliver on this promise.
“For example, Lens and Farcaster are working on infrastructure that can be more decentralized (compared to [ones] On a cumulative basis), Damus runs on multiple centralized servers rather than a completely decentralized infrastructure.
The ideal decentralized social app, despite its significant technical challenges, would allow: “1. Ownership and control of your content; 2. Data privacy and security; 3. Censorship resistance… and thus freedom of expression.”
One of the biggest challenges facing decentralized social applications is the quality and integrity of the content. While web2 social networks curate content to attract users, decentralized peer networks may end up with low-quality or even offensive content without a curator.
Wang suggested that there should be an intermediary layer, or “relay,” located between decentralized content and users. Each relay can then filter content that reflects the “unique views” of the underlying decentralized social network, thus attracting diverse user bases. “We are still waiting to see this approach implemented effectively,” he said.
But how does the app motivate users to create desirable content? This poses another challenge.
“For the social network web2, the goal is often to accumulate a large user base to generate advertising revenue, which could lead to the company going public,” Wang suggested. “However, in the web3 space, if the team does not have ownership, it becomes necessary to embed token incentives within the system. This necessity can sometimes divert attention from developing a truly useful product to prioritizing generating profits.”
“We are ten years away from widespread adoption of cryptocurrencies, but every technology is built on an existing technological breakthrough,” he added.
