There is no shortage of headlines about the beginning of the “crypto winter”. Amid a growing pile of bankruptciesOne of the industry’s most bubbly startups, the NFT marketplace OpenSea, today announced a major layoff.
Behind the scenes, however, many founders and VCs are doubling down on the promise of largely decentralized, blockchain-based outfits, and against that goal, one of the “more interesting parts of crypto right now” is at the “crossroads of social messaging and web3,” says renowned entrepreneur. and investor Elad Gil In short, he thinks current messaging tools are failing, and 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 nascent company will become “web3’s messaging platform” even as he and his former classmates are still developing its technology.
That it is still a work in progress is apparently fine with Lines backers including renowned angel investors Naval Ravikant, Balaji Srinivasan, Gokul Rajaram. What they support is a vision. There is a “rapidly increasing number of people using crypto pseudonyms to buy digital currencies, trade NFTs, vote on proposals and manage treasuries,” Handa explains. “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.”
Lines, meanwhile, aims 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 underlying blockchains and the particular crypto wallet a person uses, and as a result empowers users in a myriad of different ways. For example, they can find the owner of a particular NFT they want to buy, discover like-minded individuals based on the tokens they’ve acquired, or contact potential new hires of a DAO (sort of “group chat with a bank account“, as DAOs are called).
Gil definitely thinks the timing is right, as more people are organizing as a group and transacting online. He used to remark, “Your bitcoin or crypto assets and mine were identical, so I would have less reason to ping an anonymous user through their wallet. But with DAOs, there is a need to coordinate with various members beyond just using Discord. In the world of web3, he says, users want “to be able to identify and interact with people for governance, to reward contributions, do airdrops, and so on.” With NFTs and other collectibles, “I may want to be able to ping you to buy, sell, or trade, so there are other incentives to make a communication layer useful,” he adds.
The question is whether enough people agree that Lines offers exactly the right solution. As with any messaging app ever, its value is largely determined by the number of people using it. And how many people use it will determine whether the startup is able to partner with platforms like OpenSea that needs it on its side.
In the meantime, Handa and co-founders — who have yet to decide on a business model — will soon be competing with other messaging apps trying to take on Twitter, Telegram, or Discord, where most web3 conversations are happening these days and where, because it is virtually impossible to verify that people are who they say they are, phishing attempts and other scams rampant.
Gil himself says he is already aware of “several teams working on identity, social strata and communication on top of web3.”
Most of these are still flying under the radar, but some are starting to come out publicly. For example, last month, a crypto analytics platform called Nansen rolled out a messaging app that it says to allow users to log in with a crypto wallet and then connect to groups based on their crypto holdings and the NFTs which they demonstrably own. Like Lines, the company describes the app as a “crypto-native communication hub” for web3 communities.
An NFT marketplace, Rarible, has announced separately wallet based messenger feature last year.
Lines, of course, states that it has an advantage over others. Namely, Handa says, while he and his friends are building for web3, they have enough distance from it to build an app that both crypto natives understand, but that people new to web3 can also easily understand and to use.
“We’re really focused on the client-side use cases, rather than how decentralized the messaging protocol itself is,” said Handa, who is two credits away from graduating and very much looking forward to graduating. (“My thesis is about identity and web3 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 so “don’t be super ideological about the way we build the platform. We really just do it based on what makes sense.” from the consumer and community perspective. So many crypto products are not thought through from the consumer perspective,” he continues, “so we try to find that first use case, make an attractive product and eventually, if other platforms want to integrate , [with us]they can.”
Other investors in Lines’ starting round include Scalar Capital, Volt Capital, Caffeinated Capital, Consensys Mesh, Hash3, Mischief and a host of 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 on the market for three more engineers.
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