A Look Back at Coinbase Ventures’ Record Year 2021 via Coinbase | Jan 2022


around the block An article from Coinbase Ventures reveals key trends in cryptocurrencies. author: Conor Dempsey, Irian & Justin Matt.

2021 will be a historic year for both the crypto market and venture capital. Partly driven by institutional inflows, Bitcoin surged to new highs at the start of the year, and the broader market followed suit, approaching a record $3T market cap in November. at the same time, $30B Venture Capital Influx into the field: More than all previous years in the history of cryptocurrency combined.

2021 is also a record year for Coinbase Ventures, just shy of 150 transactions, with an average of one new transaction every 2.5 days. Coinbase Ventures has accumulated over 90% of deployed capital since its inception in 2021, reflecting the accelerated pace of activity in our fourth year of operation.

Coinbase Ventures is one of the most active corporate venture funds in operation, with a mission to advance global economic freedom by supporting leading entrepreneurs and projects in the ecosystem. Ultimately, we see cryptocurrencies and Web3 as the uptrend that has set off all boats, including Coinbase, and Coinbase Ventures is committed to making investments that are critical to the overall growth of the space.

In this issue of Around The Block, we look to the future with Coinbase Ventures’ 2021 campaign. (Learn how Ventures aligns with Coinbase and its customers here).

Coinbase Venture’s portfolio now consists of more than 250 companies and is broadly divided into the following verticals.

Let’s break down the pie piece by piece.

Protocols and Web3 Infrastructure

In 2021, cryptocurrencies have reached new heights in terms of utility, especially in what we often think of as the nascent “Web3” space A trustless, permissionless and decentralized internet utilizing blockchain technology: Essentially, support from DeFi, NFT, metaverse and Decentralized Autonomous Organization. at the bottom Web3 stack Sitting on the layer 1 protocol led by Ethereum, but in 2021 Web3 starts to expand to other layer 1 such as Solana, Polygon, Avalanche, Terra, Flow, etc.

help Extend existing Tier 1 For higher throughput, we support Layer 2 solutions including Matter Labs, Optimism, and Arbitrum. As multiple Layer 1s proliferate, so does the need to move funds securely and easily across blockchains. As such, Ventures is actively investing in projects that facilitate this cross-chain movement, including Biconomy, Movr, LayerZero, Chainflip, and more. We also observed and funded new protocols that bring better privacy to Web3 through various zero-knowledge solutions (Aleo, MobileCoin, and a third TBA).

We are also active across the infrastructure layer Web3 stack: Primitives that form the backbone of the user’s application. Specifically, technologies that introduce standards for data storage (Arweave), messaging (XMTP), and identity (Spruce) for Web3.Given that 2021 is A great year for DAOswe are actively involved in infrastructure projects with a focus on supporting DAO creation/merging (Syndicate, Utopia), Discovery/Participation (Snapshot/Consensys’ Metamask), Payroll/Operations (Diagonal) and Orchestration (Orca).

Given the investments over the past year, we expect Web3 to mature across multiple tier 1 and 2 ecosystems by 2022, with a UX more akin to Web2 applications. Additionally, we expect DAOs to continue to thrive in the coming year, along with better privacy features for Web3 applications.

Decentralized Finance

While 2021 hints at a future where Web3 activity takes place in multiple areas Tier 1 and Tier 2 platforms, DeFi activity has started to migrate over the course of the year.Most of the activity takes place in EVM Compatible Chain (Avalanche, Polygon, BSC, etc.) and Layer 2 environments (Arbitrum, Optimism). Meanwhile, non-EVM chains (Solana, Terra, Cosmos, Polkadot, etc.) have also seen impressive growth.

We believe in a multi-chain future, and while we are still the most active in the DeFi ecosystem on Ethereum, we have also invested in Solana (Orca, Solend), Cosmos (Umee), Algorand (Folks), Polkadot (Acala, Moonbeam), NEAR, Polygon and Bitcoin.Multichain France’s future It looks bright enough that almost any financial primitive can imagine in development.

Although DeFi has made great strides in 2021, the utilization of these emerging financial protocols has hampered the ecosystem, totaling over $10B.Better User Protection Still Crucial, Here’s Why Coinbase Ventures Backs DeFi Insurance Financial Agreement Including Neptune Mutual, Risk Harbor, Cozy Finance and Nayms.

In 2022, the smart contract wars will intensify as layers 1 and 2 battle for user and developer mindshare. Hack risks will persist, but we will see increased maturity in DeFi insurance solutions. In the end, this will be where we see institutions go through”Permissioned DeFi”, including user pools and on-chain proofs for KYC.

NFT/Metaverse

2021 is also a year of rapid rise NFTs and redo the “metaverse. ” Projects like CryptoPunks and Bored Ape Yacht Club boosted NFT sales from $200 million in 2020 to staggering levels $25B in 2021. Meanwhile, NFT-based games axis infinite When Filipinos are able to change the game, put game revenue on the map working full-time. Elsewhere, Facebook’s rebranding to “Meta” sparked excitement around the Metaverse.

For the most part, NFTs are in “V0” phase in 2021, with most activity focused on simple buying and selling on marketplaces like OpenSea and Rarible. In 2021, NFTs will also appear in the L1/L2 ecosystem, such as Flow (MomentRanks, Eternal GG) and Solana (Magic Eden, Solanalysis).

Ventures is now investing heavily in the NFT “utility” phase — a phase where NFT assets expand into new types of media such as audio (Royal, Mint Songs, Sturdy), avatars (Genies, OFF), AR (Anima, Jambo) ), and Games/GameFi (Ancient8, GuildFi). This will allow layering of interesting social features on top of the program recognition of NFTs (gallery).

These NFTs and gaming investments can be broadly compared to the metaverse in that they bring us closer to a possible future where we have a series of decentralized, interconnected virtual worlds and fully functioning economies. In 2022, look for tons of new games and apps, including games from traditional game studios. Metaverse applications are also expected to expand from decentralized initiatives such as Decentraland and Sandbox, as well as existing Web2 companies such as Microsoft/Activision and Meta.

Platform and Developer Tools

If there are no developers, there will be no encryption or Web3 applications that anyone uses. Therefore, supporting the tools developers need to make cryptography and Web3 thrive is a critical part of advancing the ecosystem.

For a year, we’ve been tracking the “developer journey” starting with staging (Tenderly), collaboration (Radicle), query (Covalent), auditing (Certik, OpenZeppelin, Certora), and real-time simulation/monitoring (Chaos Labs, Gauntlet). We’ve also invested in developer toolkits such as API providers (Alchemy, Consensys’ Infura).

We expect the industry’s collective investment in development tools to pay off over the next few years. With all the developers rushing from Web2 to Web3, they need it badly.

CeFi

Much of the value going into cryptocurrencies is initially realized through centralized platforms, so centralized finance (CeFi) remains an active category. We believe that cryptocurrencies are inherently global and require localized platforms as on-ramps across different regulatory, banking and infrastructure regimes. That’s why, in 2021, we are an active investor in crypto financial service providers across Latin America, Pan Africa, MENA, South Asia, Europe and North America.

The year also saw a shift towards traditional cryptocurrency investment vehicles — IRAs, IAs, ETFs, trusts, and more. Bitcoin Futures ETF In the United States. Coinbase Ventures actively invests in asset managers and brokers including AltoIRA, Onramp, Valkyrie, ForUsAll, Ledn and One River Digital. We’re also an investor in various CeFi “pick and shovel”, followed by investments in TaxBit and CoinTracker, which automate crypto tax reporting across platforms. Additionally, we support projects that help startups integrate crypto with traditional fintech offerings, including Paxos, Tribal Credit, and Meow.

2021 provides a more regulated and compliant way for institutional and individual investor capital to gain exposure to cryptocurrency through centralized exchanges, traditional investment vehicles and fintech platforms in the U.S. and abroad. We expect this to be an ongoing theme in 2022.

2022 and beyond

Macro uncertainty has caused prices to drop sharply in the new year, but one thing is for sure: this is not the crypto ecosystem in 2018. Between the best-performing asset classes of the past decade becoming more accessible to global investors, the Web3 stack, and the explosion of exciting new use cases across DeFi, NFTs, DAOs, gaming, and Metaverse, the industry seems to be is reaching escape velocity.

Just as the boom of 2017 drove the investments that laid the foundations for today’s thriving applications, what do you think the record $30B inflows into cryptocurrencies and Web3 will generate in 2021? The market seems uncertain in the short term, but the future seems brighter than ever.





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