Analyzing the Web3 infrastructure company Alchemy: Development history and business model
Alchemy's goal is to become the AWS of the web3 world.Author: Alpha Rabbit, Alpha Rabbit Research Notes
In the Web1.0 era, IBM underestimated the market for personal PCs, while Microsoft quickly entered the field with Windows. In Web2.0, browsers and mobile OSs shone brightly, with Apple and Google conquering the market. If Web3 is indeed on the horizon, Alchemy, as an infrastructure company in the crypto ecosystem, is worth studying. The founder, a serial entrepreneur with a master's degree from Stanford, saw the company's valuation soar from $100 million to $3.5 billion in just one year, with investors including celebrities like Jay Z and Will Smith, and users including OpenSea.
What is the story behind Alchemy's founding and development? What insights does Alchemy's growth bring us? How do investors perceive this company? What potential issues still exist for such companies? These are some of the questions this article attempts to explore.
Article Structure 1. Company Overview
Founder Background
Funding History
Alchemy Users
2. Overview and Business Model
Business Model: Alchemy ------ AWS of the Crypto Space
What needs does it meet?
3. Alchemy's Development Journey
Everything is about user experience
Why launch Alchemy Notify? What are the market pain points?
A set of data
Current issues in the blockchain development environment
Alchemy's applications in the DeFi field
Voices from users
4. Investor Perspectives
- A16Z
5. Other Evaluations
- Potential issues with Alchemy
6. Founder's Vision
Company Overview
Alchemy aims to become the AWS (Amazon Web Services) of the Web3 world ---Alchemy Founded in 2017, Alchemy is a blockchain infrastructure company, primarily providing blockchain development platform services to blockchain developers to enhance user experience. It currently operates in 197 countries worldwide, with millions of users.
By building development tools and computing infrastructure, Alchemy aims to realize a MultiChain future. Developers and engineers can use Alchemy's tools and computing-type infrastructure to build applications across various blockchains, helping developers on many different chains. In 2021, Alchemy provided technical support for over $45 billion in Web3 transactions for tens of millions of users globally through cross-chain solutions.
Founder Background
Co-founder and CEO
Nikil Viswanathan CEO
A serial entrepreneur, graduated from Stanford University with a master's degree in computer science, and co-founder of the well-known social app Down To Lunch. NIKIL previously worked in product roles at Google, Microsoft, and Facebook.
Co-founder and CTO
Joe Lau CTO
Joe Lau graduated from Stanford University with a master's degree in computer science. Alchemy's CTO and co-founder, a serial entrepreneur, has worked as an engineer at Pinterest, Google, and LinkedIn.
Both founders are also the creators of the social platform Down to Lunch. They are known for their entrepreneurial spirit and frugality. There was an incident where NIKIL's iMessage crashed due to thousands of messages flooding in from Down to Lunch users. Subsequently, NIKIL boldly emailed Apple CEO Tim Cook, saying, "You are our only hope," and Cook helped them resolve the issue. These two entrepreneurs are known for their frugality in the startup community; JOE LAU once spent six consecutive days in the office, while many employees at their previous company worked from cardboard boxes.
Funding History
In April 2019, Alchemy secured its first round of funding;
In December 2019, Alchemy raised $15 million in Series A funding, led by Aditya Agarwal and several other institutions;
On April 28, 2021, Alchemy raised $80 million in Series B funding at a valuation of $500 million;
On October 28, 2021, Alchemy raised $250 million in Series C funding, reaching a valuation of $3.5 billion;
Investors include former Citigroup CEO Vikram Pandit, DoorDash CEO Tony Xu, Morgan Stanley President Vikram Pandit, Alphabet Chairman John Hennessy, Coinbase, and celebrities like actor Will Smith and renowned singer Jay Z.
Alchemy's Users
Alchemy's main clients: Image from the official website
Alchemy's enterprise-level users include Binance Wallet, OpenSea, CryptoKitties, Kyber, 0x, Binance Wallet, Gods Unchained, Opera, and Maker, among others. It is estimated that in the future, 70% of top blockchain applications will use Alchemy's developer tools, representing a significant advancement for application developers in terms of quality and time to market. Overview and Business Model Business Model: Alchemy ------ AWS of the Crypto Space
Alchemy aims to become the AWS (Amazon Web Services) of the Web3 world. Founder Nikil believes that the Web3 ecosystem includes various types of applications and software running on blockchains. In the Web2.0 era, Amazon had not only shopping services but also AWS, which is known as AWS, and two-thirds of Amazon's profits came from AWS, valued at over a trillion dollars. Alchemy is conceptually similar to AWS, but it is a development platform for the blockchain industry. Currently, Alchemy supports almost all NFTs (engines) in the world.
To explain further, Alchemy is akin to a B2B software development stack that helps developers easily build applications running on blockchains. Blockchain networks and DApps need to find a way to interact, and Alchemy provides out-of-the-box solutions, allowing developers to focus on building applications for users.
What needs does it meet?
In the blockchain industry, companies typically need to spend tens of thousands of dollars to establish and operate nodes for reading and writing to the blockchain. The problems encountered are slow speeds and high costs, which consume a lot of engineering resources. A more troublesome issue is that the node architecture may not support large-scale applications and cross-server load balancing. When nodes return different block numbers out of sync, problems arise. If blockchain applications run slowly, have defects, or crash completely, developers will spend a lot of time firefighting.
Alchemy applies a completely different decentralized architecture, separating different types of data into specialized data storage, improving speed and reliability. This means that applications can be built on-chain with fewer engineering resources, similar to Amazon's AWS.
Alchemy's Development Journey
"Push notifications are an indispensable part of user experience that meets user needs and are crucial for the thriving of the entire DApp ecosystem. Experience is absolutely necessary; users expect blockchain products to be at least as good as traditional web and mobile products, if not better."
When Alchemy first started, the market size was only 5 million, entering the industry relatively early. In 2018, Alchemy joined Google's Launchpad Studio accelerator. In 2020, everything was about user experience
In 2020, Alchemy launched a new feature: Alchemy Notify for developers, aimed at replacing the nodes that enterprises use to read and write on the blockchain with a convenient and scalable infrastructure. It hopes to coexist with developer platforms, providing tools to monitor, alert, and debug cryptocurrency software.
Why launch Alchemy Notify? What are the market pain points?
User experience in the crypto space has long been criticized, mainly because transactions are relatively complex for ordinary users. Opponents of cryptocurrency argue that due to the complexity of transactions, such as the long finalization time for many blockchain protocols, cryptocurrency is still far from mainstream adoption.
This notification feature significantly improves the ease of interaction between developers and blockchain programs. Users can always know about real-time events related to their blockchain, such as interest earnings, which tokens are no longer available, real-time bids on their NFTs, transaction statuses, etc., saving users a lot of time.
Alchemy's CEO believes that solving user pain points is always the top priority. "If the blockchain industry wants to succeed, it must create simple and understandable products accessible to ordinary users. Alchemy focuses on providing developers with the features needed to create these intuitive user experiences."
A set of data
Research firm Airship analyzed data from 63 million app users, reporting that users who received notifications within the first 90 days after installing the app were about 300% more likely to continue using the app, with retention rates increasing by 820%.
In productivity-type applications, the retention rate of users who received notifications was 460% higher than that of those who did not.
This means that users in the crypto ecosystem need to maintain more interaction with DApps and applications. To address this pain point, the Alchemy Notify team surveyed hundreds of developers and found significant pain points in the user experience in the crypto space.
Alchemy CTO Joe Lau believes that the launch of Alchemy Notify is to make blockchain products as simple and user-friendly as traditional web/mobile applications. If we refer to the significant impact and transformation that notification push brought to the mobile application ecosystem and apps in the Web2.0 era, we can understand the significance of Notify.
Alchemy Notify feature illustration
In July 2020, Alchemy planned to launch Alchemy Build, aiming to revolutionize the existing issues in the blockchain development industry through new building tools, which are expected to make blockchain development more user-friendly.
Current issues in the blockchain development environment
Internal research at Alchemy shows that blockchain engineers spend up to 12 hours a week on work related to debugging, customer issues, and release cycles, leading to high time costs that stifle innovation.
The Alchemy Build tool is plug-and-play, requiring no configuration. The toolkit includes a resource explorer that can identify errors and optimization opportunities by searching historical requests. It also includes a Mempool Visualizer, allowing developers to view real-time transaction statuses on the chain; Composer for prototyping and modeling; and a Debug Toolkit, which provides real-time visualization for code inspection.
For the blockchain industry, reliability in deployment is extremely important due to its involvement in decentralized finance, internal enterprise operations, public chains, and other critical areas. Some blockchain companies offer bug bounties to white-hat hackers looking for defects and vulnerabilities in their code, while others may delay project releases upon discovering weak points and potentially exploitable bugs.
However, in the future, using developer tools like Alchemy Build can help blockchain developers address some of these issues. "Many blockchain developers tend to reinvent the wheel for the same problems; Alchemy Build can simplify the development process.
"Web 2.0 has industry-standard tools like DataDog that improve prototyping and debugging efficiency, but within the blockchain industry, we still have people engaged in basic tasks like decoding hexadecimal instead of focusing on creating the next groundbreaking application."
In August 2020, Alchemy released the official version.
"Alchemy's mission is to make blockchain accessible to all developers and to spread the magic of blockchain to the world, aiming to continuously empower blockchain developers.
Alchemy's Applications in the DeFi Field
In the DeFi field, Alchemy provides solutions for MakerDAO, 0x, and other DeFi projects. In August 2020, CEO Nikil stated that over 70% of well-known Ethereum applications, with a total value exceeding $2.8 billion, run on DeFi assets and use Alchemy to access blockchain data.
One of Alchemy's users, Dapper Labs CEO Roham Gharegozlou, believes that startups using Alchemy to "manage infrastructure," combined with "enterprise-grade development tools and support," have improved efficiency. Developers pay startups like Alchemy for infrastructure and hardware tools to facilitate the use of blockchain data, allowing blockchain startups to focus more easily on end users.
Voices from Users Since April 2021, Alchemy's revenue has grown tenfold by August 2021, with clients including OpenSea, Nifty Gateway, UNICEF, and the Big Four accounting firms.
Kent Barton, Head of R&D at ShapeShift, stated, "Using the Alchemy Build development toolset has made it easier for us to develop Web3 infrastructure. It is crucial to focus on development when we launched our blockchain product Microtick."
Sid Sethi, a senior engineer at Audius, said, "With Alchemy Build, our monthly users expanded to over 200,000 listeners, and this development toolset saved us many sleepless nights debugging code."
In April 2021, Alchemy raised $80 million in Series B funding, reaching a valuation of $500 million.
In October 2021, Alchemy raised $250 million in Series C funding, reaching a valuation of $3.5 billion.
In 2022, Alchemy's CEO stated that the Series C funding would be used to further consolidate the market share already achieved and continue to expand into the crypto ecosystem and related business sectors.
The application scope of blockchain is becoming increasingly broad. More and more users are participating in the crypto space, using various blockchain applications to buy and sell assets, play games, store data, etc. All these businesses must operate securely, resiliently, and efficiently on software. Through Alchemy, developers can build applications on the blockchain early, making it one of the cornerstones of the cryptocurrency ecosystem.
The crypto space and ecosystem continue to proliferate, which will further lead to an increase in company valuations. By the end of 2021, transactions conducted through various applications built on Alchemy reached $30 billion, with approximately ten million users. Most NFT companies in the world are using Alchemy.
Investor Perspectives Ali Yahya From A16Z
Modern blockchains are programmable, akin to a personal computer or a smartphone; one can view blockchains as a new type of computer with unique capabilities: allowing programmers to write code and make promises about how it will operate. For example, Bitcoin promises that there will only ever be 21 million bitcoins.
Every new type of computer needs its own operating system, its own platform, and a set of tools that make it easy for developers to build new things. Personal PCs have always been driven by Mac OS and Windows, while smartphones have been driven by iOS and Android. For cloud computing, we use AWS, Azure, and Google Cloud, among others. Apple, Google, Amazon, and Microsoft have become some of the most influential and valuable companies in human history by building these platforms.
Similar to how Apple and Amazon have built developer platforms for personal computers, smartphones, and the cloud, Alchemy is building an operating system and developer platform for the upcoming Web3 era. Alchemy is creating a platform company that empowers developers in the modern blockchain ecosystem.
The founders are focused and mission-driven, with grand visions and aspirations. They have strong execution capabilities and excellent team-building skills, quickly assembling a world-class entrepreneurial team.
From a business metrics perspective, Alchemy's growth over the past year has been remarkable, quickly surpassing their competitors. The Alchemy platform currently supports most leading companies and protocols in the web3 space, including Aave, Axie Infinity, Dapper Labs, Flow, and OpenSea, all of which are Alchemy users. Based on Alchemy's infrastructure, over $45 billion in web3-based transactions occur on Alchemy each year, and this number is rapidly growing.
Other Evaluations What potential issues does Alchemy face?
The biggest threat the company faces is how quickly the crypto space will become a massive market. Although Alchemy has made a lot of money selling tools and service packages for tens of thousands of dollars, truly launching the flywheel for blockchain developers and moving towards serving mainstream users is the breakthrough success.
As a company focused on development and engineering, it is relatively difficult to persuade enterprises to outsource critical parts of their infrastructure to Alchemy with a sales-oriented approach. Alchemy recently hired its first salesperson to market its business to corporate giants interested in blockchain. However, since Alchemy can indeed help industry companies solve problems and meet their needs, everything is still going well. Founder's Vision "In the coming years, we genuinely hope to empower the growth of the entire blockchain industry and strive to make this technology accessible to everyone on Earth. The blockchain industry still faces various challenges."
"In Silicon Valley, there are two relatively exaggerated metrics for startups: the first is how much money you have raised, and the second is how many people are on your team. However, in reality, we hope to minimize these two metrics while achieving success.
Technological paradigm shifts typically occur every 20 to 30 years. If we are facing a large-scale technological shift, there is an opportunity to establish a truly foundational infrastructure company in this field. This is our vision, and it is not just about money." References:
- https://a16z.com/2021/10/28/investing-in-alchemy/
- https://techcrunch.com/2018/09/05/googles-launchpad-studio-accelerator-welcomes-a-cohort-of-blockchain-and-finance-startups/
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- https://cointelegraph.com/news/alchemy-pushes-real-time-crypto-notifications-to-your-device
- https://www.coindesk.com/markets/2020/06/09/alchemy-notify-wants-to-simplify-blockchain-ux-with-a-single-push/
- https://finance.yahoo.com/news/alchemy-goes-public-developer-platform-141020324.html
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- https://a16z.com/2021/10/28/investing-in-alchemy/
