Which Web3 projects do Silicon Valley's crypto VC partners favor?
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Which Web3 projects do Silicon Valley's crypto VC partners favor?
Which WEB3 projects are you most optimistic about and looking forward to in the upcoming cycles?
Navigating Web3 tides with focused insightsWhich WEB3 projects are you most bullish on and excited about in the coming cycles?
This question was posed by The Generalist (a deep tech newsletter) to 15 Western crypto VCs or institutional investors, who offered diverse responses reflecting their own perspectives and positions:
The Cosmos-SDK has made building custom application-specific chains much easier; the market for institutional crypto credit loans shows great promise, with Maple Finance growing rapidly; Notifi and Portabl are simplifying on-chain messaging and identity verification; the long-awaited Web3 social moment may finally be arriving, with investors seeing potential in Farcaster…
Below are their full responses—shared strictly for informational purposes and not as investment advice:
Regenerative Finance (ReFi)
Web3 gives us powerful new tools to coordinate economic activity. We can use this new power to address today’s most urgent challenge—climate change.
Toucan Protocol is one of the founding projects in the regenerative finance (ReFi) space, aiming to leverage crypto and DeFi to fund environmental restoration efforts. (PS: USV is an investor in Toucan DAO.)
The first focus area for Toucan and other ReFi projects is bringing carbon credits on-chain. This simple step unlocks new use cases, such as using carbon as collateral in DeFi protocols and tokenizing carbon sequestration as NFTs.
The composability enabled by tokenizing natural assets means climate action can be embedded into other protocols and applications, unlocking more use cases and demand. Looking ahead, new on-chain demand for carbon tokens could help support real-world environmental projects by creating a robust financing ecosystem.
This is a pivotal moment for the ReFi movement. Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) will reduce energy consumption by 99%, potentially broadening crypto and Web3’s appeal to mainstream audiences. At the same time, Web3 infrastructure has matured enough to better accommodate mass adoption.
Toucan and the ReFi movement are well-positioned to seize this opportunity.
— Nick Grossman, Partner at Union Square Ventures (USV)
Farcaster
Since 2013, social and crypto have been trying to converge, but no one has successfully landed it. We believe that’s about to change—why now?
One reason is that crypto wallet penetration has improved significantly in both user count and quality. Millions of people not only own wallets but actively use them for various purposes. Crypto wallets have become a viable method for identity and login—a social product for the first time. Additionally, every wallet carries an “event feed” on-chain that can serve as conversation material within a social network. For example, your participation in an NFT mint can appear directly in your feed.
Another key reason is that crypto-native social networks benefit from path dependency in user growth. Successful social networks start with the right early adopters. Think of these early users as time travelers from the future—they instinctively behave the way the masses will tomorrow.
A social network that attracts and engages the right early community stands a strong chance of success. We believe the crypto community is the most compelling group of early adopters we’ve seen, giving crypto-driven social networks a natural advantage in cultivating this native user base.
Building a crypto social network is “expert-level” hard—it requires a great product, a thoughtful underlying protocol, and mastery of community-building.
We believe Farcaster shows all the right early signals.
— Alok Vasudev, Co-founder of Standard Crypto
Notifi
In Web2, when users create a new account, they register with an email and password—this becomes the default communication channel for the app.
In Web3, authentication happens via wallet addresses, leaving developers unable to communicate directly with users. As a result, many “user notifications” are delivered through Discord or Telegram—channels that are generic and non-targeted.
Founded by Paul Kim and Nimesh Amin, Notifi is building Twilio for Web3, starting with dApp developers across Solana, NEAR, Ethereum, Aptos, and Sui ecosystems.
Notifi offers developers a simple embeddable notification layer that integrates seamlessly into existing DeFi, NFT, gaming, or DAO apps to communicate with users. Here are some key use cases Paul and Nimesh are tackling:
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Notifications about new governance votes
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Notifications about governance vote outcomes
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Bid alerts in marketplaces
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Liquidation alerts
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Deposit and withdrawal transaction alerts
These notifications can be sent via email, text message, Telegram, and more channels.
— Edith Yeung, Partner at Race Capital
Portabl
When it comes to authentication, we live between Web2 and Web3 worlds. The rigorous verification required to access your bank account doesn’t carry over to your Web3 wallet.
We believe that as regulation, consumer behavior, and business trends evolve, this suboptimal state will shift toward self-sovereign identity. For instance, earlier this year, eight U.S. states announced support for digital driver’s licenses, with Apple Wallet serving as an authorized backend proxy.
These shifts point to a compelling emerging future where users own their data, control how it's shared, and move seamlessly between Web2 and Web3.
The 6MV team is excited about Portabl, a recent investment that tackles self-sovereign identity and authentication. The company has built a universal digital identity enabling consumers to selectively disclose verified financial credentials across Web2 and Web3—ensuring privacy and security. For vendors, it reduces onboarding costs to two clicks and automates up to 75% of maintenance, monitoring, and audit expenses.
A consumer-centric financial identity should be persistent, transferable, and portable. Modern open finance cannot succeed until we break the one-to-one relationship between accounts and verifications.
— Mike Dudas and Michelle Dhansinghani, Investors at 6MV
Axelar
As recently as 2020, Bitcoin and Ethereum were the only meaningful blockchain applications. However, in the past two years, blockspace on these chains has filled up, and we've rapidly entered a multi-chain world. With high-TPS Layer 1s like Solana, Flow, and Avalanche gaining traction, we believe this explosion in complexity is just beginning. In the long run, the blockchain ecosystem will evolve into a vibrant network of a few general-purpose chains and hundreds or even thousands of specialized application chains.
The key to unlocking this potential is interoperability—the ability for different blockchain networks to communicate and collaborate. In an interoperable crypto world, developers can build natively multi-chain applications and experiences, while users can seamlessly move assets and data across chains.
Cosmos may be the standard bearer for interoperability. Founded in 2017, the "internet of blockchains" is sometimes framed as a competitor to Ethereum, but conceptually, the two differ greatly.
Ethereum is a single, general-purpose blockchain where applications run on native smart contracts, whereas Cosmos is a framework for launching new blockchains using the Cosmos SDK. Cosmos chains use Tendermint, a proof-of-stake consensus algorithm, and can be connected via the Inter-Blockchain Communication (IBC) protocol. The Cosmos Hub, the first blockchain built on Tendermint, sits at the center of this network, providing services—including asset routing and cross-chain staking—to other chains in the "interchain," the expanding network of blockchains interacting with Cosmos.
Cosmos’ vision is inherently more decentralized and potentially more resilient than a single L1—evidenced by its strong performance even after the collapse of Terra, one of its largest chains.
Moreover, its architecture allows institutions to launch chains tailored to specific use cases or build chains that provide ecosystem-wide services. In the long term, it can integrate with broader L1 ecosystems, including Ethereum. Despite less hype compared to other cross-chain ecosystems, Cosmos has strong grassroots momentum.
We see top technical talent building the next wave of infrastructure in the Cosmos ecosystem, including Polymer, Lava, and Stride—portfolio companies of North Island Ventures (NIV)—which we view as a leading indicator. Additionally, we’re starting to see application-specific chains go live, most notably dYdX announcing its migration from Ethereum to build its own app chain on Cosmos.
Meanwhile, new protocols like Axelar are making significant progress in enabling greater interoperability. Axelar is a Layer 1 whose primary purpose is cross-chain asset transfers, enabling developers to build multi-chain dApps. An early example is AxelarSea, a cross-chain NFT marketplace. Recently, frequent hacks of cross-chain bridges have raised widespread skepticism about whether a truly interconnected world is feasible (even Vitalik Buterin envisions a multi-chain future, but not necessarily a cross-chain one). However, we believe most of these attacks stemmed from highly centralized bridges or rushed deployments.
Axelar is not a centralized point-to-point bridge, but a comprehensive proof-of-stake network built by some of the brightest minds in crypto. (That said, I still recommend extreme caution when using cross-chain bridges over the next few years.)
If something like Axelar proves secure and robust, it could abstract away complexity for developers, make dApps “portable” (reducing reliance on any single chain), solve scalability challenges, and ultimately become the ultimate meta-chain. Perhaps most beneficially, it could end the tribal wars between marketing-heavy blockchains.
In the long run, L1s will become interchangeable commodity providers, selling blockspace in automated markets. Application developers won’t need to choose between chains, and most users won’t know or care which chain their dApp or assets reside on.
Thus, interoperability can not only solve practical problems for developers and users but also foster a more decentralized and less ideologically fragmented blockchain ecosystem. This vision may take years to realize, but its implications remain largely unexplored.
— Travis Scher, Co-founder of North Island Ventures
Institutional Unsecured Lending
Last year, over $1 billion in loans were extended on DeFi lending platforms designed for enterprise clients, primarily to crypto market makers. Now that product-market fit has been proven, growth could accelerate exponentially.
In many ways, this trend is a natural evolution. DeFi lending began with over-collateralized platforms like MakerDAO.
This model works well for individuals but is difficult to scale. Undercollateralized loans are easier to grow but don’t make sense for retail users—at least not until digital identity and credit scoring gain wider adoption.
However, institutions are well-equipped to manage undercollateralized lending. Projects like Maple Finance, Clearpool, and TrueFi have risen quickly by offering enterprises permissioned, KYC-compliant liquidity pools.
These platforms connect liquidity providers seeking high stablecoin yields with creditworthy companies seeking transparent, on-chain loans. Early borrowers include Wintermute, Folkvang, and other crypto market makers supporting on-chain trading activity. The entry of players like Jane Street and Nexus Mutual further validates the expansion of institutional lending pools.
Notably, DeFi lending pools have performed relatively well recently, especially compared to the opaque CeFi lending markets exposed by the collapses of Luna and Three Arrows Capital.
I’m excited to see lending platforms expand beyond crypto capital markets and support non-crypto businesses. One example is Yaydu, a growth financing platform for online sellers that borrows from Centrifuge, a DeFi lender. Goldfinch and Credix are also active here, focusing on emerging markets.
— Etienne Brunet, Investor
Blowfish
Nearly all crypto security efforts focus on core consensus, smart contracts, and wallets.
We’ve hardened our blockchains so they resist 51% or DDoS attacks; we audit and test our smart contracts to prevent exploits and safeguard funds; we use hardware wallets and keep keys offline to protect user accounts. You only need to look at the recent Slope wallet breach to understand why these measures are necessary.
But all these efforts are futile if the interfaces used to access blockchains are opaque and vulnerable. After all, most people access dApps through hosted websites rather than calling smart contracts programmatically themselves.
Today, signing transactions is both dangerous and confusing. When transacting via a website, your wallet prompts you to sign a hash—a string of random characters that’s nearly impossible to verify unless you generated the transaction yourself and confirm the site’s proposal matches your intent. A malicious site can easily propose a transaction different from what you think you're approving. Unless you're highly sophisticated, you likely won’t notice—after all, it looks like a random sequence. This exact attack occurred at BadgerDAO, where a malicious site tricked users into signing transactions that transferred their funds to hackers.
Crypto cannot achieve mass adoption with such obscure interfaces, which is why I’m excited about services like Blowfish and Harpie—they give users the tools they need to protect themselves.
Blowfish is a human-readable transaction simulation service that takes transaction data and outputs a clear, readable version. For example, it can summarize that the transaction you’re about to approve exchanges 1 ETH for 1,000 USDC. You’d see this before signing, preventing accidental approval of malicious transactions.
Harpie takes a different approach—monitoring the mempool for potentially malicious transactions from user accounts and front-running them by moving funds to a new, isolated account.
Overall, we’re excited about the narrative of reducing attacks on users and apps by providing more transparent tools.
— Tom Schmidt, Partner at Dragonfly Capital
Maple Finance
Maple Finance is the largest institutional lending market on Ethereum and Solana. To date, it has facilitated around $1.5 billion in loans to leading crypto trading firms and market makers like Alameda Research, Wintermute, and Amber Group.
The fallout from Three Arrows Capital revealed how opaque, inefficient, and conflict-ridden institutional lending and capital markets are. Lenders often lack transparency into borrower identities, counterparty concentration, and yield generation methods. Celsius was the most shocking case—functionally bankrupt for a long time (unknown to lenders)—effectively gambling with customer funds.
At its core, blockchain and crypto solve coordination and incentive misalignment. Maple provides a transparent, on-chain process for institutional lending. Lenders fund various loan pools managed by Pool Delegates—experienced underwriters who bring expertise, post collateral, and align incentives with a first-loss reserve buffer.
Each loan includes public details: borrower name, loan amount, disbursement date, interest rate, and collateral ratio. Each pool provides public data on historical performance, credit losses, and borrower risk, enabling informed decisions. This transparency fosters accountability and better underwriting.
While CeFi peers like Genesis, BlockFi, and Celsius suffered massive losses in 2022, Maple’s lending pools proved resilient, incurring less than 1% loss across cumulative loans.
In the next decade, crypto rails will modernize existing financial infrastructure. This has already begun with the widespread adoption of stablecoins, gradually replacing traditional banking, wire transfers, and payments. Institutional capital markets and lending represent the next frontier—and one of the largest untapped opportunities. The crypto lending market exceeds $100 billion, while traditional corporate lending is $100 trillion. Maple Finance is well-prepared to lead this transformation.
— James Ho, Co-founder of Modular Capital
Cosmos SDK
There are two extreme views on crypto’s endgame. The first holds that all activity will consolidate onto a single, general-purpose execution environment—the “monolith” or “world computer.” The second argues for many specialized execution environments, each with unique design trade-offs—the “multi-chain” perspective. The core trade-off is between the synchronous composability offered by a single chain and the specialization enabled by multiple chains. I believe more projects will increasingly opt for specialization, and the Cosmos SDK offers the best toolkit for deploying application-specific chains.
To me, specialization offers two main benefits: lower, more predictable resource costs and customizability.
On the former, projects on monolithic chains compete with all other dApps for blockspace, inevitably facing uncertainty in resource costs—for example, a popular NFT mint could render another dApp unusable. Long-term, this is unsustainable for many dApps, especially games.
On the latter, projects launched on monolithic blockchains inherit a series of design decisions—from consensus model and security to runtime and virtual machine. In contrast, applications deploying their own chain (or choosing an existing specialized chain) can customize components of their stack to optimize for their use case. We’ve already seen examples: Osmosis’s MEV resistance, dYdX’s order book, Injective’s L1 primitives/bridging, and many others.
The drawbacks of specialization are deployment cost and lack of synchronous composability. On cost, while specialized chains will never be as easy to deploy as smart contracts on existing chains, I believe the gap has narrowed significantly thanks to the maturation of Cosmos SDK and the launch of interchain security—which allows the Cosmos Hub to share security with other blockchains—and could shrink further.
Then there’s the fundamental trade-off of synchronous composability. Two counterpoints: First, only a few types of applications truly benefit from it—mainly DeFi use cases where re-collateralization of tokens is crucial. For most other dApps, I believe asynchronous composability works well, provided strong cross-chain tools exist to transfer assets and enable seamless user experiences across dApps.
Second, specialization doesn’t mean deploying a chain for a single application, but rather clusters of applications that work well together or serve a specific use case. For example, while Osmosis is often seen as an AMM chain, it’s evolving into a DeFi hub hosting various dApps—money markets, stablecoins, vaults—on its chain.
We believe applications benefiting from composability will naturally cluster on specialized chains, effectively allowing dApps that need it to “opt-in” to composability.
For these reasons, I expect the space to evolve into a mesh network of interconnected specialized chains, organized into clusters around specific use cases. DYdX is the first compelling example, but in the next 12 months, I believe we’ll see a wave of dApps migrate to specialized chains built with the Cosmos SDK.
— Jose Maria Macedo, Partner at Delphi Digital
Space and Time
Space and Time is a blockchain-secure, decentralized, enterprise-grade database and analytics platform. It delivers high-performance, tamper-proof SQL analytics and machine learning over large-scale streaming datasets.
Space and Time’s novel SQL proof protocol uses zero-knowledge proofs (zk-proofs), enabling applications to generate analytical insights in a decentralized, low-cost, and tamper-proof manner. We believe Space and Time will become a core layer in the Web3 stack, comparable to a decentralized Snowflake.
— Tim Khoury, Investor at Digital Currency Group
Web3 Social Networks
Over the past decades, social networks have profoundly impacted society—shaping culture, information, relationships, and work—spawning new forms of communication and entirely new careers. With Web3, we believe they have the opportunity to go further, unlocking novel consumer experiences and aligning the interests of users and developers with those of the platform.
This open social stack—social networks built on permissionless protocols—is nascent. At scale, it offers users and developers numerous benefits tied to freedom and agency: data portability across apps, composable experiences and content, and token-based incentives.
Early Web2 social networks shut down competing interfaces and apps that leveraged their data (e.g., TweetDeck). In contrast, an open social graph lowers the barrier for third-party developers to build novel experiences and customized interfaces, ultimately expanding user choice.
These benefits aren’t just philosophical. Users can gain from decentralized social networks that offer more engaging or useful experiences. For example, a Web3 social network with token rewards can grant economic value for activities like predicting viral content. Mirror, a Web3 social platform, helps creators monetize their work via NFTs and community fundraising. Many social networks excel at showcasing user taste and curation (e.g., Tumblr, Instagram); Web3 counterparts allow users to display their hobbies and owned digital assets—already enabled by platforms like OnCyber and Context.
New content formats—images, memes, videos, text—have historically formed the foundation of new social platforms. Companies like Foundation, Sound, and Catalog are emerging examples building social platforms around NFTs.
Building a Web3 social network isn’t without challenges—scaling remains an issue—but data layers like Ceramic provide foundational infrastructure for new social apps. The continued growth of protocols like XMTP enables wallet-to-wallet messaging, unlocking on-chain communication. Open social algorithms also present an opportunity to create markets currently under unilateral control of centralized platforms—for content moderation and fact-checking.
Crypto is fundamentally financial: everything built atop crypto networks has inherent value potential. But it’s also inherently social—networked, involving global contributors and participants. In the coming years, we expect growth in social infrastructure and applications that realign the incentives of all stakeholders.
— Li Jin, Co-founder of Variant
Railgun
Railgun is a set of smart contracts that validate zero-knowledge proofs, enabling users to store, trade, swap, communicate, and interact with other smart contracts—all privately. Railgun supports ETH, ERC-20s, and NFTs, operating on Ethereum, Polygon, and BNB Chain, with upcoming support for Solana, Polkadot, and NEAR.
Private transactions are key to achieving broader Web3 adoption. Without solutions like Railgun, a single transaction or owned NFT can expose user information, wallet balances, and entire transaction history. DeFi trades can be front-run by bots, and trading strategies identified and copied. Railgun’s solution is compliant and can provide read access to auditors and regulators when needed.
— Tim Khoury, Investor at Digital Currency Group
Decentralized Software Supply Chain
Building crypto software presents many challenges, requiring developers to rethink traditional Web2 or open-source development processes. While we can retain best practices like code reviews, CI/CD, unit testing, and analysis, the heightened security requirements and permanence of dApps necessitate new technologies.
Web3 software is more akin to launching a satellite into space than rolling out a new AI photo filter. This has given rise to a new domain of smart contract security tools, companies, and protocols that support this emerging software supply chain. In particular, we’re seeing activity around audits, bug bounties, static analysis, and formal verification.
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Audit firms. Given the catastrophic cost of system failures in crypto, audit firms will continue growing. In traditional tech, audits are a rare luxury for large companies seeking higher security, but in crypto, they’re essential for projects of all sizes. The audit landscape spans small expert teams specializing in consensus systems or zero-knowledge proofs to more decentralized models like Code4rena, which runs audit competitions crowdsourcing vulnerability discovery.
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Bug bounties. While 4–5 figure bounties are normal in traditional tech—and some trillion-dollar companies now offer seven-figure rewards—crypto bug bounties have shattered records. Leading Web3 bounty platform Immunefi is pioneering this new norm, having paid over $40 million in bounties, with another $130 million available for sharp-eyed security experts. These incentive scales create more secure protocols and long-term career sustainability for security-focused developers.
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Static analysis and formal verification. Another promising area is tooling improvements throughout the software development lifecycle. Developer frameworks like Ape, Foundry, and Hardhat make writing unit tests and integrating tools easier—such as Slither for static analysis and Echidna for smart contract fuzzing. Formal verification tools like Certora allow developers to ensure their contracts are logically sound at the specification level and catch critical bugs pre- and post-deployment.
By combining these approaches, tomorrow’s software supply chain can become more secure and battle-tested, hopefully making today’s vulnerabilities a rare occurrence.
— Curtis Spencer, Co-founder of Electric Capital
Sudoswap
Sudoswap is a decentralized, fully on-chain NFT exchange powered by an AMM model. It allows multiple custom liquidity pools per collection, with pricing determined by bonding curves. Sudoswap enables instant liquidity, tighter spreads, cheaper pricing, no royalties, fee revenue for LPs, and automatic dollar-cost averaging when entering or exiting collections.
NFTs are containers representing any unique asset on-chain. This applies to far more than profile pictures—financial contracts, real-world assets, coupons, tickets, in-game items, and memberships can all be NFTs. Sudoswap’s on-chain composable protocol will improve market microstructure in this space, reduce information asymmetry, and increase capital efficiency.
— Tim Khoury, Investor at Digital Currency Group
App Mania
Over the past few years, the crypto world has focused heavily on infrastructure innovation. We’ve seen immense attention and investment flow into L1s like Ethereum, Solana, and Avalanche, though with mixed results—many applications have underperformed relative to their underlying platforms (L1s).
This should change in the coming years, as the value of infrastructure is ultimately tied to the protocols and products built on top. With multi-chain infrastructure maturing, we’re also seeing applications expand their reach—launching across multiple chains and building infrastructure to improve product usability.
Adoption and price appreciation of these protocols have been hindered by poor token structures, lack of regulatory clarity around tokens, and governance issues. Governance, in particular, plagues some otherwise successful apps like SushiSwap. We’re seeing extensive experimentation with tokenomics and genuine attempts to transform amorphous DAO-like structures into operationally sound, decentralized entities. Some names successfully doing this include Aave, Convex, Frax, GMX, and Gains Network.
With clearer token structures, better regulatory clarity, and stronger governance, crypto applications will gain renewed momentum.
— Avi Felman, Head of Digital Asset Trading at GoldenTree
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