Prominent crypto venture capitalists are clashing online about whether non-financial use cases in crypto, Web3, and blockchain have failed due to a lack of investor demand and product-market fit or if the best days for non-financial applications still lay ahead.
The debate started on Friday when Chris Dixon, a managing partner at venture capital firm a16z crypto, published an article arguing that years of “scams, extractive behavior and regulatory attacks” were the reason that non-financial use cases in crypto have not taken off.
These use cases include decentralized social media, digital identity management, decentralized media streaming platforms, digital rights platforms, Web3 video games and more.
Over $60.7 million in fees were paid over the last 24 hours to crypto exchanges and decentralized finance applications. Source: DeFiLlama
“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.”
The top 10 crypto applications by fee generation and revenue are all financial use cases. Source: DeFiLlama
“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.
The debate follows a surge of VC investment into crypto projects in 2025, which mostly flowed to tokenized real-world assets (RWAs), physical or traditional financial assets represented onchain by digital tokens.
Related: Web3 revenue shifts from blockchains to wallets and DeFi apps
Different approaches to portfolio building
Dragonfly’s portfolio is built around financial use cases and blockchain infrastructure that helps move value and risk through the onchain financial system.
Some of the firm’s investments include the Agora stablecoin and payments platform, payments infrastructure provider Rain, synthetic dollar issuer Ethena, and the Monad layer-1 blockchain network.
As for a16z, the firm’s crypto portfolio includes many financial use cases like Coinbase and decentralized crypto exchange Uniswap, but also features a much wider range of Web3 sectors like community building, gaming and media streaming.
These projects include the community building club Friends With Benefits, digital identity provider World and Web3 gaming platform Yield Guild Games.
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