On: Chain reaction This week, podcast host Lux Capital’s newest investor, Grace Isford, joined us to talk about the opaque but crucial world of web3 infrastructure. At Lux, Isford invests behind-the-scenes companies to make sure cryptocurrencies are secure enough to avoid hackers.
Prior to joining Lux this February, Isford was an investor in Canvas Ventures, which focused on enterprise software fintech. The introduction of the data infrastructure he worked on at Canvas exposed him to “uniquely sharing data across companies” across Web 3, pushing his core to crypto, he said.
“It got me out of the rabbit hole, and then I invested in myself,” Isford said. “I started crop farming, which coincided with my move to New York, where many of my friends also live in the crypto-VC ecosystem.”
Isford says his investment approach in web3 is rooted in what he calls his “scope of competence,” or the area in which he can compete with others in the space.
“NFT investing is very different from DeFi investing, which is very different from investing in crypto data infrastructure,” he said. they should probably choose their sweet spot. “In their primary jurisdiction,” Isford said.
Isford’s own “competence range”, based on his past experience, is in the fintech infrastructure of enterprises, so we asked him what he thought were the biggest challenges for web 3 infrastructure providers.
Compared to web2, Isford said web3 has no enterprise-level security solutions. Alchemy և Infura are the only two major service providers in the industry, which means that most cryptocurrencies depend on two infrastructure providers to manage their data.
While a number of startups are working on security solutions, Isford said the technology is “still quite new” when it comes to developer tools, data infrastructure monitoring and storage.
Another potential challenge is managing fraud risk, Isford added.
“I think [that issue] keeps a lot of people away from the crypto world right now [because they’re] “They are afraid of losing all their money if they go too deep into the crypto,” said Isford.
Isford is optimistic that companies will be able to create more reliable solutions due to the massive influx of investments in web3 startups over the past year.
“I think TRM Labs, Chainalysis, and a few other companies in this area have 10 times the potential for compliance compliance, because you just do not have it on the scale that we have built these sophisticated AML systems. “The financial infrastructure side of the web2 world,” said Isford, referring to traditional financial institutions’ anti-money laundering technology.
Better fraud and risk management systems are a prerequisite for more institutional money flowing into cryptocurrencies, Isford said. As companies like Fidelity, Goldman Sachs and JP Morgan continue to make progress in crypto, the market will mature.
“I think one of the biggest features of crypto right now is security, if you can build more reliable smart contracts on a scale, but you can not have a reliable system if it is not secure, right?” “And you can not run the system safely if you do not know who is on the system, so I think security is probably one of the most important parts of our priorities,” said Isford.