Avery Ching: Aptos Led a Year of 'VC Chains'

To be honest, there are many people who could be nominated alongside Avery Ching for this year's most influential list. The blockchain, Aptos (APT), that he helped develop as chief technology officer of Matonee, is one of a number of next-generation chains we could have nominated. Each has significant financial backing, recently launched public platforms and/or started to gain traction in 2023.

It's hard to say which, if any of them, has the best shot at shaking crypto to its core.

This profile is part of CoinDesk's Most Influential 2023. For the full list, click here.

There's Base, Blast and Celestia, which actually uses Cosmos (ATOM) software. All of them are Ethereum (ETH) scaling solutions; modular chains like Fuel Network and ThorChain (RUNE); and others like Sei (SEI), Shardeum and Sui (SUI).

That last one, in particular, has practically an equal chance as Aptos. Both projects have the same origin: the blockchain subsidiary Meta (formerly Facebook) founded in 2019 to develop its stablecoin Diem (formerly Libra). They also have the same end-goal: scaling a crypto network to hundreds of thousands of transactions.

Neither is quite there yet.

Aptos and Sui, being constructed by Mysten Labs, also use the same custom programming language (Move, developed for the quashed Facebook stablecoin project), are being developed primarily by ex-Meta employees and even raised hundreds of millions of dollars from many of the same venture capitalist investors (a16z, FTX Ventures, Coinbase Ventures, Binance Labs, among others). Meta, reportedly, has given its blessing to both, but hasn't disclosed whether it invested in either.

Both chains also represent legitimate technological advancements in blockchain design, and both founding teams are inking deals with impressive institutional players. Sui, for instance, is carving out a niche in gaming.

Moreover, both face similar criticisms over their potentially worrisome, long-term tokenomics (prescheduled "unlocks" will flood the market with SUI and APT) and were beaten up for the same reasons at launch (Aptos, in late 2022, and Sui, in early 2023, initially processed a fraction's fraction of the promised transactions).

Despite a severe curtailment of the number of VC dollars entering the blockchain industry since the collapse of FTX, this year could be said to be The Year of the VC Chain. And, in many respects, Aptos is the embodiment of this trend.

The story so far:

After leaving Meta in December 2021, Aptos's co-founders Mo Shaikh and Ching (who spent over a decade at the firm) decided to take the technology and go for it. It was all open source, after all. The two, who are six years apart in age, had met while working on Facebook's 300+ person blockchain team. They bonded over a mutual love of basketball and met for the first time in person the year they left Meta. Deciding to start a company was seemingly a matter of stubbornness.

"I've never not launched a product, no matter what thing I've been a part of," Ching told Fortune in 2022. Both describe themselves as competitive and ambitious – in interviews Shaikh and Ching both often name data-heavy platforms like Netflix and Instagram as potential clients, one day – and each bring complementary skill sets. Ching had focused on coding the Diem blockchain while Shaikh led strategic partnerships at the Novi wallet division.

Aptos takes its name from an Ohlone word meaning "the people," which is also the name of a nearby town in Palo Alto, CA, where the team is based. The name is meant to symbolize the ethos of Web3. "If we collaborate with these larger institutions, we can meet the next billion users where they are," Shaikh told Fortune.

Multicoin Capital, the venture fund known for being early to Solana (SOL), could be said to be the duo's first backer, seemingly before Matonee was incorporated. It then raised $200 million in March 2022 (in a round led by FTX Ventures and Jump Crypto), $150 million that July (led by a16z) and an additional $50 million from Binance Labs in exchange for token warrants.

But there are people who would contest this version of events, and who want a slice of the firm's $2 billion valuation.

In early March, Matonee and CEO Shaikh were sued by Shari Glazer (of the multiple sports team-owning Glazer family) and Swoon Capital, over a breach of contract. Glazer claimed she, instead of Ching, is a "50/50" partner with Shaikh in Aptos and should be considered a co-founder, as she initially pledged $10 million to back the venture.

Aptos filed to dismiss the case, arguing Glazer and Shaikh's deal was non-binding. In particular, Glazer said not to raise additional capital, which would dilute her shares, while Shaikh remembered saying her seed funding "won't be enough." Although a judge initially declined to dismiss the lawsuit, Glazer ultimately said she reached an agreement with the company — the terms of the settlement were not disclosed.

"[Aptos] is pleased this case has been dismissed ... [and wishes] Ms. Glazer well in her future endeavors," a spokesperson told The Block in December 2022.

Though resolved, Glazer's concern over Aptos' funding does raise the question: what exactly will a blockchain do with nearly half a billion dollars? It costs money to hire skilled developers, especially those accustomed to Meta salaries. And, in an effort to build a community and ecosystem around the blockchain, Aptos has been hosting hackathons and is investing in a number of projects, including Kana Labs, Mintdropz and Indian social media app Chingari, Crunchbase indicates.

It's not really CoinDesk's place to judge, but these multi-multi-million funding rounds for new blockchains are not a free lunch. While 51.02% of APT tokens are planned to be distributed to the Aptos community, they will be released in monthly token unlocks for the next 10 years, according to Aptos' distribution schedule, which could put sell pressure on the token.

Many notable crypto commentators like Cobie also criticized Aptos for a lack of transparency when the token was first listed on exchanges like FTX, Upbit and Binance. Cobie has said this represents a significant fall from grace from the fair distribution of Bitcoin's proof-of-work system, which creates a competitive (but fair) market for coins, and even from the age of ICOs, which were available for public sale.

Mega-valuations for infrastructure is a growing trend and one that may be setting off alarms in the U.S. Securities and Exchange Commission (SEC). It took several years for the SEC to work out settlements with the largest ICO raisers, EOS and Telegram, which each raised over $1 billion. (Both Mysten and Matonee are U.S.-based.)

A recent court decision in SEC v. Ripple has set precedence for sales to VCs to be treated as "investment contracts" while sales to exchanges for retail trading are kosher.

See also: Brad Garlinghouse Is 2023's Comeback King With XRP's Win Over SEC | Most Influential 2023

Indeed, what little investing VCs have done in recent years amid a heavy cloud of market contagion, public criticism and reduced use across crypto has been almost entirely in base layers and building blocks. Time will tell if protocols like Aptos and Sui are used to build anything useful.

CORRECTION (DEC. 5, 2023): Updates to note Glazer's lawsuit was resolved out of court, and adds additional context.