Multicoin Capital: An In-Depth Look at the Features and Potential of Web3 Credential Network Project Galaxy
"We expect it to play a central role in application development and cutting-edge marketing campaigns, interacting with and attracting users in new, truly crypto-native ways."Author: Mable Jiang, Partner at Multicoin Capital
Original Title: 《Investing in Web3 Credentialing》
Compiled by: Hu Tao, Chain Catcher
On January 25, the Web3 credentialing network Project Galaxy announced it has raised $10 million in funding, led by Multicoin Capital and Dragonfly Capital, with participation from Spartan Group, Coinbase Ventures, Binance Smart Chain Growth Fund, Solana Ventures, Alameda Research, and others.
Below is the research report on the project released by Multicoin Capital on the same day, compiled by Chain Catcher:
Web3 Credentials
There can be various credentials to represent certain achievements or contributions of individuals. Historically, credentials have been shared through resumes, typically manifested as certificates from institutions such as universities, governments, or training programs.
On the other hand, Web3 credentials exist on-chain. While they are similar to traditional credentials obtained through work proofs, the "work" of these credentials may be someone's on-chain contributions, such as the duration they provided liquidity to a funding pool or the number of Snapshot votes they participated in within a community. They can also include useful off-chain data brought onto the blockchain, such as contributions to community proposals or the number of forks they created on GitHub.
One of the most well-known Web3 credential projects is POAP (Proof of Attendance Protocol), which issues NFTs that mark verifiable participation in significant community events. (Note: The "credential data" referred to in this article is all public data. Other forms of credential data may involve private or semi-private data, and Project Galaxy plans to provide such data in the future.)
Currently, credential data can be utilized in various ways. Here are some examples:
- Compared to passive token holders, individuals actively using certain DeFi protocols may qualify for greater voting power per unit of token;
- Those who help promote ideas or proposals on Twitter during a specific time period (e.g., retweeting or commenting) may also gain priority in new token distributions;
- Individuals who have interacted with certain contracts may qualify for rewards in targeted growth hacking activities; and
- Those who achieve certain milestones in games may qualify for quick recruitment in specific guilds.
Web3 credentialing creates new methods for the flywheel effect of Web3 applications and other organic growth, which was previously impossible. Beyond the number of tokens a person holds (which naturally represents more power for whales), Web3 credentials also represent qualitative data that helps describe address profiles (whose value has historically been overlooked).
The democratization of credential data effectively introduces a new (and better) way to allocate power to community members, rather than solely based on token voting. For non-quantifiable behavioral data—especially off-chain data—the power balancing mechanism can favor the status and rewards of "true fans" in the community, even though they are often not the largest token holders.
The Galaxy Network consists of two core components: the credential network and the network module that helps users interact with credentials. The modules are pre-configured to provide different functionalities, such as targeted airdrops, task-based giveaways, access to closed communities, or anti-sybil attack token distribution.
The workflow for interacting with the Galaxy Network is straightforward: curators provide credentials to the Galaxy Network without permission, thereby expanding the available audience, and then users of the Galaxy Network (i.e., Web3 protocols and communities) can run credential-based activities using the set of credentials selected by the Galaxy Network module. They can also incorporate Project Galaxy's credential oracle as part of their smart contracts to ensure it always targets the most up-to-date and qualified credential groups.
By separating the credential oracle from NFT badge issuance, users of the Galaxy Network can map credentials to the appropriate individuals without restricting the transfer and speculation of NFT badges. Whenever a protocol requests this data, the oracle will push the latest status of the credentials, with NFTs issued for demonstration purposes as snapshots of the credentials. The more datasets used once credentials are contributed to the network, the more revenue the corresponding curators can earn.
Credential Flywheel
As I mentioned above, this is our second round of investment in the project. They have come a long way since we first checked in.
Before working on Project Galaxy, Harry worked with Charles as co-founders of Lino Network and DLive. I met this team in 2018, and they impressed me as one of the most capable, hardworking, and ambitious teams in Web3. Since the infrastructure was not ready for decentralized social platforms in 2019, Lino/DLive was ultimately acquired by Bittorrent. Two years later, they continued to build their vision, this time through credentialing.
The credential network does not magically come together by simply inserting query middleware into the blockchain. Because the data required to create effective credentials is decentralized, it is challenging to establish a credential network, especially to build a credential network at scale. Fortunately, this community has long been dedicated to solving these issues and has accumulated one of the largest Web3 credential datasets in the world in the process. It now features subgraph queries, on-chain snapshots, governance history, proof of attendance, and a database for interacting with Web2 applications. Throughout the process of running different activities, Project Galaxy has also been able to identify commonly used participation modules and continuously add missing modules to the Galaxy suite.
This creates an organic flywheel: 1) With the richest data and the most user-friendly participation modules, Galaxy is now the preferred resource for projects looking to attract users; 2) As more users are rewarded based on credential data, other users will follow suit (creating ideal activities) and generate more credential data; 3) This growing usage of the Galaxy Network will lead credential curators to contribute more credentials to the network, as the likelihood of their credentials being used (and thus curators being rewarded) increases, creating a cycle that attracts more projects to use Project Galaxy.
Supporting Web3 Identity with the Galaxy Credential Network
There are two approaches to building Web3 identity: top-down and bottom-up. Top-down identity is typically granted by institutions, such as government-issued IDs. Bottom-up identity is created through the aggregation of previous actions, such as a personal brand represented by the sum of their tweets.
Project Galaxy is looking for the next opportunity. They will allow individuals to associate their credentials across different chains with a Galaxy ID.
Project Galaxy's bottom-up approach is powerful in several meaningful ways:
- No single, authoritative standard definition. For example, any decentralized application can freely define its own scoring system using the underlying credential data in the Galaxy network. An ID can have multiple scores (one for AAVE, one for Compound), and different applications can choose the score that best meets their requirements or that they trust the most.
- Powering Web3 LinkedIn. Web3 tasks (e.g., tasks in Web3 applications and games) can find the best matches based on users' past activities and achievements across different chains. The Galaxy Network provides data for anyone to curate the custom resumes needed to recruit for specific tasks: individuals can display their income history for joining guilds in games and showcase all participation badges selected as community ambassadors from one community.
- Changing the paradigm of targeted marketing. Web3 applications can drive adoption by targeting the right audience using existing Web3 credentials, thus incentivizing certain behaviors. Replicating such targeted activities in a Web2 environment is much more challenging without public behavioral data.
The credential network and on-chain digital identity are core components of the Web3 stack. Until recently, they were simply not feasible due to the complexity and elevation required to guide these networks. With this round of funding, Project Galaxy can now serve the entire crypto ecosystem across all chains. As Web3 continues to evolve and more complex applications are built, we expect it to play a central role in application development and cutting-edge marketing campaigns, interacting with and attracting users in new, truly crypto-native ways.
