The crypto bear market may have dampened public interest in blockchain and cryptocurrency, but venture capital firms like Framework Ventures continue to pump billions into the industry.
“There are three paths,” said Vance Spencer, co-founder of Framework Ventures decrypt at Chainlink SmartCon. “There is traditional DeFi, we still invest in it. There is regulated DeFi [products], which is just emergent. And then there are regions like Brazil, India and Southeast Asia – they just need the infrastructure to get online, so we’re investing in that too.”
One area that Framework Ventures has focused on is blockchain gaming. The company committed $200 million to the blockchain gaming industry through its FVIII fund in April.
“People are excited [blockchain] Games because they all start Q1 [2023]’ Spencer said, adding that with so many games coming out at once, the industry will quickly find out if it’s any good at game development.
“Gaming and DeFi are two things that we do very tactically because there are big markets right now and we have use cases that currently exist,” Spencer said.
But that is easier said than done. The promotion of blockchain or web3 games has surpassed their design skills and many in the gaming community see it as nothing more than a money grab at the expense of players.
“The first iteration games were [like] Axie Infinity,” Spencer said. “It was hyperfinancialized, potentially financial napalm,” he said, noting what he called “violent ups and downs” in the market. But Spencer says he’s optimistic about the next six to 12 months as more traditional game studios build games on-chain.
“They probably won’t have their own native token,” he said. “Maybe they’ll put NFTs on-chain or have monetization and have the virtual currency as a token,” but they’ll be more grounded in reality.
As Spencer explained, one problem slowing the adoption of blockchain or web3 games is that they are known as blockchain web3 games. This label carries years of baggage, including negative environmental impacts.
“I find [not referencing blockchain or Web3] will be the recipe for success for the first iteration of games,” said Spencer. “We’re bringing in people playing traditional games, and you don’t want to inundate them with too much blockchain.”
Spencer went on to say that developers using the blockchain to create better user and gaming experiences like virtual reality, augmented reality, and GPS-based games are the ones who will be successful.
“A lot of people look at the 1,000 DeFi protocols that didn’t succeed and get a bit disheartened, but I choose to see the 50 that worked,” Spencer said. “You have to throw 1,000 startups against the wall for 50 to work.”
While regulation and the risk of driving blockchain innovation abroad are concerns, Spencer is optimistic that this will eventually create better investment opportunities.
“I feel [it] represents an opportunity; You will have DeFi as it is now, but that will be more overseas,” he said [projects] in the US will have to fall under a regulatory jurisdiction.”
DeFi under regulatory oversight, Spencer explains, would be positive for the industry, opening it up to investors, the traditional banking system, and access to more capital.
“There will be some growing pains,” he says. “But the industry is constantly changing and evolving and can’t just be the same. And so we’re pretty optimistic about that. It’ll give you a headache, but that’s okay.”