USV: Why we lead the investment in Daylight, an on-chain transaction information flow

Press: On September 25, 2024, Union Square Ventures announced that it led the $6 million seed round of financing for Daylight, a personalized on-chain behavioral information flow platform. 1kx co-led the investment, and Framework Ventures, Chapter One, and the co-founders of Zerion, Blockaid and Yup participated in the investment. Nikhil Raman and Nick Grossman from USV's investment enthusiasm published an article to explain why they led the investment in Daylight; 0xjs@Golden Finance compiled.

The following is a USV article:

Over the past 15 years, as cryptocurrency has developed and matured, contrary to popular opinion, many of its promises have been largely realized. Every day, millions of users around the world bring their wallets to various applications, where they perform on-chain operations and have sovereignty over their assets and data.

Many of these operations are the result of users interacting directly with applications, protocols, or assets. But the open, composable, and permissionless nature of cryptocurrency means that all of these operations can be easily packaged and presented as embedded experiences while retaining their full functionality.

These conditions create an opportunity for products like Daylight. At its core, Daylight is a personalized transaction recommendation feed that can be presented to users in a variety of applications and wallets through API integrations. These recommendations come in the form of mints, claims, tasks, and more — new transaction types are constantly emerging as cryptocurrency applications become more diverse. Given a wallet address, Daylight can ingest a user’s on-chain activity and use it to help users find useful and personalized things to do on-chain.

Currently Daylight provides recommendations for many of the most popular wallets’ “Home” and “Discover” pages, reaching over 6 million active addresses per month. However, wallets are just one type of application that is aware of a user’s address, and virtually any “address-aware” internet application (meaning it has a user with a known blockchain wallet address) can use this feed.

Daylight's discovery engine helps applications provide better experiences for users, while also providing a revenue opportunity, as on-chain transactions are often very valuable operations, and Daylight can help application partners enter this process. In addition, due to the open and composable nature of cryptocurrencies, value streams can be stacked and embedded without permission, opening up an infinite canvas for connecting value across applications and experiences.

For example, every time a mint is made on Zora, the protocol pays fees to creators and referring sites. These rules are transparent and embedded in the protocol, and rewards are automatically paid every time a mint is made. To the extent that channels like Daylight drive volume to protocols like Zora, they receive a share of these rewards, which can be further shared with their distribution partners, all without having to establish a business relationship up front. Referral flows like these are common in Web2, but they require trust and contractual agreements, and are slow to pay out. On the other hand, the open nature of crypto allows anyone to enter this process, creating a more inclusive and efficient value chain.

As crypto grows, more people will look at address-aware applications and spend more time in them. This will provide opportunities both to recommend more actions to users, but also to learn more about them in greater detail. The result may resemble the architecture of the Web2 advertising/referral ecosystem, but given the open, composable, and address-aware nature of Web3, it may also be very different. We're excited to find out.

The dynamic and open nature of the growth and discovery problem in Web3 is part of what impressed us so much about the Daylight team. Co-founders Kyle and Morley have experience in both Web2 and Web3 organizations, have a deep understanding of wallets, and approach the space with great pragmatism. We are very excited to be working with them and to lead Daylight’s $6 million seed round with our friends at 1kx.