Raising Funds as a Blockchain Startup: A KYVE Interview

Ishan Pandey: Hi Fabian Riewe, welcome to our series “Behind the Startup.” Please tell us about yourself and the story behind KYVE?

Fabian Riewe: Hi Ishan, thanks for having me. I am a software developer from Germany, and I used to work as a tech lead in a local startup. I got into the crypto scene by the end of 2019 while participating in a hackathon. In this hackathon, I have developed a solution for enterprise companies to store signatures for digital contracts onto the Ethereum blockchain.

During Summer 2020, I got introduced to the Arweave ecosystem, in which I developed a product called Arverify. In February this year, John Letey and I worked on a bounty for bridging Polkadot data over to Arweave. We then talked to other L1s like Avalanche, Cosmos, The Graph, and others to make sure our product solved an existing pain point. They were all excited about our solution and wanted to be users. This is how KYVE, the startup, was born.

We then started scaling the team in March, raised the first funding round, and integrated our testnet. At KYVE, we hope to become the default tool for data collection and computation for all Web3 projects and therefore help projects solve their scalability issues.

Ishan Pandey: KYVE raised $2.875 Million in the second funding round featuring Hypershphere, Coinbase Ventures and others. What advice, tips and tricks would you give to budding entrepreneurs who want to raise funds for their startups?

During the first months at KYVE, we spent lots of hours collaborating with blockchains, identifying their infrastructure issues and ensuring that the protocol we were building was solving those issues. As soon as we made sure of this, we raised from other founders, not only venture capital firms.

By this, you create a perfect round set-up which is beneficial for the project. Capital is not mainly necessary, and you always get the chance to get it from somewhere.

Ishan Pandey: What are your views on Arweave and how can the application impact and disrupt our society?

Fabian Riewe: Arweave is a fantastic tool and the best permanent storage out there from my perspective. Unregulated public permanent storage comes with a lot of challenges, though. Just imagine someone uploading tons of illegal data. Of course, this also comes with many benefits where permanent storage is a censorship-resistant space for people to have free thoughts.

Ishan Pandey: According to you, what is the future of NFT arts? Further, how can NFT collections protect their art by shifting to Arweave?

Fabian Riewe: NFT Metadata (e.g., the image) is often stored on centralized storage solutions like AWS or other clouds. This does not guarantee that the data always stays online. This introduces the risk that you would buy an NFT but lose the image itself. When storing the metadata on Arweave, you ensure that this does not happen and your NFT is always available.

Ishan Pandey: Please explain to us about KYVE and how the protocol works? (Please give a technical explanation).

Fabian Riewe: The protocol is focused on storage pools. In every pool, there is one uploader and multiple validators. The uploader is connected to a data source. Whenever new data is sent to the uploader, he bundles it and stores it onto Arweave. He then registers the Arweave transaction in our smart contracts. The validator then picks up the new transaction and validates the data. Depending on his outcome, the validator votes with either valid or invalid. After the grace period, the smart contract evaluates the result and then marks the transaction as valid or invalid, depending on the majority votes. Users can then query the bundle, check its result and work with the data.

Ishan Pandey: How can decentralized storage be leveraged currently by blockchain startups? Further, do you think that such protocols will be able to take the pie from AWS, Google Cloud and Azure?

Fabian Riewe: Oh yes, absolutely, decentralized storage is a massive use case in the archive and backup industry. You can even extend the idea of decentralized storage and take it towards hosting files on the web. This creates censorship-resistant websites, domains, etc.

Permanent storage is a cost-efficient solution too, especially with protocols like Arweave, where you pay once, and the data stays online forever.

Example: Storing 10GBs of data costs 1€ a year on some imaginary cloud platforms. When storing 10GBs on Arweave, it might cost 50€ first, but after 50 years, this is cheaper than the cloud solution.

Ishan Pandey: From an enterprise point of view, storing information on a decentralized public network sounds fascinating and scary at the same time. Are public decentralized storage protocols completely safe for enterprise use or are there some cybersecurity threats that still exist?

Fabian Riewe: Storing data permanently and publicly comes for sure with significant risks and responsibility. Enterprises need to put a lot of thought into this question. I would not advise storing sensible data onto permanent storage. Nevertheless, even for the average user, this is an interesting question. They need to be aware that stored data can not be removed and might create harm in a few decades from now.

Ishan Pandey: According to you, what other significant trends are we going to witness in the blockchain industry in the year 2021?

Fabian Riewe: I see a huge trend in infrastructure projects. DeFi is great, but when the costs for using those products are in the upper hundred dollars for gas costs, it will not be able to reach the average market and get greater adoption. The whole blockchain industry is ready to cover the more average market with cheaper and more scalable infrastructure.