Variant 2024 intended investment areas: On-chain infrastructure remains the focus
Original author: Variant Fund
Original compilation: Deep Chao TechFlow
As the new year begins, Variant Fund talks about the projects they expect to invest in 2024. Here’s what they expect from startups, covering aspects such as consumer payment user experience, DeFi tools, games, gambling and prediction markets.
Crypto payment infrastructure
For now, the opportunity to improve global payments by leveraging cryptocurrency technology is huge. However, paying with cryptocurrencies and transferring between cryptocurrencies and traditional payment rails remains challenging for users and developers. Within the crypto payments value chain, there are many opportunities to remove friction between developers, users, and merchants.
Institutional Grade DeFi
In the medium term, as large areas of cryptocurrencies and traditional finance merge, the distinctions between them will disappear. There is still an opportunity to build high-performance financial applications and infrastructure that fully leverage the capabilities of cryptocurrencies and serve existing cryptocurrency users while gradually adding new users, including institutional users.
Consumer-centric transactions
Geoff Hamilton, investment partner at Variant, believes there is a lot of design space around apps for buying and selling cryptocurrencies to provide users with a compelling experience. Giving current and future users more options for interacting with cryptocurrencies will greatly benefit them.
information market
Regarding information markets, investment partner Alana Levin and data scientist Jack Gorman believe that blockchain makes it easier to create two types of information markets: markets for obtaining existing information and markets for creating new information. The former is about pricing access and eliminating information asymmetries; an example might be paying for proof about specific consumer behavior or demographics. The latter focuses on making previously unobservable information observable through unique aggregation of existing data or facilitating new exchange rate mechanisms. Examples in this category might look like new structures for pricing risk, engaging in on-chain simulations, or prediction markets with real liquidity. The financialization of information is already evident in systems such as Friend.techs keyholder rooms, Polymarket, and Arkhams Intel Exchange, which are new ways of assigning value to previously hard-to-find information.
payment app
Product-oriented payment applications, especially micropayments, may have great opportunities in the future. These apps leverage the crypto rail to create opportunities to enter new or expanded markets: a global audience that would normally be shut out by currency conversion fees, users who are less willing to pay than traditional users, and more.
new namespace
Investment partner Alana Levin believes that subdomains, which are digital resources with verifiable ownership, feel undervalued. Issuing a subdomain from a trusted party (such as a parent organization) can help prove the legitimacy of the entity. Charities are a prime example: The Federal Trade Commission estimates that hundreds of millions of dollars are lost each year to charity fraud. A trusted issuer that grants a verifiable subdomain to a registered charity can create a useful log of which organizations are truly legitimate.
privacy infrastructure
Privacy infrastructure is in its extremely early stages. This category is exciting from its sheer size. We firmly believe that in the long term, most on-chain state will be private because of the advantages it brings for market efficiency, security, and consumer preference. Solutions utilizing FHE, ZK, MPC, and TEE all come with different tradeoffs, making each solution suitable for different applications. The design space at the infrastructure level is vast and the opportunities are huge.
Uniswap V4 Hook Market
Investment partner Derek Walkush said that one of the most exciting new designs in DeFi has emerged: Uniswap V4 hooks, which are plug-ins for designing pools with unique features and functions, such as new auction mechanisms, fee designs, and more . On-chain and off-chain liquidity are becoming increasingly blurred with the release of intent-based trading protocols such as UniswapX. As a result, Hooks are becoming the new frontier of DeFi mechanism design; they are designed to make on-chain liquidity more competitive than CEX liquidity, which DEX traders can now take advantage of.
Gambling Apps
Top creators like Mr. Beast create videos with viewership numbers that rival those of NFL games. Theres already been a thing around sports betting apps, but now social media and great online gaming players (like creators) are big enough to have their own betting and prediction experiences. Think of it as cryptocurrency sports betting on social media.
Real world MMORPG
Stepn demonstrates the potential of cryptocurrency lifestyle games that leverage mobile-first Web2-like experiences, gamified IRL activities (like running), and subscription-based assets (like biodegradable sneaker NFTs). However, Stepn also has flaws: the game is mostly single-player, uses a complex token economy, and is too financial. Centered around social habits, combined with incentive mechanisms and verifiable off-chain actions, there is great potential for new types of real-world games.
On-chain artificial intelligence agent market
Investment partner Mason Nystrom believes that as crypto AI agents become more sophisticated, developers will design agents to perform specific tasks. Rather than building one agent that has to know how to do everything, you can have generic agents purchase services from other specific agents. A marketplace for crypto AI agents will allow people to purchase targeted agent services or trade trained consumer application agents (e.g. Parallel Colony NPC, ASM Brain, Frenrug, etc.) within the platform or game.
On-chain reputation system
Data scientist Jack Gorman said that although blockchain is designed to be a trustless system, it is still very difficult to trust the various participants on the blockchain. I think there is a big opportunity to build a reputation system that leverages blockchain data and can help us trust the contracts and participants we interact with. A reputation system not only easily prevents bad actors such as scammers or airdrop Sybil attackers, but also rewards good behavior on the blockchain, which could play a role in areas such as unsecured lending or freelance marketplaces.
