Web3 and Crypto Landscape of 2024 From a Venture Capital Perspective

In November 2024, I joined Skyland Ventures' Web3/Crypto fund as a partner. Here's a summary of the Web3 and crypto landscape in 2024 from a venture capital perspective.

This year, Skyland invested in 15 projects, with 9 of them going public and 2 becoming unicorns. The pace of development in this industry is incredible, and 2024 is no exception. In this article, I share insights on the transformation of the Web3/crypto space and key players from a VC perspective, highlighting emerging areas to watch in 2025.

Decentralized Finance (DeFi)

The key to a new financial system What is Web3/crypto? Understanding its essence is crucial. In my view, it represents the democratization of finance brought about by the internet and blockchain technology. Particularly through decentralized finance (DeFi), this field is reimagining financial systems that previously relied on centralized institutions. Permissionless and stateless financial services, along with the infrastructure supporting them, are at the heart of this revolution. Just as the internet has fundamentally changed various sectors such as information, retail, media, and hardware, blockchain is driving similar transformations in finance. Transactions and remittances that once required banks or financial intermediaries can now be completed instantly and at low cost using cryptocurrencies. The title "Bankless" aptly summarizes this paradigm shift. By the way, speaking of cryptocurrency videos, Unchained is another channel you should definitely check out. Nevertheless, challenges remain. The volatility in the sector has led to excessive leverage and speculation during bull markets, while bear markets often see the liquidation of over-leveraged assets, leaving significant scars. The substantial losses from security vulnerabilities and hacking incidents are also ongoing concerns, leading governments and large corporations to adopt a cautious stance. Despite these obstacles, the value of the cryptocurrency market still exceeds $3.3 trillion, surpassing the size of some national stock markets. While acknowledging these challenges, my goal as a venture capitalist is to support the paradigm shift towards "next-generation internet finance."

Virtual Protocol

A testament to entrepreneurial resilience In 2024, a landmark entrepreneurial story emerged in the industry. Virtuals Protocol was initially launched in 2021 as a token-based gaming and community DAO project. However, during the bear market of 2022, its valuation plummeted, with its FDV dropping to just $6 million. This situation would have forced many projects to retreat, but the founders of Virtuals chose to persevere and explore new directions. Starting in 2023, against the backdrop of the rise of artificial intelligence technology, they began researching AI and shifted their focus to AI agents. They developed a platform supporting tokenized AI agents, and by 2024, their FDV had soared to $3 billion, making it a leading project in the AI agent space. This success underscores the importance of long-term vision and adaptability in the face of changing market conditions.

The evolution of the Ethereum ecosystem In 2024, the Ethereum ecosystem made significant strides in infrastructure maturity. The long-discussed scalability issues saw substantial progress with the emergence of Layer 2 (L2) solutions. Technologies based on zk-rollup, such as Taiko, Scroll, and zkSync, launched mainnets and listed tokens. Coinbase's Base L2 also gained attention, becoming the second-largest L2 in terms of users and TVL. Notable contributors to this success included the social application Warpcast in the first half of the year and the DEX Aerodrome in the second half. Meanwhile, Uniswap announced its own L2, Unichain, which belongs to the Optimism Super Chain framework.

Additionally, significant advancements were made in the restaking domain, led by EigenLayer. Restaking allows assets like Lido's LST to be staked again, enhancing Ethereum's security on EigenLayer's AVS while achieving shared security. Projects like EtherFi, Renzo, and Puffer have contributed to this thriving ecosystem. Ethereum has evolved into a modular, scalable ecosystem with tremendous network effects.

BTCFi

Unlocking Bitcoin's potential Bitcoin (BTC) accounts for about half of the cryptocurrency market but lacks smart contract functionality. The launch of BTC staking protocols like Babylon is addressing this limitation, allowing staked BTC to secure infrastructure. Furthermore, EVM-compatible BTC L2 solutions such as MerlinChain, B²Network, Bitlayer, and BOB have emerged, leveraging the scalability and network effects of EVM. These initiatives mark the beginning of an era where previously dormant BTC assets are becoming active.

Liquidity fragmentation: challenges and solutions As the Ethereum modular ecosystem develops, competition among Layer 2 (L2) solutions has intensified, making liquidity fragmentation a major challenge. Many L2s have established independent networks, leading to a competition for liquidity. To address this issue, concepts like intent and chain abstraction have been widely adopted. Currently, using high-speed L2 bridges such as Orb