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Dragonfly Partners Interview Summary: Ethereum is the only institutional choice, the market has bottomed out

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Dragonfly Partners Interview Summary: Ethereum is the only institutional choice, the market has bottomed out

Cryptocurrency investor and analyst Miles Deutscher interviewed Haseeb Qureshi, a partner at venture capital firm Dragonfly Capital, who also summarized 12 key points in a 73-minute interview on topics such as the future of L1 and L2, three major perspectives for 2023, and Bitcoin and Ethereum.

Note: Dragonfly is one of the main investors in NEAR, hence the continuous mention of its potential, similar to Multicoin Capital's public advocacy of continued belief in Solana post-FTX crash.

1. Biggest Lesson: The Importance of Mechanism Design

Haseeb mentioned FTX, Luna, Axie Infinity, and Solana, emphasizing the long-term importance of examining the protocols and platform design mechanisms. Regardless of the scale and market value, it is not feasible if they cannot generate net profits.

2. Institutional Perspective: Ethereum Superior to Bitcoin

Due to being more ESG-friendly, institutions generally consider Ethereum superior to Bitcoin.

Haseeb pointed out that achieving a trillion-dollar token market value is not possible by relying on retail investors alone, and for institutions, Ethereum is indeed the only choice.

3. L1 Competition is Not Over Yet

Ethereum still faces its initial scalability issues. If the problem of high Gas consumption by users on the client side is not resolved, significant improvements in underlying scalability will not emerge.

4. L1 is Like a City

Building on the third point, Haseeb believes there will be successful new cities and successful old cities.

The question lies in the differences between each L1. These differences will gradually become more apparent and important over the next 3 to 5 years.

5. A Non-EVM Mainstream Public Chain Will Emerge

Although EVM-compatible public chains have proven dominant, Haseeb believes at least one non-EVM winner will emerge, whether it be Solana, NEAR, or Aptos is hard to say.

6. NEAR Does Have Potential

NEAR is the only blockchain, aside from Agoric BLD, that allows developers to write smart contracts in JavaScript. He noted:

Solidity has 200,000 developers, but JavaScript has 12 million. If you want blockchain code editing to go mainstream, you need to make it accessible first.

Haseeb mentioned that Ethereum has consistently lagged behind its initial plans in implementing sharding scalability technology, ultimately abandoning sharding and focusing on Rollup.

However, NEAR has not given up and offers unlimited scalability possibilities.

7. Focus on Investment Potential Rather Than Asset Class

Here, the legendary investor Howard Marks' quote is referenced: "There are no bad assets, only bad prices."

He believes that both DEX and NFT are worth investing in, with the key lying in whether the entry price is reasonable.

8. L2 Still Dominates the Market

All L2 projects are gradually rising, and the trend will become more evident after the Shanghai upgrade.

9. Most Worthwhile Focus This Year: ZK Rollups

Haseeb mentioned that ZK rollups are about to enter the public eye and are an area well worth focusing on.

Vitalik has also stated that ZK Rollups will eventually outperform Optimistic Rollups and become the main scaling solution for L2.

10. Look for Projects That Solve Problems

Especially in the previous crypto bull and bear cycles, projects that successfully propose solutions will be the biggest winners. These problems include:

  1. Scalability

  2. Digital Identity

  3. Usability

  4. Security

Projects invested by Dragonfly:

  • Quadrada: An identity solution that allows users to conduct privacy-preserving KYC verification on-chain.

  • Aptos: Haseeb is excited about the Move ecosystem.

  • Matter Labs building zkSync: In the long run, ZK Rollups are the future.

11. Worst-case Scenario May Have Passed

Haseeb himself is unsure how many projects are destined for doom, but after experiencing numerous bloodbaths last year, he believes the market is in a healthier position, giving him more confidence to actively invest.

12. Don't Try to Time the Market

Trying to time the market or guess the bottom has never been a good investment strategy.

Haseeb urges to buy assets, stop worrying, as it is a better strategy.