Top Blockchain VC Investment Trends Q2 2021
Another DeFi summer
During the second quarter of 2021, over 120 projects were by the 70+ blockchain VCs I follow. Yes, my VC watch list has grown from 20 to 70ish because more VCs are actively investing. And by VC, I mean crypto funds, DAOs, exchanges, and established crypto projects.
Trends I picked up by a look at the 120+ projects of Q2:
DeFi keywords: yield, liquidity, fixed-rate interest, real-world assets, gameFi and DEXes and Oracles on newly emerged non-Ethereum blockchains;
NFT keywords: marketplaces, art/gaming collectibles, and a few tapping into social media as NFT, NFT as collateral, NFT oracle, hash power NFT, etc. which gradually bridging NFT with DeFi;
Infrastructure keywords: APIs, privacy layer, bridge, CDN, and payment rails;
Two potential trends have yet been unveiled, but I am really excited about: DAOs and social networks. Investment DAOs are likely to go viral with incentives built in the DAO; one bottleneck now is compliance, which warded most interested users off. Unfortunately, the barrier of entry will not grow less in any short time. That’s the glass ceiling there. Nonetheless, it’s a start.
Another trend I am personally fascinated to see is the emergence of many different decentralized social networks willing to have tried. As for what makes a good social network, the foundations lie in governances, which DAO will naturally be part of that social network; other popular themes like social media NFT and social token will also likely get embedded, last but not least, such social network will incorporate peer to peer media into the platform with incentives built for publishing and distribution. And, of course, privacy will be built in. It will not be easy. Each feature will likely be a standalone dAPP on a major network. Hopefully, we can see many different renditions and “vote” for the best social network that will not harm the human race as a whole.
Branded blockchain gaming & NFTs
Animoca Brands is a giant in branded blockchain gaming and the collectible NFT market. Funded by IDG and Intel Capital back in 2011, Animoca has been a veteran in the traditional gaming industry, listed on the Australian Securities Exchange, and subsequently privatized in 2020.
Animoca has “developed and published a broad portfolio of mobile products including games such as The Sandbox, Crazy Kings, and Crazy Defense Heroes as well as products utilizing popular intellectual properties such as Formula 1®, Marvel, Garfield, Snoopy, Thomas & Friends™, Power Rangers, MotoGP, and Doraemon. Animoca Brands’ portfolio of blockchain investments and partnerships includes Lucid Sight, Dapper Labs (creators of CryptoKitties), WAX, Harmony, and Decentraland”.*
A lieu of top blockchain VCs invested in its recent Venture rounds, including Coinbase Ventures, Huobi Capital, SNZ Holdings, Hashkey.
So, Animoca has great brand resources, a huge war chest, and an army of incubated or invested blockchain games. At this stage, it is hard for any other branded blockchain games to top that.
Token economy as a service for games
Founded in 2019, San Francisco, Forte provides “An end-to-end solution for token-based game economies and NFTs,” A great tool to help traditional games blockchain-fy. Token economy and NFTs will unlock the potential of the existing games to another magnitude.
Instead of aiming for individual games, Forte is a platform of tech, tools, and sometimes market-making aiming for long-tail games. It mainly uses layer2 technology to build portable sidechains for each game with smart contracts, multi-token wallets, white-label marketplace, etc. Andressen Horowitz joined its recent $185M Series A round in May.
Upshot is an innovation where appraisers stake and answer binary questions about the NFT price; a DMI mechanism calculates the best score and incentives the most accurate answers.
NFT price discovery is not rational. The current stage collectible NFTs are speculative heavy, which renders price highly irrational and hence the price discovery protocol not useful. Like DeFi evolved from a meager TVL to today’s 100B TVL, the NFT market will also grow from a speculative collectibles marketplace to a sound ecosystem with insurance, and defi, where price oracles as such will be a key building block.
Price discovery for illiquid assets
Like Upshot, Lithium uses the DMI mechanism and prediction market model to crowdsource wisdom for price discovery of illiquid assets such as pre-IPO evaluations.
NFT as collateral
Pawn.fi is built by Non-fungible Technologies, a decentralized lending/borrowing platform where people can use one or multiple NFTs as collateral to get loans. Users define their own loan terms, including the principal amount, loan duration, rate, and funding currency, and the platform provides escrow and settlement.
This new project, founded in 2021, recently received a $2.75M seed round, led by Hong Kong-based Lemniscap with participation from Arrington XRP Capital and some angel investors.
ZKP based full-stack development platform for private applications
Privacy is a right. There has to be a privacy layer for the web3 stack. “The web will become private-by-default.”* “Moreover, privacy is not binary. It exists along a spectrum and matters more or less to different individuals and/or institutions depending on the context.”* Aleo is a ZKP based platform where developers can write private web Apps with the coding language Leo and complete dev tooling.
Fixed-rate DeFi Yield
Donut is an iOS mobile app offering fixed-rate savings to the public.
It recently rolled out three plans, including 4% APY Save, 5–7% Build, and 6–10% Grow. With the 4% APY fixed-rate savings, Donut converts USD to DAI and lends it to a trusted pool of institutional borrowers; with the Grow plan, Donut generates higher yield through Yearn, while the Build plan is half Save and half Grow.
Fixed-rate savings via DeFi is likely to achieve massive mainstream adoption because it solves a concrete demand.
Enso has not been launched yet. Enso combines social trading with multi-sig syndicate and DAOs. It is likely the platform that gives birth to a true DAO.
AMM model derivatives dex
SynFutures is a derivative dex with the AMM model. Its V1 offers fixed margin futures followed by index futures products with no natural market makers, with shared margin futures and cross margin futures lined up further down in the roadmap.
SynFutures will enable users to list assets, which will unlock more potential than centralized listing, with a wide range of supported token standards from “Ethereum native, crosschain digital assets, to the real-world assets”.
Though still at closed alpha, SynFutures is definitely another project to pay close attention to.