Web3 – Kae Capital

Dynamic NFT Enablers

Posted on July 14, 2022March 18, 2026 by Kae Team

The last few months have seen a rapid rise in all things metaverse and blockchain gaming across the globe. It may be tempting to brush this aside as a fad, but the adoption numbers tell an interesting story – the number of Daily Unique Wallets interacting with Gaming Smart Contracts has grown from 28k in 2020 to 1.3 Mn in 2021.

According to reports, even monetization trends have been strong ~ Blockchain Gaming Quarterly Revenue for Q3 FY22 alone was $ 2.32 Bn vs $ 320 Mn in the whole year of 2020 – which is an 8x growth. At the heart of it, metaverses are interactive ecosystems which use game-level graphics (can also use AR/VR elements) and game engine interactions to solve for user engagement through the game. These ecosystems use a blockchain ledger to build out X2E economies (X – can be “Play”, “Learn”, “Contribute”, etc.) – where a supply of tokens (which run the economy) is released into the ecosystem as more and more users come in. P2E economies have become the most prominent paradigm in blockchain gaming – usual suspects include games like Axie.

Dynamic NFTs (NFTs whose metadata can be updated) form a core piece of the Web3 metaverse and gaming economies. To understand the complexity of such ecosystems – imagine a Pokemon game (read: an Axie-like game) where you start off with 3 pokemon -> A, B, C. Assuming there are approximately 200 players who will want to start with A, 300 with B and 400 with C – we effectively have 900 NFTs (each NFT will have a unique address and unique metadata values at a particular “state” – the metadata here can be experience points or XP/levels, movesets, graphics, etc.). The updated rules can be coded into the smart contract, i.e. if my Pokemon crosses 100 XP (note: here the parameter XP is predefined in the NFT), it will evolve or if the NFT interacts with an external signal – like a sports news feed – it can trigger the update of the NFT, or if you enter a certain zone in the Metaverse, etc.

As the games scale up, i.e. go from sub 500 DAUs, to 10,000 DAUs, there are different elements of the backend which will need to be productized in order to enable deployment of dynamic NFTs at scale across different NFT use cases like upgrading, minting, renting, leasing, fractionalizing, etc.

We have seen challenges with the synchronization of on-chain and off-chain databases – Games/Metaverse often work with both on-chain and off-chain databases. On-chain databases will be used to store the addresses/ownership data. For example, if there’s a fighting game where one can pick up different weapons/items, if one picks up a knife NFT, the ownership vector will now point to that person. Similarly, for the off-chain data, a character’s graphics will get stored on a centralized/off-chain database. As games/metaverses scale, there is a potential to provide a platform for the synchronization, batching of blockchain update requests and updating of various data points in the ecosystem – which games currently build in-house using ineffective alternatives like cron jobs. Companies like Chainlink have been working on this problem.

Currently, no dashboards exist to see the status of active NFTs, and no good tools exist to edit smart contract updating rules. At any given point in time, game developers do not have visibility of the game rules and conditions in one place – for example, if one has 400 unique pokemon – each corresponds to a unique smart contract which determines the rules of NFT updates. With newer games and mechanisms – the NFT ecosystem becomes more complex, for example, of the 400 NFTs, you have 200 NFTs which need to further interact with external stimuli to trigger a smart contract auto-updating/metadata updating. The vision can be to build a no-code dashboard to drag and drop game functionality/game economy functionality – where one can drag a box which changes the game economy rules (eg. changing the prize for a pokemon battle from 1 point to 2 points, etc.)

We have also come across challenges with serum-based NFT updating mechanisms (however, they don’t allow for the preservation of the previously held NFTs). We believe that the TAM will become large enough in the coming few years as Web3 metaverse and gaming companies might share $0.5-$1 per user (approximately $15-20 ARPU), making this an interesting but nascent space to look at.

The NFT ecosystem is rapidly evolving with many exciting new opportunities and challenges – we feel we have just scratched the surface, and there is a lot more yet to come.

Multi-chain, Cross-chain Interoperability and Composability Explained

Posted on February 28, 2022March 18, 2026 by Kae Team

Interoperability implies the seamless transfer of assets (fungible or non-fungible) and messages, while composability essentially implies shared infrastructure/effective cloning of dApps.

The Web3 ecosystem has taken off over the last two years. What started off as a whitepaper by the pseudonymous Satoshi Nakamoto back in 2008 has evolved from the first L1 – BTC (a prototype of sorts), to the arrival of the now dominant ETH (Ethereum), which drew the imagination of developers from across the globe with its smart contract functionality.

Now with other L1s like Solana and Avalanche, L2s like Arbitrum and Optimism, and even multi-chain ecosystems like Polkadot, the Web3 space has become massive.

The top 15 blockchains store $10 billion in value each, with ETH and BTC together contributing almost $2 trillion.

But these ecosystems are growing in silos –

Ethereum, the largest ecosystem, has the best developer pools. Most programmers are comfortable with ETH UX/UI, languages, and smart contracts but with the current PoW (Proof of Work: requires miners to solve a cryptographic equation by trial and error) mechanism, the chain is suffering from poor scalability due to gas fees.

This is despite having the best security. It is said that ETH 2 with PoS (Proof of Stake: requires miners to stake all or a portion of their coins in order to validate transactions) will be much faster and cheaper.

Solana, which is currently the most prominent Proof of History based (sequence of computations that can provide a way to cryptographically verify the passage of time between two events), non-sharded chain, has high transactions per second (TPS). However, developers are still getting used to Rust, and with the core use cases being built around gaming, it’s becoming another siloed ecosystem

Terra, which aims to become “DeFi Central”, and seems to be doubling down on DeFi use cases with its array of stablecoins and innovative DeFi protocols, is also becoming another fascinating silo.

What encompasses interoperability and composability

Interoperability implies the seamless transfer of assets (fungible or non-fungible) and messages, while composability essentially implies shared infrastructure/effective cloning of dApps, meaning one should be able to deploy any dApp on any chain with minimum friction and time.

Each ecosystem has its core strength, core use cases, core set of developer pools and liquidity pools. Just like economies benefit from trade – blockchains benefit from trading functionality, assets, liquidity pools, etc.

The vision is to enable developers to deploy dApps from any chain, onto any other chain in an almost no code format at scale.

This entails the seamless sharing of ecosystem strengths through smart contract calls or even on tools abstracted one layer above the smart contracts themselves.

For example –

Computation (think logic and calculations, like those required in gaming) on SOL/AVAX smart contracts (depending on the kind of use cases)
Transactions (meaning buying or selling, but not settlement) happening on SOL
Finally, settlement occurring on ETH (eg. when someone pays using VISA or Mastercard – that is not a settlement. Settlement comes weeks after that.)

However, interoperability and composability today are broken. The future is not cross-chain vs multi-chain, but cross-chain AND multi-chain, we will need both –

The mode of connecting ecosystems today is cross-chain bridges. This is where we enter murky waters – i.e. the cross-chain vs multi-chain debate, which is at the heart of it all.

With bridge security mechanisms becoming a core piece of debate (bridge hacks leading to stolen tokens – like the Wormhole hack), a large chunk of the population believes cross-chain is not the future. Ethereum founder Vitalik has explained (here) why it is always possible to override consensus on bridges, making them a losing proposition.

This leads us to multichain ecosystems, with the core idea being shared security. For example, the Polkadot ecosystem is an “internet of blockchains” with shared security, shared virtual machines (think computations, logic) with the concept of creating new chains called parachains.

So not only can the chains communicate with each other seamlessly and transfer assets, the security risk is much lower.

However, even with two “Internet of Blockchain” ecosystems coming up with their individual shared securities, they will still need to communicate with each other! Hence, bridges cannot be taken out of the picture altogether unless there is a completely new mechanism to substitute them.

Overall, we want to make bets on infrastructure plays, which will enable a multichain interoperable, composable future. This can include Tooling/Infra or Ether plays on Polkadot (think governance, no code plays, etc.).

This also brings in Protocol based interoperability standards (think cross-chain smart contract enablers, messaging layers, function call layers, interoperability standards, etc.), also containing DAO tooling which allows for multi-chain functioning, etc.

Rise of New Creator Economy, Powered by Blockchain

Posted on December 14, 2021March 18, 2026 by Sarthak Biswas and Veenu Choudhary

India is one of the youngest countries globally and has the second most internet users after China. Post COVID-19, the average time spent on the internet has increased significantly and a large proportion of this time is being spent on social media. The quantum of content created and consumed has grown manifold over the last five years – signalling the advent of a massive creator economy.

The creator economy is built on the back of creators/ influencers monetizing their online content. Online creators are emerging in multiple categories: artists, fashion bloggers, musicians, writers, live game streamers, stock market traders, educators, and business bloggers. There are more than 50Mn creators globally spread across platforms like YouTube and Instagram. There are ~ 10 Mn Instagram accounts in India with over 10k followers and we estimate that approximately ~5 Mn are active/semi-active creators.

This number is rapidly growing year on year with a large number of young Indians entering the fray incentivized by aspirations to be recognised for their passions/hobbies while also getting an opportunity to generate parallel income or in some cases primary income streams. This is a particularly interesting phenomenon given that the revenue streams are still fairly restricted in the Web 2.0 paradigm.

The creator-consumer relationship is one which involves creators sharing content on YT, Instagram which the users can view (images, GIFs), watch (clips, movies) or hear audio where monetization is often restricted to ad-based revenue, or brand contracts where the payment from brands is unpredictable, the terms are often black boxed. Additionally, there is no guarantee on subsequent contracts. The creator economy, both in India and abroad is highly skewed from an earnings perspective – for example in the US – 80% of the earnings come from 20% of the creators.

Within the Indian market – creators earn primarily from Youtube and brand partnerships. Globally, there are 3-4 more sources of earning like Patreon, Onlyfans, etc. But their participation is largely restricted to Western economies. Our internal market sizing (for India) would skew the Indian creator economy significantly towards the top segment of the creators as well.

The creator economy in India is currently constrained by skew, lower ticket sizes and disproportionate bullet payments and manual/unscalable operations. In order to enable creators to drive engagement and retention, some founders have built vertically focused platforms so that UIs and workflows are tailored to specific categories, for eg. Discord started its platform with gaming.

Despite this, the existing platforms are very centralized. In Web 2.0, central social media platforms like YouTube and Instagram decide how much a creator can make based on the views. These platforms own your content and decide the monetization terms and as a result, a major chunk of money is flowing to the top creators and the platform itself.

With existing revenue streams putting a cap on the TAM, we believe Web 3.0 will solve both the earning capacity of creators while also driving higher engagement with the fans – significantly driving up the market size in the coming few years.

Through blockchain and Web 3.0, the earning power goes back into the hands of the creator. Web 3.0 inherently decentralizes value. It is disintermediating these central platforms, allowing creators to have ownership of their work and allowing them to decide the best value for their art. A critical piece of this decentralization is NFTs or non-fungible tokens.

NFT capabilities allow creators to earn in perpetuity through every transaction of their creation. Tools have emerged to convert different content formats into NFTs. Globally, creators are making thousands/ millions of dollars in NFTs. CryptoPunks is one of the earliest NFTs launched and has more than $2.2Bn in total trading volume (https://dappradar.com/nft). Few weeks ago a CryptoPunks NFT was sold for over $500Mn.

NFT marketplaces have received tremendous traction. OpenSea, which is the largest NFT marketplace, has passed a total trading volume of $10Bn in Oct’21. Rally is another platform where creators and communities build their own social tokens. NBA TopShot, where you can own top NBA moments, has facilitated more than $737Mn of total trading volume (https://dappradar.com/nft)

Axie Infinity is an NFT-based game that has grown exponentially and has made more than $3 Bn in total sales since its launch in Mar’18. Its play-to-earn model has created a new category of games. On Axie Infinity, players acquire unique digital pets (Axies) and battle to win in-game currency, which can be traded on exchanges. Even Indian celebrities like Amitabh Bachchan and Salman Khan are also jumping on the NFT bandwagon making it popular in India.

BitClout has enabled creators to form a platform to enable content consumers to share opinions, with each opinion generating a fraction of the Bitcoins which are provided as income to the creators. Creators now have the option of creating their own storefronts – reward point mechanisms and workflows have been developed to incentivize creators and fans alike.

Companies across the globe are planning to build on Web 3.0. Facebook’s (now Meta) decision to move to Metaverse increases confidence in Web 3.0 and encourages more people/ companies to move to Web 3.0. Web 3.0 is redefining the digital world. The creator economy as a whole has a lot to gain from the arrival of the Web 3.0 paradigm.