Why web3 companies get hacked so often, according to crypto VC Grace Isford

Grace Isford, the newest investor in Lux Capital, joined us to talk about web3 infrastructure. Isford invests in companies that work behind the scenes to make sure that the exchanges are safe and reliable.

Isford was an investor at Canvas before he joined Lux. 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, she said.

Isford said that he got into yield farming after moving to New York.

Isford says her investing approach in web3 is based on her circle of competence, or the area where she can be competitive compared to others in the space.

I would argue that anyone who says they invest in web three shouldn't invest in all of that.

We asked Isford what she thought were the biggest challenges for web3 infrastructure providers.

Isford said that web3 lacks enterprise-level security solutions. Most of the coin is reliant on two infrastructure providers to manage their data, because they are the only two major service providers in the industry.

Isford said that there seems to be a new security hack reported every week.

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

Managing fraud and downside risk is one of the major challenges.

Isford said that the issue is keeping a lot of people out of the world ofcryptocurrencies.

Isford thinks that companies will be able to build more reliable solutions because of the massive investment into web3 startups in the past year.

I think TRM Labs, Chainalysis, and several other companies in this space have 10x potential in terms of compliance and monitoring because you don't have that yet at scale.

Isford said that better fraud and risk management systems will lead to more institutional money flowing into the space. The market will mature as companies like Fidelity, Goldman, and JP Morgan continue to make strides into the space.

If you can build more reliable smart contracts at scale, you can have a reliable system. Isford said that security is one of the most important pieces from a prioritization standpoint.