Is Web 3.0 a scam?
We take a deep dive into Solana blockchain and their initial token allocation
The inspiration about this article came from a video which was posted a year ago on Youtube from Trader University. While, we don’t necessarily agree with all of the stuff he says, he raises some good points about web 3.0 space, which we are going to talk about today.
Have a look at this chart from Messari. It shows initial token allocations for some of the public blockchains.
While there are a lot of well known blockchains on this chart, our focus will be on Solana blockchain.
What is Solana?
According to their official website, “Solana is the fastest blockchain in the world and the fastest growing ecosystem in crypto, with thousands of projects spanning DeFi, NFTs, Web3 and more.”
We are not really going to argue with that whether that is the case or not. While it might be the fastest, for sure it is the one who had the most outages, roughly 5 outages just in 2022. We are talking about outages which lasted for a few hours to almost a day long outage.
Let’s talk about the token distribution from Solana Blockchain first
As you can see from the chart above, 48% of the token allocations was held for Insiders. Insiders in this case are founders, company and VC purchased tokens. While you can barely see the blue color which represents the public sale, another huge percentage is held for Community Allocations. Keep that in mind, in this category are tokens which might potentially go to the community! Experience so far has told us that in most of the cases that does not happen and those funds.
What does this mean in plain English?
You see, you are sold in so many web 3.0 initiatives where founders and VCs pretend to be the saviors of the space, where web 3.0 is all about community and holders. Is it really?! Well, you already have the answer to that. That is absolutely not the case. While there is no argue, there were people who got involved early and they got huge returns, the ones who actually got rich the most is founders and VCs.
Let’s focus on Venture Capitalists (VCs)
Venture Capital by definition is “a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth.”
They go after projects where they see a potential. They are in a game of making more money. I mean, who doesn’t?!
If you check Solana’s profile on Crunchbase, you’ll see the list of investors as well as the ones who were lead investors. Sure enough, Andreessen Horowitz is part of it. Chris Dixon is a partner at Andreessen Horowitz (also known as a16z). He lead investments in the crypto space. What it was initially a $350 million fund, they had roughly $6 billion of unrealized gains or roughly 18x returns on the initial investments.
That’s bonkers. Absolutely insane returns. Then during 2022, they launched a $4.5 billion crypto fund. We did cover their report in details a while back if you want to check it out.
What is the message we are trying to convey?
A very simple one. Next time you see people like Chris Dixon or any other VCs shilling projects, do a little more research before you degen into any project. Of course they will be promoting web 3.0, of course they will be saying “it will be about community, fully decentralized, owned bo holders..”, because they are incentivized to say such things so you jump into it and pump the prices of their token. Otherwise, how can they make 18x returns within a year..
There is no actual decentralization in case of Solana. It is fully centralized (developers have the power to shut down the blockchain).
Next time you see a token/crypto project, do a little more research into it, read more about the team, read about their token sale, who is backed by, what is the goal, how their token distribution looks like, do you really see a potential in the project..etc, and do not get easily sold from people who are incentivized to make you think that it is really about you when in fact it is about them making billions.
Cheers!
