Venture capitalists are currently engaged in lively debates regarding the potential and viability of non-financial applications within the Web3 and cryptocurrency space. While the initial surge of investment in Web3 was largely driven by speculative narratives, a shift is occurring towards projects demonstrating tangible utility and real-world applications. This transition is causing friction among VCs, as they evaluate the long-term prospects of blockchain technology extending beyond the realm of decentralized finance (DeFi).
Some VCs argue that the "read-write-own" model, which posits that users should have greater control over their data and digital assets, has not yet proven successful outside of financial use cases. They maintain that the foundational value of blockchain lies in its ability to coordinate capital and human resources at internet scale, with finance serving as the primary testing ground for this capability. According to this viewpoint, financial applications like payments, stablecoins and DeFi are essential for bringing a critical mass of users on-chain, which will then pave the way for broader adoption in areas like media, gaming, and artificial intelligence. Chris Dixon, a partner at a16z, recently emphasized that finance comes first, and everything else will follow.
However, other VCs are increasingly interested in the potential of Web3 to revolutionize various sectors beyond finance. They see opportunities in decentralized social media, supply chain management, digital identity, healthcare, and more. These investors believe that blockchain's inherent properties, such as immutability, transparency, and decentralization, can address critical issues in these industries, such as data security, authenticity, and user empowerment. For example, blockchain could be used to combat counterfeit medicines, trace foodborne illnesses, maintain property records, and create new kinds of non-hierarchical organizations.
This divergence in opinion is impacting investment strategies. VCs are applying deeper diligence to projects, scrutinizing tokenomics, security, team execution, and governance. They are also placing greater emphasis on projects with clear paths through evolving regulations. Compliance readiness is becoming a growth advantage, particularly for DeFi, stablecoins, and tokenization initiatives.
The debate also touches on the fundamental nature of Bitcoin and other cryptocurrencies. Some critics oppose the idea of embedding non-monetary data into blockchain transactions, arguing that it shifts Bitcoin away from being a purely financial technology towards a general-purpose data blockchain. This schism within the development community has even led to resignations, highlighting the strong convictions on both sides of the issue.
Despite the ongoing debate, the overall sentiment towards Web3 remains positive. In the second quarter of 2025 alone, Web3 startups raised $9.6 billion in VC funding. However, investors are becoming more selective, favoring projects with strong user retention and products that can withstand market cycles. This suggests a maturing market where real-world utility and sustainable models are increasingly valued over speculative hype.