Are we winning, son?

It’s 2025, Bitcoin finally crossed the coveted $100k mark, ETFs have launched, governments are beginning to shift their stance on crypto, on-chain active addresses have reached an all-time high, and your CT timeline (at least before the shitshow of events that took place post-$Trump launch) has been euphoric. What started as a radical idea for permissionless peer-to-peer transactions has blossomed into a multi-trillion-dollar industry in less than two decades. Not bad for a technology propagated by a bunch of weirdos and degenerates like myself. For those of you who’ve been around for more than one cycle, congratulations. The progress made is nothing short of surreal. Yet, as remarkable as this journey has been, it’s not the endgame.

Part of the reason I entered this space very early in my career instead of abiding by my Asian parents' wish of having a doctor son is that I envisioned a future wherein crypto would transcend its niche origins and become deeply ingrained in the fabric of society, not just in a select few individuals. However, I've yet to see this gradual shift from the esoterica to the exoterica, spearheaded by the emergence of disruptive applications that harness the unique benefits of blockchains. While I understand these seismic shifts in how society functions takes time, we are nearing the 20-year mark since Nakamoto released his renowned whitepaper and yet most of the people’s experience with our industry has not extended beyond speculative trading of tokens on centralized exchanges (CEXs).

Before you dismiss me as overly cynical, let me explain. Have certain blockchain-enabled use cases achieved clear product-market fit? Absolutely. DeFi? Yup. Memecoins? Sure. Stablecoins? Most definitely. But these things have been around for a while now. While one could argue that even if these were the only outcomes of all the effort and capital poured into this industry, the total addressable market (TAM) would likely be substantial enough to declare success, I remain unconvinced that discovering new, groundbreaking apps to propel us further into the mainstream is nothing more than a pipe dream.

The app vs infra debate

This has long been a central topic of debate in crypto discussions. The prevailing argument is that capital resource allocation, both from retail investors and institutional players, predominantly flows toward infrastructure projects above all things. This is undeniably true, as evidenced by the data. Don’t worry, this isn’t going to be another "stop building infrastructure, we need more apps" rant. While I understand the sentiment, I find it to be an oversimplified argument. It would be hypocritical of me to endorse such a narrative. In order to truly grasp why the industry is in its current state, we must examine the facts.

Infrastructure projects, up to this point, have served as the backbone of our industry, making the development of novel applications even possible in the first place. They have also consistently delivered the highest returns on investment (ROI) for both investors and builders, which is why it shouldn't come at a surprise that capital continues to flow into this vertical and the most talented teams naturally gravitate toward building the next blockchain rather than apps built on top of existing ones. That said, the claim that venture capitalists don’t invest in applications is simply inaccurate. In 2022, billions of dollars were poured into gaming applications, fueled by the meteoric rise of Axie Infinity. Unfortunately, since then, very few applications have achieved the scale many had hoped for, with only a handful of category-defining projects standing out. The reality is that most tokens trade on a relative basis, and until we see a significant shift in public market demand from infrastructure to applications, private market capital allocation is unlikely to change dramatically. Thus, the cycle persists.

So, where does that leave us? Venture capitalists are hesitant to invest heavily in applications because infrastructure projects have historically outperformed. At the same time, application builders aren’t receiving the support they need to scale their startups to a level of value comparable to the blockchains they’re built on, which would, in turn, incentivize greater investment from VCs. This creates a classic cold-start problem. Some argue that we are still in the phase of infrastructure being built to pave the way for an application renaissance. I tend to agree more with the folks at Union Square Ventures (USV) who highlighted that distinct infra-app phases don’t exist, rather we actually experience a responsive cycle of applications and infrastructure being developed. Unfortunately, in crypto, what should be a cycle of new infra → new apps → new infra → new apps, has felt more like new infra → new infra → new infra → few apps → new infra. The issue is not that there is too much infrastructure, the issue is that there’s not enough apps being introduced as new infrastructure comes to market. There is a clear imbalance.

"Apps and infrastructure evolve in responsive cycles, not distinct, separate phases."

- Dani Grant and Nick Grossman

Infrastructure is indeed important. Especially as early as we are, we should expect a surplus in infrastructure. But they are but means to an end. I reject the notion that the infrastructure that has been built up to this point still remains inadequate to create novel applications. If there was ever a better time to build apps in crypto it’s now, but breaking our current predicament would require a concerted effort from all stakeholders involved.

Over the past few months, I’ve spent some time thinking about the different kinds of applications that have been and could be built on top of blockchain rails and which of these interests me the most as an investor in this space. I will share some thoughts on a few sub-sectors, categorizing them under one of three buckets.

Crypto apps: pitfalls, progress, and possibilities

I. Pitfalls: Applications that have not worked / I'm less interested in

1. Social Media: Web3 social is a recurring narrative that gains traction whenever a new application goes to market and offers some sort of incentive program to try out the app, only to see interest wane quickly as retention challenges arise. While the concept of decentralized, censorship-resistant social media is compelling from a moral perspective (i.e. having users own their data), creating a groundbreaking social media platform is an enormous undertaking in and of itself. The reality is that competing for screen time against established giants like Facebook, Instagram, and TikTok is an uphill battle unless said new app offers a truly unique and compelling value proposition. The average user typically rotates between 4-5 social media apps daily, making it exceptionally difficult to break into that routine. When was the last time you added a completely new app to your daily usage? For those considering building a social application, the critical question to ask is this: beyond the crypto infrastructure and concepts like data ownership (which frankly I don’t think majority of people care about), what unique in-app experience can ONLY your platform deliver? If the goal is simply to create a Web3 version of TikTok or YouTube, it’s unlikely to provide a compelling enough reason for users to migrate from the platforms they already know and love.

2. Questing: Questing applications gained significant traction during the airdrop meta, serving as a mechanism to incentivize users to engage with and test new protocols by distributing tokens provided by projects. These platforms were particularly appealing to projects seeking to meet user number requirements for listings on CEXs. By rewarding users for completing specific on-chain tasks, questing platforms created a symbiotic relationship between projects and users, at least that was the idea. However, despite their initial popularity, many questing platforms have struggled to maintain long-term viability. Users often join questing platforms solely for financial gain, leading to a lack of genuine engagement or community building. As a result, inorganic traction proliferates, resulting in these users just dumping their earned tokens at token generation events (TGE). Consequently, many players in this space have pivoted their business models to adapt to these challenges. Some have repositioned themselves as decentralized identity protocols, leveraging user activity data to build reputation systems. Others have transitioned into ad networks, monetizing user engagement through targeted advertising. A few have even rebranded as Layer 1 blockchains (surprise surprise). If your application or protocol solely relies on these platforms to bootstrap users, chances are they will not make it in the long run. When it comes to going to market, prioritize quality over quantity. Acquiring 1000 high lifetime value (LTV) loyal users is almost always better than 100,000 low LTV ones.

3. NFTs: I would actually argue that Non-Fungible Tokens (NFTs) represent one of the most architecturally significant innovations within crypto, enabling unparalleled ownership granularity and programmability for digital assets. However, their meteoric rise in mainstream adoption circa 2021 led to the proliferation of new ideas for potential implementation. This spanned sectors such as e-commerce, digital art, gaming, ticketing and more, premised on the assumption that NFTs inherently confer disruptive value and therefore new businesses can and should be built on the back of this technology. This enthusiasm, while philosophically intriguing, has led to teams conflating technical feasibility with commercial viability, which is not always the case. Simply put, the promise of NFTs lies in two things: authentication (certifying provenance and ownership of digital assets) and attribution (assigning value to digital scarcity or exclusive access). While these can open up an array of practical applications in the real world, empirical evidence has shown that most NFT-based businesses have failed. Aside from being used as means for creating exclusive online communities (e.g. EtherRocks, CryptoPunks, Pudgy Penguins, etc.) or as a small feature in a larger product (e.g. NFT items within games), I'm skeptical in backing start-ups that fundamentally rely on NFTs as the main product. I believe that NFTs' utility is maximized as embedded functionalities within mature ecosystems: enhancing user experiences, enabling royalties, airdropping rewards to specific users and such. I see much more opportunity in these instances wherein NFTs operate in service of the broader strategic goals of an existing business, rather than being the business itself.

II. Progress: Applications that have worked very well and I continue to look for

1. Tokenization: Some of the most prominent and widely utilized applications in crypto today revolve around token creation. These platforms facilitate the launch of new tokens, which serve as the building blocks for a wide array of blockchain-based projects and ecosystems. Whether it's initiating a token to jumpstart a blockchain's economic flywheel, minting stablecoins on Tether, generating new memecoins on Pump.fun, or creating AI agent tokens on emerging platforms such as Virtuals, the demand for asset creation remains robust. Tokens will remain the lifeblood of nearly all crypto projects as they drive user engagement, economic activity, and network effects. The sheer volume of token creation is staggering. Currently, there are nearly 12 million tokens listed on CoinMarketCap, with tens of thousands of new tokens being launched every single day. This explosive growth underscores the critical role that asset creation platforms play in the broader crypto ecosystem. Moreover, these platforms have proven to be highly lucrative businesses. For instance, Pump.fun and Virtuals have generated approximately $600 million and $60 million in lifetime revenues respectively, highlighting their financial viability and the significant demand for their services. While it is true that the vast majority of tokens launched on these platforms may never achieve substantial value or utility or that there is not enough liquidity to support even more launches at the moment, if you subscribe to the view that crypto-users will grow then you can expect that activity on these platforms will continue to persist and even grow over time. As these platforms continue to evolve, they are likely to become more user-friendly, lowering the barrier to entry for non-technical users and further democratizing the process of token creation. I continue to be excited about teams building the tools needed for different or tokenized assets to be introduced.

Ryan Watkins

@RyanWatkins_

Pumpdotfun is the fastest growing application by revenue in the history of the cryptoeconomy — $100M in revenue in just 217 days.

Love it or hate it Pump is a massive signal to builders to build on Solana and a trojan horse for consumer adoption of blockchains.

627

3:33 PM • Sep 2, 2024

2. Trading: Perhaps an even larger sector than the creation of digital assets themselves is the market for trading these assets. At its core, what currently drives much of crypto adoption is speculation and the allure of accelerated wealth creation. The prospect of discovering the next token that could deliver an exponential return continues to attract retail and institutional investors alike, drawing them into these highly volatile yet potentially lucrative markets. This dynamic has cemented trading as one of the most critical and enduring use cases within crypto. While CEXs like Binance continue to dominate market share, the variety of trading platforms has expanded significantly in recent years. Decentralized exchanges (DEXs) such as HyperLiquid are pushing the boundaries of permissionless trading, rivaling the volumes of these larger centralized players. Applications such as Blum are leveraging the widespread adoption of messaging platforms like Telegram to enable on-chain trading directly within apps where non-crypto users congregate. Platforms like Moonshot are simplifying the memecoin trading experience, making it more accessible to the masses by reducing complexity and friction. More interestingly, the scope of tradable assets is expanding beyond traditional cryptocurrencies and NFTs. Teams are now enabling the trading of assets that were previously illiquid or untradeable. For instance, Noise is a platform that aims to allow users to trade trends and mindshare. Time.fun allows people to tokenize and trade someone’s time. Uranium Digital wants to facilitate the trading of a commodity like Uranium. This trend underscores the transformative potential to tokenize and democratize access to a wide range of assets. I find myself more intrigued by specialized platforms that cater to these specific niches. These could include platforms focused on trading newly tokenized assets, those targeting a particular demographic of traders, or those innovating in areas like token discovery and alpha generation.

WarDaddyCapital

@wardaddycapital

Hyperliquid perps vs Binance perps

HL just hit its ATH in market share compared to Binance.

Last 7d:

HL took almost 15% of the perps volume between the two platforms, up 6x in the last 4 months.

368

7:47 PM • Feb 10, 2025

3. Prediction Markets: As observed in asset trading platforms, the most widely adopted applications in the cryptocurrency space share a common characteristic: they are driven by speculation. Prediction markets are no exception. Initially pioneered by Augur in 2015, these platforms have gradually gained mainstream traction, significantly propelled by the success of Polymarket. The inherent transparency, automation, and permissionless nature of blockchain technology have created an ideal environment for such markets to flourish. The popularity of these platforms peaked during the US presidential election season, with monthly trading volumes surpassing $2.5 billion as the election date approached. Although volumes have declined significantly since November, daily active user metrics have remained relatively stable, indicating strong user retention and a degree of product-market fit. While these markets are currently dominated by large-scale events within specific verticals, such as politics or crypto-native sectors, I anticipate a growing demand for markets centered around long-tail events over time. This expansion could manifest through general-purpose platforms like Polymarket or via specialized integrations within other applications. Notable examples include Sweep, an application built on MegaETH that enables users to make real-time predictions during Twitch streams, and Kizzy on Monad, which allows fans to predict social media statistics of their favorite content creators. Given the vast array of events that can be predicted, I find the TAM for this sector to be highly compelling. While Polymarket currently holds a dominant position, I expect increased competition in the space, with significant opportunities for vertical-specific prediction markets to emerge and thrive.

David

@EffortCapital

Remember @Polymarket?

The general consensus was that post-Election volume would fall off a cliff and it would fade into irrelevancy.

The reality?

Yes, total volume fell by 50%+ after the election, but sports betting volume as grown 25x in Q4 and is now the largest market on…

385

3:25 PM • Dec 31, 2024

III. Possibilities: Other applications that interest / excite me the most

1. DePIN: Short for Decentralized Physical Infrastructure Networks, DePIN represents a compelling paradigm shift in the conceptualization and management of physical infrastructure. It challenges conventional top-down, centralized, and often extractive models by leveraging blockchain technology and tokenized incentives to bootstrap these networks through community-driven participation. This approach democratizes infrastructure development, enabling individuals to contribute to and benefit from shared systems in ways previously dominated by institutional gatekeepers. In my opinion, DePIN stands out as one of the most pragmatically impactful verticals within the blockchain ecosystem, with tangible applications across diverse industries. In recent years, the DePIN landscape has expanded significantly, with projects like Filecoin (decentralized data storage) and Helium (decentralized wireless network) demonstrating the viability of this model. However, its applicability extends far beyond these examples and can be applied in more verticals than one might think. For instance, Puffpaw illustrates DePIN’s potential in everyday consumer markets by deploying a network of e-cigarette devices to collect and analyze preference and consumption data, while projects like Wingbits operate in very niche industries, leveraging decentralized infrastructure for real-time flight tracking. These cases underscore DePIN’s ability to address both mainstream and specialized industry needs. However, achieving mass adoption for DePIN applications remains a challenge. On the supply side, network efficacy hinges on scalable participation. While early adopters may benefit from generous token rewards, incentive structures often face diminishing returns as networks grow, creating a ceiling for sustained expansion. On the demand side, DePIN solutions must compete with entrenched Web2 incumbents that already dominate markets with established trust, reliability, and user experience.

Amira V

@amiravalliani

In 2024, @solana DePIN projects distributed $400m to project contributors, ie people who installed dashcams, deployed hotspots, & offered compute to networks coordinated over blockchain rails.

Showed this to @ngundotra today and he was floored.

250

2:26 AM • Apr 30, 2025

2. Gaming: Web3 gaming has become one of the most contentious sectors within the crypto applications. Once heralded as the poster child for mainstream adoption, gaming has seen its prominence diminish among both retail and institutional investors in the space. This shift stems largely from the absence of breakout successes following Axie Infinity, a project that briefly captured global attention but has since underscored the sector’s struggle to create sustainable token economies. Having engaged extensively in this space being in a fund that is among the most active investors in this vertical, I can attest to the growing skepticism surrounding the viability of the intersection of blockchains and games. There are many challenges facing Web3 gaming currently. First, development cycles for blockchain-based games are inherently prolonged, clashing with the rapid iteration and short attention spans characteristic of crypto markets. Second, the capital-intensive, hit-driven nature of game development complicates the identification of viable winners, particularly in a nascent industry where metrics for success remain undefined. Third, and most critically, the majority of playable Web3 games out there fail to meet the quality benchmarks set by their Web2 counterparts. While our Web3 ideologies argue that blockchains can revolutionize gaming economies, the reality is that most gamers remain indifferent to these innovations. However, I maintain a cautious optimism that Web3 gaming will experience a resurgence, albeit probably not in the ways that we have previously thought. I can see this playing out in one of two ways:

• Premium hybrid models: High-quality games indistinguishable from top-tier Web2 titles, distributed through conventional channels (e.g., Steam, consoles), with blockchain integration as an optional layer and probably abstracted away for the most part. Examples include MapleStory Universe, Off the Grid, and The Bornless which prioritize gameplay while offering crypto-native features as supplementary value propositions. 

• Crypto-native paradigms: Novel gameplay mechanics explicitly designed for crypto-savvy audiences, leveraging decentralized infrastructure for unique experiences. Projects like Parallel Colony, Cambria, and AWE exemplify this approach, embedding blockchain at the core of gameplay loops.

Sam Steffanina

@SamSteffanina

web3 gaming is inevitable

141

1:12 PM • May 1, 2025

3. Fan Engagement: I'm also intrigued by applications that enhance the relationship between creators and their fans. Few bonds are as strong that between these two, and from a business perspective, this dynamic often translates into heightened user engagement, increased spending, and greater profitability for these platforms. While certain Web2 applications currently facilitate these relationships, there is significant room for improvement, particularly in areas such as concretizing fan feedback and rewarding loyalty and engagement through proper attribution, both of which can be effectively addressed through blockchains. A standout example of this is Modhaus, a company that has redefined how Korean entertainment agencies form and manage K-pop artist groups through its platform, Cosmo. As the creators behind the hit group TripleS, Modhaus leverages blockchain technology to elevate the fan experience, enabling fans to influence TripleS’s activities through token-based voting. This system fosters a deeper sense of inclusion and participation, as fans can vote on the group’s name, activities, concepts, outfits, and even song selections weighted based on the number of tokens they hold. These tokens are earned by purchasing digital collectibles, creating a seamless integration of engagement and monetization. Whereas in most protocols governance can often be financially motivated and gamed by large holders (i.e. voting on proposals that will drive up token price), voting on Cosmo feels more pure with no ulterior motive besides genuine interest of the fans. Furthermore, Modhaus ensures transparency and fairness through the use of smart contracts that not only manage fan votes, but also streamline revenue settlements between agencies and artists. This approach creates a more equitable and less extractive environment for artists, addressing long-standing issues in the entertainment industry. Whether it’s platforms like Cosmo that empower these idols or emerging apps for AI-agent creators such as OH, I look forward to continued developments in this vertical.

4. AI <> Crypto: Over the past year or so, the surge of interest and rapid advancements in AI have catalyzed a new narrative at the intersection of artificial intelligence and blockchains. This convergence gained significant momentum in October 2024 with the emergence of AI-focused tokens such as $GOAT and $AI16Z, among others. These launches ignited a wave of enthusiasm around crypto-enabled AI applications, exemplified by platforms like Virtuals, which allow for the creation and tokenization of autonomous AI agents. While a short-lived mania for now (most AI tokens have retraced substantially in the last few months, mostly due to the abundance of vaporware but also partially due to broader macroeconomic headwinds), the underlying premise has proven to be fertile ground for innovation. While conversations started around tokenized commerce, it has evolved into a broader exploration of how blockchains might decentralize various layers of the AI stack, from compute and training to inference. Increasingly, teams are investigating ways to leverage blockchain infrastructure to support AI-native applications. Still, at this stage, the narrative feels more speculative than substantive. Drawing lessons from the Web3 gaming bubble of 2022, I’ve become more cautious when approaching emerging narratives like this one. As investor fomo kicks in and AI-related crypto venture rounds rapidly fill, there's a risk of overexposure before the underlying tech or user behavior catches up. That said, I’m firmly of the view that the AI revolution is only in its infancy. It’s becoming increasingly obvious to me that AI will be the defining technological force of the coming decades. Whether blockchains will play a significant role in this future remains uncertain, but I do see areas of genuine convergence. On the application layer, the most compelling intersections seem to lie in payments and incentive structures such as using crypto to facilitate frictionless settlement rails for agent-to-agent or agent-to-human transactions (shoutout to Payman), or applying crypto-economic mechanisms to incentivize participation in model training and fine-tuning.

5. 0-to-1s: Above all, I am most excited about applications that represent true innovation. These are projects that introduce pioneering concepts built from the ground up rather than incremental iterations. I hold a conviction, perhaps too optimistically, that the next transformative application vertical remains nascent or yet to be conceived. Crypto has shown its unique value lies in its capacity to enable paradigm-shifting business models, often unbundling legacy inefficiencies in the stack to unlock profitability that far surpasses traditional Web2 business models. The most compelling applications of tomorrow cannot not merely provide new utility but will also need to architect sustainable economic engines, generating tangible cash flow by reimagining value creation and distribution. It is quite clear to me that the market will inevitably recalibrate toward fundamentals, which separate enduring ventures from speculative experiments. Founders must anchor their vision in the discipline of building real businesses. This seems axiomatic, but you’d be surprised how many teams undervalue the rigor of designing for profitability from day one. Identifying these rare opportunities where product innovation intersects with commercial viability is where my focus remains unwaveringly fixed.

Conclusion

Crypto has come a long way, yet its full promise still feels elusive. Despite the incredible infrastructure we've built and the capital we've mobilized, the application layer remains severely underdeveloped, with only a few breakout successes to show for two decades of experimentation. This isn't a knock on the builders or the backers, it's a sober reflection of the truth: real adoption won’t happen without a fundamental shift in how we approach this space.

In many ways, we’ve been so focused on perfecting the plumbing (the consensus models, the throughput benchmarks, the modular stack wars, etc.) that somewhere along the way, we lost sight of why we are building in the first place.

Still, I remain deeply optimistic about what can be built on the blockchain. Not because of blind belief in crypto's inevitability or some sunk-cost fallacy, but because I’ve seen flashes of brilliance. I've seen apps that feel like glimpses of the future. The challenge now is amplifying those sparks. That means backing founders who are building for users, not just for narratives and chasing whatever meta is currently hot on Crypto Twitter.

Crypto has always rewarded early believers. But fast liquidity can be a trap, it breeds complacency and a false sense of accomplishment which clouds objectivity and judgement. The truth is, the hardest and most meaningful work is still ahead. The job's not finished. Let’s build what matters.

Disclaimer:
The views expressed in this article are solely my own and do not constitute financial, investment, or legal advice. Any mention of specific projects or companies is for illustrative purposes only and should not be interpreted as an endorsement or recommendation. Spartan may hold positions in some of the projects referenced. Readers should conduct their own research and consult with a qualified financial advisor before making any investment decisions.