Apple’s 30% tech tax on developers has not only upset consumer tech giants like Epic Games and Spotify, but is also turn web3 startups against it. Major NFT marketplaces OpenSea and Magic Eden apparently only allow users to browse listings on their iPhone apps without allowing trading to avoid high fees. But this prevents the billion iPhone users from easily accessing a new generation of decentralized applications, while the current web3 challenge is to foster mass adoption.
A fledgling startup hopes to solve the app store problem for the web3. Founded last year, Magic Square is building an app store that allows developers to list community-approved projects. And its initial traction – 250,000 people signed up to test out its upcoming beta – helped it grab the attention of investors.
Magic Square’s valuation jumped to $75 million after recently raising an additional $1 million, up from $30 million for its $3 million seed round led by Binance and Republic that closed in July. The startup is now looking to raise $4.4 million at a $120 million valuation, CEO Andrey Nayman told TechCrunch.
Crypto.com Capital, the VC arm of the namesake crypto exchange, has joined as a strategic investor and will leverage the large pool of projects listed on the exchange to help Magic Square onboard more developers.
The startup wants to make marketing cheaper for crypto startups, who currently spend tens of thousands of dollars on influencer endorsements without knowing for sure it will lead to new users, or they launch an airdrop but end up attracting new users. speculators rather than real users.
As such, Magic Square has designed a marketplace for affiliate marketing – a concept that’s been around since the dawn of the internet – where developers set the price they pay for each acquired user. In turn, marketers claim the tasks and work to help these apps attract users. This is also how the startup generates revenue. Instead of a tax on in-app purchases, it requires a 10% reduction in the developer’s campaign budget.
Buoyed by new revenue, Magic Square plans to grow its team of 40 employees across the globe and focus on product development for its affiliate marketing program.
With the explosion of blockchain apps and crypto scams, having some sort of gatekeeper could provide a layer of protection for consumers. Despite the heavy tax they charge, Apple and Google do their best to at least eradicate illegal or suspicious apps, even if the mission sometimes fails.
“There are about 10,000 dApps right now, but if I’m talking about production-ready apps, it’s like 2,150 apps,” says Nayman, who was previously an investor in a major Israeli hedge fund.
“If you are a crypto-savvy user, you know where to look. You know how to check the whitepaper, the audit reports, the founders’ LinkedIn — the nuances to check to decide if this is a project you want to be part of or not. But if you’re not, you don’t know where to start.
There is an apparent paradox in building a user-friendly decentralized product because accessibility and speed often rely on centralized data centers. But as some Web3 pundits increasingly argue, it’s the degree and type of decentralization that matters.
In the case of Magic Square, the decision-making for publishing apps is kept in the decentralized realm. Its store depends on a group of validators to filter applications, a process that goes through a decentralized autonomous organization, or DAO, with an incentive mechanism to keep participants accountable and active. The App Store is moving from Solana to Binance Chain.
Validators are the ones who ultimately decide what should be on Magic Square, and they do so by reviewing projects against three criteria — content, security, and user experience — much like traditional app store inspection. Each application goes through 250 randomly selected independent validators, including 50 “qualified” who are technically advanced and 200 “standards” who can be anyone from the community.
Validators do this for financial returns. For their app to pass the test, developers must pay validators in Magic Square tokens to audit their apps. The store also encourages app users to leave reviews by rewarding them with points that can be converted into tokens, a structure Neyman likens to the popular – if sometimes cumbersome – play-to-win business model used in GameFi. .
“Instead of playing, they can just use the same app they use in their daily lives,” explains the CEO.