The adoption of new technology does not follow a linear path. Instead, it progresses in a step-like fashion: initial innovation triggers a surge in adoption → the impact of these innovations diminishes over time, and growth plateaus → new innovations emerge to address bottlenecks, enabling further adoption → leading to another wave of growth → and the cycle repeats.
Web3 has already experienced several of these cycles. The previous wave of adoption was driven by innovations in smart contracts, DeFi, and NFTs. Currently, we are in a plateau phase where numerous bottlenecks must be resolved to unlock the next wave of Web3 growth.
When searching for investment opportunities, focus on projects that address the major pain points in the industry. In other words, today’s challenges in Web3 represent tomorrow’s investment prospects. Here are eight key areas where solutions are critically needed:
Decentralized Finance (DeFi)
Scalability and User Experience Issues in DEXs
Decentralized exchanges (DEXs) enable the trading of long-tail assets and allow anyone to earn by providing liquidity. For the value internet to scale, well-functioning and scalable DEXs are essential. However, current DEXs suffer from several problems that lead to a poor user experience, including:
- Impermanent loss
- High slippage
- MEV and sandwich attacks
- Slow and unreliable transaction execution
- Lack of basic order types like stop-loss or limit orders
- Severe shortage of tools for asset indexing, analytics, and screening
Many projects have attempted to address these issues, but so far, success has been sporadic.
Investment Insight: Look for projects that combine traditional finance (TradFi) exchange models with DEX business models to improve scalability and user experience.
Lack of Integration with the Real Economy in On-Chain Lending
Borrowing demand in decentralized money markets and banks almost entirely stems from speculation. For decentralized lending to attract more liquidity and users—and genuinely compete with traditional banks—this must change.
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.
Investment Insight: Seek out companies with existing distribution, users, and track records in real-world lending that are blending traditional lending products with cryptocurrency solutions.
Non-Fungible Tokens (NFTs)
Unreliable 1:1 Mapping with Off-Chain Assets
Current NFT technology is primitive at best. A fundamental issue is the difficulty of ensuring a reliable 1:1 correspondence between an on-chain token hash and the off-chain asset it represents. We haven’t even found a reliable way to point NFTs to JPEGs (which are off-chain), much less to physical assets.
Solving this problem may require a complete rethinking of NFT technology. However, if resolved, it could unlock use cases that are orders of magnitude larger.
Investment Insight: Focus on projects building scalable solutions to ensure that the mapping between an asset and its token is unique and stable—meaning no two NFTs point to the same asset.
Weak Tools for NFT Storage, Display, and Verification
The primary use case for NFTs today is digital collectibles, which is a limited market. Many future applications of NFTs involve using them as verification tools—for instance, proving identity or accessing membership benefits.
However, most of these use cases could be better served by Web2 databases without NFTs. To make NFTs indispensable, 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.
Investment Insight: Prioritize projects that significantly enhance the NFT user experience and integrate NFTs into everyday consumer activities, such as NFT-based check-ins.
Poor Integration with the Broader Blockchain Economy
So far, there has been little interaction between the NFT and DeFi worlds. Concepts like NFT collateralization remain largely theoretical and have not gained traction.
To build a strong moat for blockchain, different parts of the ecosystem—such as DeFi and NFTs—should leverage each other and grow together.
Why hasn’t this happened yet? Partly because NFTs need stronger use cases and a larger market cap to become meaningful native assets in DeFi. But achieving that requires solving the earlier challenges—creating a chicken-and-egg problem.
Investment Insight: Until NFTs become a larger asset class with stable value and a broad holder base, projects focusing on DeFi-NFT integration may be premature.
Infrastructure
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 blockchains still suffer from poor performance, so this quest is far from over.
In the medium term, this will determine whether public blockchains can compete with more centralized alternatives (like CBDC networks) as the infrastructure layer for the internet of value.
Investment Insight: Expect more "ETH killers" and "Solana killers" to emerge. It’s possible to identify mid-term leaders even if they aren’t the ultimate winners—similar to how AOL and Yahoo preceded Google.
High Friction and Low Security in Cross-Chain Operations
Cross-chain messaging and bridging have become highly competitive—and risky—business areas. Cross-chain bridges are hacked almost weekly, yet they handle increasingly large volumes.
This is typical of an early-stage, high-growth industry. The "internet of value" requires smooth connectivity between different blockchains. For Web3 to scale, robust cross-chain operations are essential.
Investment Insight: Similar to L1/L2 ecosystems, new players will continue to emerge in this space. However, unlike public chains, there is no clear market leader yet—meaning the landscape is still open. Learn to bet on mid-term leaders without becoming overly attached to any single protocol.
Application Layer
Lack of Non-Crypto Native Projects and Viable Products
Most Web3 applications built so far are structured around project tokens that eventually become products. These tokens have indeed brought new users into Web3 through speculative waves. But when bear markets arrive, they often collapse quickly.
More sustainable adoption will likely come from leveraging Web3 to support growth in other industries—using tools like blockchain payments, utility tokens, and NFTs.
While similar ideas and prototypes have existed in previous cycles, crypto awareness in the public consciousness may now be high enough for some "Web3 + traditional economy" hybrid experiments to succeed. This could help drive the next wave of crypto adoption.
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Investment Insight: Look for projects that bring Web3 business models and tools into high-growth sectors of the real economy. In the United States, examples of rapidly growing industries include:
- Direct retail
- Beverage manufacturing
- Healthcare
- Online gaming
- Personal services
- Real estate
- Transportation
This isn’t to say that successful Web3 projects will necessarily emerge from these sectors. However, high-growth industries generally provide fertile ground for innovation, and Web3 could well be one of those innovations.
Frequently Asked Questions
What are the main obstacles to DeFi adoption?
Key obstacles include poor user experience, high transaction costs, smart contract risks, and regulatory uncertainty. Improving scalability and simplifying interfaces are critical for mass adoption.
How can NFTs move beyond digital art?
NFTs need better verification mechanisms, stronger utility (e.g., access rights, identity), and seamless integration with real-world assets and services to expand beyond collectibles.
Why is cross-chain interoperability important?
Interoperability allows different blockchains to communicate and share value, enabling a more connected and efficient ecosystem. It reduces silos and expands use cases across networks.
What industries are most likely to benefit from Web3?
Industries with high trust costs, middlemen, or complex supply chains—such as finance, logistics, healthcare, and creative content—could see significant benefits from Web3 adoption.
How do I evaluate Web3 investment opportunities?
Look for projects solving real problems, with strong teams, clear tokenomics, and community support. Avoid excessive hype and focus on fundamentals and long-term viability.
Are public blockchains sustainable in their current form?
Current leading blockchains face scalability challenges. Solutions like layer-2 networks, sharding, and alternative consensus mechanisms are being developed to improve sustainability.