Note: On September 25, 2024, Union Square Ventures announced that it led the $6 million seed round of financing for Daylight, a personalized on-chain behavior 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, investors from USV, published an article to explain why they led the investment in Daylight; 0xjs@Golden Finance compiled.

The following is the USV article:

As cryptocurrency has grown and matured over the past 15 years, contrary to popular belief, many of its promises have largely been fulfilled. Every day, millions of users around the world bring their wallets to various applications where they conduct on-chain operations and have sovereignty over their assets and data.

Many of these actions 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 actions can be easily packaged and presented as embedded experiences while retaining their full functionality.

These conditions create opportunities for products like Daylight. At its core, Daylight is a personalized stream of transaction recommendations 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. With just 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 the chain.

Daylight currently provides recommendations for the "Home" and "Discover" pages of many of the most popular wallets, covering over 6 million active addresses per month. However, wallets are just one type of application that knows 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 information flow.

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 tap into this flow. 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 occurs on Zora, the protocol pays fees to creators and referring sites. These rules are transparent and embedded into the protocol, and rewards are automatically paid out every time a mint occurs. 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. The open nature of cryptocurrency, on the other hand, allows anyone to enter this process, creating a more inclusive and efficient value chain.

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

The dynamic and open nature of growth and problem discovery in Web3 is part of why we are so impressed by 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.