Web3 Non-Financial Applications Spark Heated Debate Among Venture Capitalists
According to a16z crypto's managing partner Chris Dixon, the future success of non-financial crypto applications depends on achieving regulatory clarity.
Leading venture capitalists in the cryptocurrency space are engaging in a heated online dispute regarding whether blockchain and Web3 non-financial applications have stumbled due to insufficient market demand and poor product-market fit, or whether these non-financial use cases are still positioned for future success.
The controversy ignited on Friday after Chris Dixon, who serves as a managing partner at a16z crypto venture capital firm, released an article contending that prolonged periods of "scams, extractive behavior and regulatory attacks" have been the primary obstacles preventing non-financial crypto applications from gaining widespread adoption.
Among these applications are decentralized platforms for social networking, systems for managing digital identities, decentralized streaming services for media content, platforms dedicated to digital rights management, video games built on Web3 technology and various other innovations.
"Non-financial use cases for crypto have failed because no one wants them," Haseeb Quereshi, a managing partner at crypto venture firm Dragonfly, said in a response on Sunday. He added:
"Let's just admit it. They were bad products. They failed the market test. It was not Gensler or Sam Bankman-Fried (SBF) or Terra that caused these things to fail; it was that no one wanted any of it. Pretending otherwise is coping."
Dixon said that as a16z crypto's funds are managed with at least a 10-year time horizon, "building new industries takes time."
"You don't have the luxury of 'waiting to be right' in VC," Nic Carter, the founding partner of venture firm Castle Island Ventures, said in a reply to Quereshi. "You need to be right about a market during the 2-3 year fund deployment period," he said.
This discussion emerges against the backdrop of a significant increase in venture capital funding directed toward cryptocurrency projects throughout 2025, with the majority of capital flowing into tokenized real-world assets (RWAs), which represent physical or conventional financial assets in digital token form on blockchain networks.
Different approaches to portfolio building
The investment portfolio at Dragonfly has been constructed with a focus on financial applications and the underlying blockchain infrastructure that facilitates the movement of value and risk throughout the onchain financial ecosystem.
Among the firm's notable investments are the Agora stablecoin and payments platform, Rain which provides payments infrastructure services, Ethena the synthetic dollar issuer, and the Monad layer-1 blockchain network.
Conversely, a16z's crypto investment portfolio encompasses numerous financial applications such as Coinbase and the decentralized cryptocurrency exchange Uniswap, while simultaneously featuring a significantly more diverse array of Web3 sectors including community development, gaming entertainment and media streaming services.
Within these projects are the Friends With Benefits community building club, World which provides digital identity solutions, and Yield Guild Games, a platform dedicated to Web3 gaming experiences.