8 Potential Web3 Pain Points and Their Possible Investment Opportunities
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8 Potential Web3 Pain Points and Their Possible Investment Opportunities
We are currently at a plateau on the staircase, with many bottlenecks needing to be addressed to unlock the next wave of Web3 growth.
Navigating Web3 tides with focused insightsWritten by: Tascha
Translated by: TechFlow intern
The adoption of new technology does not develop linearly—it progresses in steps: initial innovation triggers a wave of adoption → the impact of these innovations fades over time and growth plateaus → new innovations emerge to solve bottlenecks, enabling further adoption → driving another wave of growth → repeat the cycle.
Over time, Web3 has already gone through some of these steps. The last wave of adoption was driven by innovations in smart contracts, DeFi, and NFTs. Currently, we are on the flat part of the staircase—many bottlenecks remain to be solved before the next wave of Web3 growth can be unlocked.
When searching for investment opportunities, focus on projects that help resolve major industry bottlenecks. Therefore, today’s Web3 challenges are tomorrow’s investment opportunities. Look for projects addressing these eight key problems across the following areas:
DeFi
1. Poor scalability and user experience in DEXs
Decentralized exchanges (DEXs) enable trading of long-tail assets and allow anyone to earn by providing liquidity. Well-functioning, scalable DEXs are essential for the expansion of the internet of value. However, today's DEXs suffer from a range of issues leading to poor user experiences, including but not limited to:
Impermanent loss
High slippage
MEV / sandwich attacks
Slow and unreliable transaction execution
Lack of transaction control, such as difficulty executing basic order types like stop-loss or limit orders
Severe lack of indexing, analytics, and filtering tools for asset discovery
Many projects have attempted to solve these issues, but so far with only sporadic success.
Potential investment angle: Look for projects combining TradFi exchange models with DEX business models to address scalability and user experience.
2. On-chain lending is not integrated with the real economy
Demand for borrowing in decentralized money markets/banks comes almost entirely from speculation. This must change if decentralized lending is to attract more liquidity and users and truly capture market share from traditional banks.
Collateral requirements and liquidation rules need adjustment, and non-crypto collateral must be integrated. These are not easy problems to solve—we haven't even successfully integrated NFTs into DeFi lending, let alone real-world assets.
Potential investment angle: Look for companies that already have distribution, users, and track records in real-world lending and are now blending existing lending products with cryptocurrency.
NFT
3. Unreliable 1:1 mapping between NFTs and off-chain/real-world assets
Today’s NFT technology is, at best, primitive. A fundamental issue is the difficulty in ensuring a reliable 1:1 correspondence between the on-chain hash token and the off-chain asset it represents. We haven’t even figured out how to reliably link an NFT to a JPEG file—since the latter resides off-chain—let alone physical assets.
Solving this may require a complete rethinking of NFT technology. But if solved, it would unlock thousands of new use cases for NFTs.
Potential investment angle: Look for projects working on scalable solutions to ensure that the mapping between assets and tokens is unique and stable—i.e., no two NFTs point to the same asset.
4. Weak tools for NFT storage, display, and verification
Currently, the primary use case for NFTs is digital collectibles—a limited market. Many future NFT use cases envision them as verification tools—for example, proving identity or granting access to membership benefits.
But the truth is, most of these use cases could be better implemented via Web2 databases without needing NFTs. To make them killer applications for NFTs, we need:
a) Better integration of NFTs with other parts of the blockchain ecosystem to create synergies.
b) User-friendly infrastructure and UX for storing, displaying, and verifying NFT ownership.
Potential investment angle: Look for projects focused on significantly improving NFT user experience and integrating NFTs into daily consumer experiences—e.g., NFT check-ins.
5. Poor integration with other parts of the blockchain economy
To date, there has been little interaction between the NFT and DeFi worlds. Concepts like NFT collateralization are still largely in the hype phase and haven't progressed far.
To build strong moats for blockchain, ideally different parts of the ecosystem—like DeFi and NFTs—should leverage each other and grow together.
Why hasn't this happened yet? Partly because NFTs need stronger use cases and larger market caps to become meaningful native assets within DeFi. But achieving that requires solving problems #3 and #4—a bit of a chicken-and-egg situation.
Potential investment angle: Projects aiming to bridge DeFi and NFTs may still be "too early" until NFTs become a larger asset class, with a significant number of NFTs holding relatively stable value and broad holder bases.
Infrastructure
6. High cost and low performance of public blockchains
The search for faster, cheaper smart contract platforms has been a dominant investment narrative over the past two market cycles. Despite progress, public chains still suffer from poor performance—so this pursuit is far from over.
In the medium term, this will be a key factor determining whether public chains can compete with more centralized alternatives (such as CBDC networks) as the foundational infrastructure layer for the internet of value.
Potential investment angle: More "ETH killers" and "Solana killers" will enter the battlefield. You can identify solid mid-term leaders even if they don't end up being the ultimate winners—e.g., AOL and Yahoo existed before Google.
7. High friction and low security in cross-chain operations
Cross-chain messaging/bridging has become a fiercely competitive red ocean. Cross-chain bridges are hacked almost weekly, yet continue to handle growing transaction volumes.
All of this signals an industry in its very early stages but experiencing high growth. By definition, an “internet of value” requires seamless connectivity across different blockchains. Robust cross-chain operations are critical for scaling Web3.
Potential investment angle: Similar to L1/L2, this space sees constant new entrants. But unlike public chains, there is currently no dominant market leader—large portions of the pie remain unclaimed. Learn to bet on mid-term leaders, but stay protocol-agnostic.
Application Layer
8. Lack of non-crypto-native projects / viable products
So far, most Web3 applications have revolved around project tokens that eventually became the product. These tokens did bring new users to Web3 through speculative waves. But once bear markets hit, they quickly collapsed.
More sustainable adoption may come from leveraging Web3 to support growth in other industries—using tools like blockchain payments, utility tokens, and NFTs.
Of course, these ideas and prototype projects existed in previous cycles, but crypto awareness in society may now finally be high enough for some "Web3 + traditional economy" hybrid experiments to succeed—helping drive the next wave of crypto adoption.
Potential investment angle: Look for projects bringing Web3 business models and tools into rapidly growing sectors of the real economy. In the U.S., examples of fast-growing industries include:
Direct retail;
Beverage manufacturing;
Healthcare;
Online gambling;
Personal services;
Real estate;
Transportation;
This doesn’t mean successful Web3 projects will necessarily emerge from these industries, but generally, high-growth industries provide favorable demand conditions for innovation—and Web3 could well be one of them.
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