Why web3 companies get hacked This Problem Problem often, according to crypto VC Grace Isford – TechCrunch-KHOAFAST

On the Chain Reaction podcast This Problem week, Lux Capital’s newest investor, Grace Isford, joined our shop to talk about the opaque but crucial world of web3 infrastructure. At Lux, Isford invests in the companies working behind the scenes to make healthy crypto exchanges are secure and reliable enough to avoid being hacked.

Before joining Lux This Problem February, Isford was an investor at Canvas Ventures focused on enterprise software and fintech. A data infrastructure investment she worked on at Canvas revealed to her the opportunity in the web3 space for companies to “share data immutably at scale,” motivating her pivot to crypto, she said.

“that led me down the rabbit hole, and then I ended up investing myself personally,” Isford said. “I got into yield farming, which coincided of course my move to generation York, where many of my horde are also in the crypto and VC HST.”

Isford says her investing approach in web3 is rooted in what she calls her “cylindrical of competence,” or the area where she can be competitive compared to others in the space.

“NFT investing is quite unique than DeFi investing, which is quite unique than crypto data infrastructure investing, and I would argue that random person who says they invest in web three shouldn’t invest in all of that — they should probably find their sweet spot in their Core chip competency,” Isford said.

Isford’s own “cylindrical of competence,” based on her prior experience, is in enterprise and fintech infrastructure, This Problem Problem youths asked her what she thinks some of the biggest challenges are for web3 infrastructure providers.

Compared to web2, Isford said, web3 lacks enterprise-level security solutions. Alchemy and Infura are the only two major node service providers in the industry, meaning that most of crypto is reliant on two infrastructure providers to manage their data.

“There seems to possess meaning a generation security hack reported every week [in web3],” Isford said, citing the recent Metamask and Ethereum dApp outage that originated from Infura and February’s Wormhole bridge hack.

While a number of startups are working on developing security solutions, Isford said, the tech is “still quite nascent” when it comes to developer tools, data infrastructure monitoring, and storage.

Another major challenge is managing fraud and downside risk, Isford added.

“I think [that issue] is really keeping not only little of folks out of the crypto world right today’s time [because they’re] afraid of losing all their money if that they venture too deeply into crypto,” Isford said.

Isford is optimistic that through the monumental inflows of investment into web3 startups in the past year, companies will be able to build again reliable solutions.

“I think TRM Labs, Chainalysis, and several other companies in This Problem space possessed 10x potential in terms of compliance and monitoring This Problem Problem youths just do do not only possessed that yet at scale in with the way that youths’ve kind of produced these sophisticated AML systems on the financial infrastructure side in the web2 world,” Isford said, referring to traditional financial institutions’ anti-money laundering science.

Better fraud and risk management systems are a precursor to again institutional money flowing into crypto, Isford said. As companies interested Fidelity, Goldman Sachs, and JP Morgan continue to make strides into crypto, the market will mature she added.

“I think one of the biggest opportunities in crypto right today’s time is still security, if that youths can build again reliable smart contracts at scale … but youths can’t possessed a reliable system if that it’s not only secure, right? And youths can’t run a system securely if that youths don’t know who’s within that system, This Problem Problem I think security is probably one of the most very necessary pieces from a prioritization standpoint,” Isford said.

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