Pastel Investor Update
State of Digital Assets & Web3: Pastel is Poised for Rapid Growth
Sustained Development, Relentless Partnership Pursuits, and Focus on Community
We provide an update on Pastel Network. We also evaluate the state of the broader global environment and its impact on technology, digital assets, and Pastel. We provide an outlook into the nascent Web3 industry and forecast where it is headed. Lastly, we share details on what Pastel has achieved so far in ’22 and what’s to come.
State of the Market
Many of you are undoubtedly wondering if and how the digital asset and Web3 markets can recover from the current downturn. And what does it mean for Pastel Network & its native PSL token? It is important to first understand how we got here and keep mindful that digital assets are still tightly interconnected to both traditional risk-asset markets and broader economic conditions.
There is no question that we have swiftly transitioned away from a relatively frothy macro environment characterized by cheap money and low interest rates, which had enabled investors to justify paying unjustifiable multiples in order to gamble on the techno-rich future of tomorrow.
The irrational behavior of the average investor results in a failure to adequately calculate the cyclical nature of markets — particularly in a debt-based, non-free risk asset environment. Subsequent selection bias drives us to overlook inconvenient truths about systematic portfolio risk to the point until wen moon? remains the only relevant question.
Beginning in November of ’08 when QE-1 commenced, accelerating with quasi-imprudent policy inclusions over the last decade (see: Operation Twist), and culminating with COVID-19 era monetary and federal recklessness (e.g., Reverse Repos, crisis-era backstopping of corporate commercial paper, and outright helicopter money) global markets have witnessed unprecedented dovish policy catapulting the aforementioned phenomenons to new extremes.
Alas — all good things must come to an end. And as the fed’s arsenal dried up, repercussions of supply chain disruptions, energy consumption, global tensions, and fiscal stimulus collided in perfect sync resulting not only in a forceful ‘press-pause’ on the money printer but also leading to a 180-degree policy reversal.
This broader market correction started in the first half of 2021 with high-growth tech equities and began to disseminate through the latter half of 2021 across the broader public markets, finally spreading into private equity, corporate credit, growth assets, and of course crypto. To be certain, a combination of factors — from hawkish monetary policy to supply chain disruptions and global uncertainty — has undoubtedly caused a perfect storm of global market volatility.
As risk assets take a beating across the board, nothing is spared. While wen moon transposes to 75 vs 100bps, the market paints with a very broad bush and often the ‘baby is thrown out with the bath water.’ The result? Certain equities, bonds, or digital assets are temporarily mispriced, creating an opportunity. Periods of intense dislocations have historically proven to be fertile hunting grounds for value-oriented and patient investors.
Impact on Digital Assets and Web3
The downturn has been felt across the crypto market as well — hindered by a number of the same economic, monetary, and geopolitical issues. Stablecoins like Tether were strained as credit markets reacted to increasing benchmark rates, while de-pegging of UST caused lasting ripple-effects across the crypto ecosystem.
Cheap money and a self-fulfilling prophecy of stratospheric rises in token prices created a tight feedback loop of reckless leverage. A counteracting wave of margin calls and liquidations drove even the crème de la crème to insolvency (see: Three Arrows Capital), bringing down much of the market as balance sheets were wound down to nothing. Purported net-neutral market-makers moved to net-short positions and began to ‘take’.
DeFi and illiquid assets like NFTs at the right tail-end of the risk curve were arguably impacted the most. From just June to July, NFT sales value dropped by 26% to ~$647m — a monumental decrease from ~$4.8bn in as recently as January. Not surprisingly, fear spread, money withdrawals occurred, and nearly every digital asset including Bitcoin and Ethereum significantly decreased in value.
Should I Be Worried?
TL;DR: Be greedy when others are fearful.
In spite of the current downturn, Web3 and NFT technology are better positioned than ever to reshape society and the way consumers interact with the internet. NFTs are here to stay. Momentum will continue to build as projects continue to innovate and develop future use-cases — including applications in finance, healthcare, copyright, real estate, and many more as shown below.
NFTs and Web3 innovation is real and growing.
Projects are investing time, energy, and resources in innovation and refined utility. There is more building and development in Web3 than ever as projects and investors properly calculate just how massive the market opportunity is ahead of us. The Web3 market is expected to hit ~$42Bn by 2028 at a ~42.5% CAGR. Given the nascency of Web3 and the interconnected technological world, its rapid growth is unlike any new industry we have seen before.
Such growth is substantiated by the steep increase in developer, startup, and social media activity since inception as well as the healthy segmentation across key market sectors, including NFTs, Gaming, Metaverse, and DeFi.
Source: Electric Capital
Web3 continues to build momentum as the internet continues its massive evolution, and blockchain provides the fundamental foundation on which it can grow. As a result, VC activity in Web3 has increased significantly in 2021, and the capital invested will play a pivotal role in the success of Web3 companies throughout the current down-cycle.
Source: Silicon Valley Bank’s State of the Markets H1 2022 Report
In particular, Pastel Network is better positioned than ever to capitalize on current market conditions as it is focused on mass global disruption with a multi-year outlook — spending millions of dollars on continuous technological development and innovation during the current “crypto winter.” While others sit in fear of what’s to come, we remember that price is NOT a KPI. We remain more bullish than ever on our initial thesis. And we are using this time to continue to build revolutionary technology, recruit the best talent, secure large customers, and beat out our competition.
We continue to emerge as the preeminent protocol standard of Web3 with better software, higher on-chain transactions, larger protocol revenue, and bigger partners.
We launched Pastel with the goal of building a marketplace so that creators, collectors, and builders could benefit from the world-class features and protocols that Pastel had to offer. At its core, a decentralized system that allowed for creators and collectors to trade NFTs in an entirely decentralized, peer-to-peer manner. A platform built purely to be the alternative to those running on Ethereum — offering a very intuitive interface, negligible fees, proven authentication of NFTs, and reliable storage.
With this objective in mind and our technical prowess already proven, we raised $5M in seed funding from Innovating Capital to continue refining the network and platform while simultaneously building out our marketing and business development program. We employed a less popular development model than most projects coming onto the market today. Unlike other projects who marketed their vision, raised capital, and then started building, we focused on perfecting the technology first.
After a few months of developing the marketplace, we began to identify that certain gaps in the broader NFT ecosystem were growing larger and larger. We saw major issues not being solved but rather ignored. NFT scams and frauds were innumerable and asset loss due to antiquated and centralized storage solutions was dangerously high.
We already built the protocols to solve these problems, but they were to be accessible only to those using the marketplace on our native blockchain. That did not sit well with our team because this ecosystem was built with collaboration, decentralization, and open-source in mind. The very nature of decentralization is that no one entity holds the keys to the castle. We had the tools to protect users from scams and asset loss with all the necessary infrastructure to work with layer-1 blockchains, layer-2 scaling solutions, and third-party dApps. Additionally, we had a number of layer-1 projects interested in utilizing our protocols on their own networks.
As such, we opened our technology to the world and focused all our efforts on becoming the infrastructure standard for Web3. We decoupled our protocols and features, modifying them to be standalone solutions easily capable of integrating across the ecosystem via Web3 open-APIs. Core features are as follows:
- Sense Near-Duplicate NFT Detection Protocol: Deep-learning based system to assess the relative rareness between NFTs that can be used to detect scams / copyright infringement and provide certification of authenticity.
- Cascade Protocol for Permanent NFT Data Storage: Fully distributed, permanent, and entirely redundant storage protocol. Pay once and store forever. Prevent centralized points of failure, monthly subscription maintenance, IPFS pinning, and 404 errors.
- Pastel Developer Modules: Develop on-chain marketplaces or third-party applications directly on the Pastel blockchain, supported by a series of protocols, Web3 APIs, and RPC functionality to help builders get started.
- Agile Smart Ticket Structure: A lightweight, flexible system of a higher-level series of tickets is leveraged to allow information to be written to and stored on the blockchain as a means of performing the necessary NFT-related information on the network.
So where does Pastel fit into the ecosystem after their path change?
Pastel Ecosystem Map
We continue to follow our core tenets of creating a better world for creators, collectors, and builders. And we are bringing our technology to the ecosystem. Pastel is the preferred partner for mission critical NFT/Web3 infrastructure. As a native layer-1, application-specific blockchain, we have been able to develop a framework that allows our core protocols — Sense and Cascade — to integrate seamlessly with all layer-1 blockchains, layer-2 scaling solutions, and third-party dApps. Additionally, shown in the diagram above, we are well-positioned to integrate and partner across the entire ecosystem. We have increased our footprint — all through tremendous technological innovation.
Cezanne Mainnet Upgrade: We released a massive Pastel Chain upgrade — Cezanne Mainnet. It is perhaps the largest milestone for Pastel to date. Having been under development for over 8 months, Cezanne marks the beginning of a new chapter for the Pastel Network. What does this mean? In short, more on-chain transactions, more network usage, and more protocol revenue. This upgrade includes:
- Improvements to NFT Minting and Collections
- Support for NFT Transfers, Trades, and Auctions
- Interchain account identification via PastelIDs
- Cross-chain network access via Web3 APIs
- Dramatic upgrades to Sense (our near-duplicate NFT detection protocol)
- Enhancements to Cascade (our distributed NFT storage protocol)
- User-friendly utility services via PastelUp
- Improvements to network optimization and security
SmartMint Launch: We spent months developing a tool built for creators by creators. There is currently no simple solution for users to easily create smart-contracts and NFTs that allows for custom metadata, properties, and attributes while also guaranteeing permanent NFT data / metadata storage on a decentralized network.
SmartMint is a no-code NFT minting platform where creators can easily create, manage, and mint NFTs on their own custom smart contracts. The tool also provides creators with additional peace of mind as it leverages Pastel’s infrastructure for near-duplicate NFT detection (Sense) and permanent NFT data storage (Cascade). SmartMint enables creators to mint NFTs on Ethereum, Solana, Pastel, and more.
It enables creators to do what they love without the hassle and complexities of minting and deploying NFTs across various platforms and blockchains. Easily create smart contracts and NFTs in seconds via our no-code tool powered by Pastel’s advanced technologies for guaranteed NFT security, storage, and counterfeit protection.
Since opening up our technology to the ecosystem, we have closed on 8 partnerships this year with integrations currently underway. These integrations consist of a Sense and Cascade implementation at the core protocol level, NFT standard, or dApp level.
With the Cezanne upgrade here, we are now in a position to move our integrations from Testnet to Mainnet which we expect to take place in early to mid-Q4. What this means in short is that each time a new NFT transaction occurs on any of our partners’ networks, at least 2 transactions occur on Pastel. We anticipate this will equate to high on-chain transactions and protocol revenue per partner.
Partnership highlights include:
We have a healthy pipeline of marquee and high-impact projects that we are close to securing in the near future. Our commitment is to bring revolutionary, mission critical technology across the entire ecosystem.
The future is bright for us. Pastel provides mission critical infrastructure to NFTs and Web3. Sense and Cascade are powerful solutions that have far more applications than merely digital art. Pastel Network was built for the future of NFTs and Web3. We are excited for what’s to come. The future of Web3 is now.
Target use cases of focus:
- Emergent DeFi protocols that use non fungible standards — think Uniswap V3 leveraging ERC721 for LP positions — for metadata storage on our native storage layer (Cascade) and duplicate detection (Sense) to detect on-chain over hypothecation.
- Legal documentation tokenized to provide higher levels of security must leverage Sense for authentication.
- Medical records as NFTs will require highly scalable metadata storage solutions on decentralized infrastructure and duplicate detection technology to ensure records are not subject to tampering or copying.
- Traditional companies like Getty Images can utilize Sense to protect against copyright.
Pastel is poised for this burgeoning world and we are excited to have you on board for the journey. All of us at Pastel would like to thank you greatly for all of your support thus far. As always, we are beyond grateful for your tremendous support! We are more driven and inspired than ever before. A big thank you from the entire Pastel Network family!
About Pastel Network
Pastel Network is a fully decentralized, developer-friendly layer-1 blockchain serving as the preeminent protocol standard for non-fungible tokens (“NFTs”) and Web3 technology.
Pastel allows for the development of third-party decentralized-applications (“DApps”) to sit on top of its Network, enabling developers to enjoy the scalable registration features, storage processes, and security of the broader ecosystem. Lightweight protocols such as Sense — which was built to assess the relative rareness of a given NFT against near-duplicate metadata — and Cascade — which conducts permanent, distributed storage of underlying NFT data — can be integrated cross-chain across various layer-1 blockchains, layer-2 protocols, or other third-party apps.
Pastel is managed by world-class developers, cryptographers, and technologists, supported alongside an experienced and extensive network of marketers, influencers, and third-party agencies. Pastel is backed by key stakeholders including Innovating Capital, a prominent venture fund.
For more information on Pastel Network, visit https://pastel.network/.