Introduction to Venture Capital Perspective | "What Kind of DApp Do We Need?" The market has bottomed out, it's time to invest in Web3

Recommended: "What Kind of DApp Applications Do We Need?" is an article published by Xin, a partner at the venture capital firm OFR. The article discusses the oversaturation of blockchain infrastructure and the advantages and disadvantages of popular applications in recent times. Despite the market conditions not yet improving, Xin believes that the market has bottomed out and it is time to start investing in Web3.

The Blockchain Infrastructure is Over-Saturated, It's Time to Develop DApps

At the WebX conference in Tokyo in July this year, Tron founder Justin Sun and Itai Elizur, Managing Partner of PR firm MarketAcross, had a fireside chat where they broached a sensitive topic: "Is the blockchain infrastructure too much?"

In response to this question, Justin Sun used the analogy of the "iPhone moment" to compare the current industry development situation and stated that developing DApps may have more potential than building blockchain infrastructure.

Read more: WebX | Fireside Chat with Justin Sun: Why is he not in jail yet? Which is better, developing DApps or infrastructure?

In this article, Xin also straightforwardly stated: "If you are a rational and objective investor, you should feel that we don't need more infrastructure projects, at least not right now."

So, how saturated is the current infrastructure? Xin believes it may even be sufficient for the next bull market, but as for when the "next" bull market will arrive, no one can say for sure.

For those who have been following the industry's development for a while, they may also feel that every year, several new L1 blockchains are launched, garnering attention before their airdrops, but losing interest shortly after. Most on-chain applications are simply protocols forked from other chains, with the only difference being that no one dares to claim to be the "Ethereum killer" anymore. As for L2 solutions, the community is no longer discussing which aspect of the technology is lacking, but rather who will stand out in the fierce competition of L2.

In this scenario, developers have the essential prerequisites for developing DApps. Xin believes that what truly challenges developers is not a lack of infrastructure or development tools, but rather:

"Where are the killer DApps?"

All the prerequisites are in place, why haven't killer DApps emerged yet?

To address this question, Xin examined three popular applications in the community recently and reflected on them:

1. Meme coins

• Meme coins like PEPE or Bitcoin HarryPotterObamaSonic10Inu are crucial innovations for bears, attracting retail investors more than the massive market value projects funded by venture capitalists.
• Creating memes is not easy because there is no fixed template to follow; one must have a deep understanding of a certain subculture to design something that captures the community's attention.
• Meme coins have risen as another part of Crypto culture after PFP NFTs.

2. Friend.tech

• Friend.tech is not considered a social product but rather a financial product based on Twitter, now X. It does not create new social relationships or change the way people communicate.
• Essentially, it adds token incentive mechanisms to the Twitter social network using a community approach since Twitter does not have its own coins.
• The recent trend of "Tip Coin" has captured the essence of Friend.tech.

3. Telegram Bots

• Catering to the needs of meme traders in the crypto circle, Telegram Bots have introduced many practical functions.
• The token design is clever, and the income is directly proportional to the level of ecosystem prosperity, also related to product functions.
• By accurately targeting Telegram, a platform loved by the crypto community, they attract traffic from Telegram.

Through these examples, Xin outlined a "product success" triangle with three endpoints being product power, subcultural creativity, and token economics, stating that a successful project needs to have at least two of these elements, but to gain customers and survive in the long term, it needs all three.

However, these three examples individually lack product power in meme coins and subcultural creativity in Friend.tech and Telegram Bots.

Is it the Right Time to Invest in Web3? Has the Market Bottomed Out?

Although Xin clearly pointed out the challenges facing current DApps, he also believes that now is the right time to invest in Web3, stating that the signs of the bottoming out of the primary and secondary markets are very clear, for the following reasons:

• Projects started at the end of the previous bull market, without competitiveness or lacking funds, either fail or pivot to other areas.
• Traditional venture capital institutions are currently more focused on AI projects.
• The infrastructure is already saturated, and even though many projects funded in the last bull market have not yet launched their tokens, the market does not have enough chips for these projects to enter the secondary market and thrive.
• Only innovative applications can bring new narratives, new traffic, and new blood.

Recommended: "What kind of DApp applications do we need?," Xin's article list, and Twitter.