The initial fervor surrounding Web3 has waned, leaving the landscape relatively quiet with few notable news stories. Yet, amidst the so-called “crypto winter” that saw a 74 percent decrease in Web3 funding in 2023 compared to the previous year, Web3 platforms are still successfully raising funds. An excellent example of this resilience is found in projects built on the Switzerland-founded Internet Computer (ICP), which have amassed over $15 million through the ICP’s community governance model, all without the involvement of venture capitalists.
So, what exactly is the Internet Computer? Developed by the Internet Computer Protocol (ICP), it enables individuals to construct Web3 services and enterprise systems directly on a decentralized public network. This network is capable of scaling to host social networks and media streaming platforms while offering tamper-proof, firewall-free, Web3-compatible services that can interact with the outside world trustlessly. In essence, the Internet Computer blockchain replaces the centralized IT stack typically controlled by tech giants, presenting itself as a complete alternative technology stack.
The ICP asserts that developers can use this platform to create decentralized applications (dApps) and services in emerging areas like SocialFi and GameFi, which blend social media and gaming features with decentralized finance (DeFi), thus contributing to the development of a fully decentralized metaverse.
Now, you might be wondering how Web3 projects manage to secure funding despite the downturn in VC investments. The answer lies in decentralized autonomous organizations (DAOs). The ICP claims that a new breed of DAOs is rejuvenating the Web3 ecosystem and generating much-needed revenue, representing a paradigm shift towards user-centric decision-making. These DAOs transform regular users into shareholders, directors, and decision-makers, promising users the opportunity to become founders in the platforms they use.
While DAOs may have faded from the spotlight for a while, they are making a comeback. ICP-backed startups have raised substantial amounts, such as OpenChat from the UK securing over $5.5 million in just six hours through a decentralized fundraising round. OpenChat is developing a chat application running entirely on the Internet Computer blockchain.
Another example is Hot or Not from the US, which recently raised $4.5 million. This startup is working on a Web3 social media platform that combines short videos with prediction markets. Users can stake tokens on videos, essentially betting on whether a video will go “hot” or “not,” thus providing an innovative way to monetize social media consumption.
Furthermore, Kinic has raised more than $2 million (500,000 ICP) to develop a decentralized “Google of Web3.” Kinic is the world’s first Web3 search engine, offering user and data privacy, open-source and transparent SEO, and verifiable machine learning and search algorithms, promising a new era of information access freedom.
To address the participation challenges often associated with DAOs, the Internet Computer introduces the concept of a Service Nervous System (SNS). SNS is an advanced form of DAO that can run any Web3 app in a fully decentralized and on-chain manner. Token holders within the community can propose and vote on all changes made to a dApp, including code updates.
Lomesh Dutta, Vice President of Growth at the DFINITY Foundation, explains how SNS enhances user engagement and participation. SNS-based DAOs are typically formed by dedicated early adopters, ensuring that proposals with insufficient initial support from the community are less likely to succeed. This contrasts with traditional DAOs, where anyone can buy a token and participate, often driven solely by profit motives.
Users participating in SNS-based DAOs are rewarded with airdrops, voting rights, and more, based on their interaction with the apps they engage with daily. This approach differs from the usual DAO model, as SNS-based dApps typically offer high-engagement services, including social media platforms, games, and online news outlets.
Moreover, SNS-based DAOs are owned and governed by the people who use them, offering significant benefits. Users have control over the service’s evolution, preventing centralized entities from making decisions that negatively impact user data. Consequently, SNS-based DAOs can develop in the best interests of their communities.
In summary, Web3 platforms are finding innovative ways to thrive and secure funding, with DAOs and the Service Nervous System playing a crucial role in reshaping the landscape of decentralized governance and funding models.