Above Chain reaction This week’s podcast, Lux Capital’s newest investor, Grace Isford, joined us to talk about the obscure but crucial world of web3 infrastructure. At Lux, Isford invests in companies that work behind the scenes to ensure crypto exchanges are secure and reliable enough to avoid being hacked.
Prior to joining Lux this February, Isford was an investor at Canvas Ventures focused on enterprise software and fintech. An investment in the data infrastructure she worked on at Canvas revealed to her an opportunity in the web3 space for companies to “share data continuously at scale”, fostering growth. pivot her pivot to crypto, she said.
“That led me down the rabbit hole, and then I invested in myself,” says Isford. “I got into yield farming, which coincided with my move to New York, where many of my friends are also involved in the crypto and VC ecosystem.”
Isford says her approach to investing in web3 is rooted in what she calls a “circle of competence,” or the area in which she can compete against others in the space.
“Investing in NFTs is quite different from investing in DeFi which is quite different from investing in crypto data infrastructure and I would argue that anyone who says they invest in the web does not should invest in all of that – they should probably pick their sweet spot in their core competence,” said Isford.
Isford’s own ‘circle of competence’, based on her previous experience, is in enterprise infrastructure and fintech, so we asked her what she thinks about some of the big challenges especially for web3 infrastructure providers.
Compared to web2, Isford said, web3 lacks enterprise-grade security solutions. Alchemy and Infura are the only two major node service providers in the industry, meaning that most cryptocurrencies depend on the two infrastructure providers to manage their data.
“Looks like there’s a new security hack being reported every week [in web3]’ said Isford, quoting recent Metamask and Ethereum dApp stop working derived from Infura and the February of Hack deep hole bridge.
While a number of startups are working on developing security solutions, Isford said, the technology is still “quite nascent” when it comes to developer tools, infrastructure monitoring, and more. data and storage tiers.
Another big challenge is managing fraud and downside risk, Isford added.
“I think [that issue] really keeping a lot of people away from the crypto world right now [because they’re] Isford says they fear losing all their money if they get too deeply involved in crypto.
Isford is optimistic that through the massive inflow of capital invested in web3 startups over the past year, companies will be able to build more reliable solutions.
“I think TRM Labs, Chainalysis and some of the other companies in this space have 10 times the potential in terms of compliance and oversight because you don’t have that at scale in the same way that we’ve created the This complex AML system on Isford says, refers to the anti-money laundering technology of traditional financial institutions.
Better fraud and risk management systems are the premise for more institutional money to flow into crypto, Isford said. As companies like Fidelity, Goldman Sachs, and JP Morgan continue to make forays into crypto, the market will mature, she added.
“I think one of the biggest opportunities in crypto right now is still security, if you can build more reliable smart contracts on a large scale… but you can’t have a reliable system. trust if it’s not secure, right? And you can’t run a system securely if you don’t know who’s in it, so I think security is probably one of the most important parts from a preference standpoint,” said Isford.
