ArkStream Capital: 2023 Q2 Investment Updates

12 min readJul 14, 2023

In Q2 2023, ArkStream Capital funded six projects. We will explain our investment rationale through project summaries and market analysis.

SEI

-Project Introduction

Sei Network is a Layer1 blockchain built using Cosmos SDK and Tendermint, specifically designed for digital asset transactions. Sei aims to be the fastest blockchain in the industry by leveraging new consensus mechanisms and technological breakthroughs. It features a built-in Central Limit Order Book (CLOB) module.

From August 2022 to April 2023, Sei completed three rounds of financing totaling $35 million USD, with investors including Jump Crypto, Delphi Digital, and ArkStream Capital.

-Cosmos Ecosystem

Thanks to the flexibility of Cosmos’s modular tools and the upgrades in cross-chain technology, many projects have chosen to build their chains within the Cosmos ecosystem. Despite the significant shock caused by the collapse of Luna, the largest public chain in the ecosystem, Cosmos still leads with a $900 million USD total value locked (TVL) and nearly four hundred protocols, far ahead of another multi-chain network, Polkadot.

The role of Cosmos Hub within the whole ecosystem has always been unclear, resulting in a low value-capture ability for $ATOM. However, this has led to fewer “taxes” for the public chains within the Cosmos ecosystem. With the assistance of Cosmos’s IBC, cross-chain combinations have resulted in better development. Notable application dYdX has also announced its migration to Cosmos as an independent chain.

-Why we Invested in Sei

Sei, being built under the Cosmos ecosystem, can fully utilize Cosmos’s liquidity and is optimally designed for DeFi.

Technologically, Sei has a built-in order-matching engine, sub-second settlement speed, parallel processing of orders, and single-block order execution. All these custom features are completed at the base layer. Sei has implemented some of its optimizations through ABCI++, an upcoming upgrade to Cosmos’s ABCI, making every step of consensus programmable. Sei has been trying to improve using ABCI++ in three areas: optimizing block production, smart block broadcasting, and parallel order execution. All these efforts aim to make Sei the optimal solution as a Layer 1 blockchain “designed specifically for DeFi”.

Speed is crucial for decentralized derivatives, so on Arbitrum, derivatives have developed more rapidly. The current trading volume of GMX maintains a daily volume of over $100 million USD, and protocols such as Gains and Mux also have tens of millions of dollars in volume. As the market gradually recovers, decentralized derivatives will gradually grow to their rightful significant position, so the importance of investing in a public chain that can serve decentralized derivatives well is undoubtable.

Sei was founded by Jeffrey Feng and Jayendra Jog. The team members have backgrounds in tech and traditional finance, mostly from companies such as Robinhood, Databricks, Airbnb, and Goldman Sachs. They understand the complexity of establishing a L1 blockchain. They also have traders with rich TradFi experience from Goldman Sachs, other investment companies, and Cosmos OGs. Such a team background perfectly aligns with SEI’s vision of a TradFi public chain.

2. LINERA

-Project Introduction

Linera is a Layer1 blockchain aimed at providing a secure, highly scalable, low-latency blockchain to deliver faster response times for Web3 applications. Linera seeks to support the most demanding Web3 applications by providing internet-scale predictable performance, security, and responsiveness. To address the issue of block space scarcity, Linera introduces a new integrated multi-chain paradigm based on elastic validators. Linera puts users at the center of the protocol, allowing them to manage block production in their own chains (called micro-chains) for optimal performance. To help web3 developers make full use of Linera infrastructure, the project has developed a rich, language-agnostic multi-chain programming model. Linera applications use asynchronous messages for cross-chain communication. Within the same micro-chain, applications are composed using synchronous calls and temporary sessions (also known as resources). Thanks to the Wasm virtual machine, Linera’s initial SDK will be targeted at Rust programmers. Linera infrastructure is based on delegated proof of stake. It will use cutting-edge economic incentives and community-wide audits to ensure strong decentralization. In June 2022, Linera completed a $6 million USD seed funding round led by A16Z. The details of this round have not been disclosed yet.

-MOVE Language Public Chain

Move is a programming language developed by Meta (formerly Facebook) for its stablecoin project Diem (formerly Libra), which aims to be a global digital native currency combining stability, low inflation, universal acceptance, and interchangeability. This vision determines that Move is a programming language born for finance. However, due to regulatory issues, Diem could not continue, and team members respectively established projects such as Aptos, SUI, Linera.

Move language excels in security, parallelization, and developer-friendliness.

Security: Move provides comprehensive security for smart contracts at various levels including language design, virtual machine, contract call method, and contract-specific execution.

Parallelization: Move has a special definition for digital assets, classifies and identifies transactions, and in combination with the multi-threaded execution engine, allows transaction data to be processed and executed simultaneously.

Developer-Friendly: Move lowers the barrier to entry and reduces complexity. Experienced developers can learn Move in about 1–2 days; for developers without a background in smart contract programming, learning Move from scratch will take about 1–2 weeks.

-Why We Invested in Linera

Move provides a more fitting treatment for Tokens, the core of the blockchain, and assets are the most important part of the chain. This improvement by Move is highly meaningful.

Technologically, Linera has three highlights: Building a secure infrastructure with predictable performance and responsiveness by running multiple chains across a set of elastic validators; making multi-chain programming mainstream by working on a new execution layer, enabling a rich ecosystem of scalable web3 applications; and maximizing decentralization by ensuring elastic validators get optimal incentives and community-wide audits. With this architectural design, the following can be achieved: Elastic scaling, high responsiveness, composability, chain security, power decentralization, and language agnosticism.

The founding team of Linera is mostly composed of former Zcash and Meta/Novi engineers and researchers. Linera founder Mathieu Baudet is a cryptography Ph.D. and a competent CEO in terms of R&D capabilities. He previously served as an engineer at Meta, helped create the Diem blockchain, was the chief researcher and engineer at Novi, and was a core participant in inventing the FastPay and Zef protocols.

3. ORB

Project Introduction

Orb is a decentralized social media platform on the Lens Protocol. It combines all the best features of existing social media applications into a convenient and user-friendly platform, allowing real ownership and control over identity, content, and monetization. This round of financing has not yet been disclosed.

Web3 Social Applications

Social networks occupy a significant part of our lives, but the current hot social platforms are criticized for their review mechanisms and data ownership. When we talk about the term Web3, most people expect that compared to the “readable, writable” of Web2, the “ownership” of Web3 will fundamentally change social behaviors. We are on the eve of the Web3 social explosion. In the past two years, the basic infrastructure of Web3 social products is being built brick by brick: Ethereum upgrades, L2 and the development of new public chains have solved the congestion and high cost of the blockchain. The social protocol represented by the Lens Protocol has rebuilt the data structure required for social networking on the chain. Many knowledge graphs, DID, wallet entrances, and other products are laying the groundwork for the explosion of decentralized social applications. However, the high barriers to entry and migration costs are preventing users from using decentralized social products. This is evident on Damus, vigorously promoted by Twitter’s former CEO Jack Dorsey. The market urgently needs a good product.

Why we Invested in Orb

Since the Lens Protocol was launched, we have been paying attention to its ecological projects. Compared to the steady infrastructure, we look forward to the powerful explosion of the application layer. Our investment in Orb is not accidental, but based on a year-long tracking survey of hundreds of projects in the Lens ecosystem. They have the fastest iterative capabilities and the strongest user perception. Compared with the original doctrine of “decentralization,” Orb believes in the supremacy of users and focuses all their energy on “how to build a good social product.” If you don’t deliberately search, it’s hard to see information related to Web3 on Orb’s APP. Their excellent user experience allows you to seamlessly transition from Web2 to Web3, but behind it lies a decentralized account structure and data ownership, giving the decision-making power back to the users. Without any token incentives and airdrop expectations, they have already accumulated over 100,000 users, which is an important step in the history of Web3 social development.

4. INTUITION

-Project Introduction

Intuition is an open, decentralized knowledge-sharing platform that allows users to create proofs about any topic, using decentralized identity verification, data, and financial primitives, to build an open, decentralized, permissionless semantic knowledge graph to help users make better decisions. The vision of Intuition is to build an application ecosystem interconnected by verifiable data-sharing pools, inspiring global knowledge sharing and the formation of decision-makers.

-Web3 Social Graph

The control of users over their social data is an important aspect of Web3. The purpose of the social graph is to return the network of social relationships to the users themselves, allowing them to freely choose the applications they use, while retaining their original social relationships. This conflicts with the interests of current centralized social products — most products hope to continually increase the migration cost for users, in order to keep them in their ecosystem forever. The Web3 social graph aims to change this status quo, with different projects tackling from different angles, from user’s friend lists or follow lists, to communities built by multiple people, more and more data is breaking away from the centralized network, which will more effectively help form the decentralized social graph.

-Why we Invested in Intuition

Unlike other social graph projects, Intuition is a “knowledge graph”. The difference is that while social graphs emphasize social relationships among users, Intuition emphasizes how these relationships “reshape” people. Most decentralized social products are thinking about how to map offline relationships on-chain, but users lack the incentive to put data on-chain, resulting in most products only having a “decentralized” castle in the air, without a compelling reason to use. Intuition takes the opposite approach, incentivizing users with tokens to put countless actions on-chain, unconcerned about value and authenticity, then using a large amount of on-chain data and network effects to infer the necessity and usability of “identity”. This will bring huge possibilities for the Web3 social network that lacks data. In our investment philosophy, “new” and “possibility” are one of the driving forces for industry development, and Intuition’s solution stands out among many social products, giving us a fresh perspective. We believe that under the leadership of Ethereum core developer Billy Luedtke, Intuition will improve the reputation and identity data we can obtain about our daily interactions.

5.POLKASTARTERGG

-Project Introduction

Polkastartergg is a gaming platform founded by one of the largest issuance platforms on the chain, Polkastarter, positioning as the largest user entrance for future web3 games. This financing round is a seed round and has not yet been disclosed.

-Web3 Gaming Platform

Web3 gaming experienced explosive growth in 2021, according to Zeeve Link’s “WEB3 GAMING IN 2022 REVIEW”, the number of daily active users in web3 gaming in mid-December 2022 was 420,000. For players, there is an urgent need for a high-quality gaming platform that includes game entrances, information, reviews, and guides in the bustling world of web3 games. Gaming platforms have also become the first stop for web2 users to enter web3 games.

-Why we Invested in Polkastartergg

In the next cycle, the game is the engine driving the exponential growth of web2 users into web3, and the game’s user entrance is a key focus track for ArkStream. Polkastartergg was launched in November 2022, and its traffic ranks first in its sub-sector. It has already cooperated with 125 games, rated 75 games, and has over 67,000 Twitter users. Core collaboration projects include Magic Eden, Ultra, etc., and top collaboration games include Star Atlas, Illuvium, Big Time, Edenbrawl, etc.

Polkastarter team has strong business barriers and successful experiences in web3. The team’s first project, Polkastarter, stood out from hundreds of IDO platforms in the last cycle, becoming one of the largest IDO platforms with strong traffic, growth, and project resources. The team is now focusing on developing a gaming platform and preparing for game issuance in the future.

6. BLOCKUS

-Project Introduction

Blockus aims to provide a one-click full-stack technical solution for web3 games, including social login/built-in marketplace/fiat channels. It can help web3 games quickly establish, reduce costs, and focus on content. Blockus comes from A16Zcrypto’s first accelerator. In February 2023, Blockus completed a $1.1 million preseed round of financing led by a16z.

-Web3 Gaming Full-stack Technical Solution

To build a complete web3 game, besides the game content itself, teams often need to develop or integrate a variety of technical facilities, including social login, built-in swap/marketplace, and fiat channels. This is a considerable development cost for startup games and comes with high development cycles. Web3 game full-stack technical service providers provide a one-click technical solution for web2 game studios to transition to web3, greatly reducing costs and efficiency.

-Why we Invested in Blockus

Blockus combines the technical and business advantages of a full-stack technical solution for games. Technically, apart from the team’s years of SaaS technology accumulation, another core advantage is that its technical architecture is prepared for legal compliance, integrating compliance into the complete set of financial and technical stacks for the game. The lead investor, A16Z, provided the team with four lawyers for this. This gives it a high-ground advantage over similar competitors in the current wave of embracing regulation in web3. In terms of business resources, in addition to its own web3 game, its CEO’s strong resources in Roblox and web2 game studios give it more business entry points from web2 games. It has already provided technical solutions for three games, including Aybss World and Double Jump.

The three founders all come from well-known companies in web2 and web3. CEO Jess Zhang comes from the former Roblox Data Science team, CTO Linglong is the former Tech Lead for Airbnb Payment, and CPO Michael Wei formerly worked at Coinbase.

ArkStream New member

Kushagra Aryal, Investment Analyst

ArkStream Capital is pleased to announce the addition of a new member to its team, Mr. Kushagra Aryal, as an Investment Analyst.

Mr. Aryal is an alumnus of the Wharton School at the University of Pennsylvania. He brings with him a wealth of experience from his previous positions at a range of esteemed organizations, including PayPal, Evernew Capital, and Big Brain Holdings.

Mr. Aryal’s technical acumen spans various programming languages like SQL, HTML, and CSS. Additionally, he has demonstrated proficiency in utilizing various software tools, including Zapier, Figma, Jira, and Bloomberg, further enhancing his investment analyst capabilities.

Based in Philadelphia, Mr. Aryal will spearhead ArkStream’s deal-sourcing efforts in North America. He will also oversee the company’s investments and foster strategic partnerships in this region. The company is excited to welcome Mr. Aryal aboard and looks forward to the exceptional contributions he will make.

ArkStream Events 2023 Q2

MIT Bitcoin Expo, Boston