Q2 2021 State of Decentralized Applications (DApps) — Kyle Ellicott

The State of Decentralized Applications (DApps) — H1 2021 Review

June 2021

The first half of 2021 brought us a little insight into what we can expect from the next phase of the web and decentralized applications (DApps). We’ve now begun “The Turning” period, where technical adoption will become a default, use cases grow at a more progressive rate, and fresh capital will fuel an influx of companies building at scale. The second half of 2021 will be an exciting one to witness & participate in, potentially more than any point since the genesis of Bitcoin in 2009.

The DApps Landscape:

Today, I’m excited to share with you that we’re now seeing 400+ companies concentrating on developing the required infrastructure layers that are powering the applications of today and those of Web 3.0. This is an increase of 18% from Q4 2020. Furthermore, we saw more than $18 billion invested throughout the companies listed in the landscape, along with over 30 NEW venture capital funds with fresh capital to support.

Q2 2021 State of Decentralized Applications (DApps) Landscape Map — Kyle Ellicott

Venture Capital & Funding:

Throughout all areas of the landscape, we’re seeing increased capital deployments. The first half of the year brought us several early-stage and Series investments with over 45 publically announced investments in Q2 alone and $100M+ dollar fundraisings in Solana, Ledger, Dapper Labs, Blockchain, and Chainalysis. Additionally congratulations to Blockdaemon, DappRadar, InstaDApp, Upshot, and Red Date creators of Blockchain Services Network (BSN) on their recent 💸 fundraising and Coinbase on the IPO along with the acquisition of Skew.

Within the landscape, the leading venture capital funds included Digital Currency Group (DCG), Andreessen Horowitz (a16z), Coinbase Ventures, Pantera Capital, and Fenbushi Capital. We also welcomed 30+ new investors to the landscape many with DApps apart of their core thesis. May alone saw 17+ new funds with fresh capital enter the landscape. A few notable names — BlueYard Capital, Master Ventures, Komorebi Collective, The Brooker Group, and others looking to make their impact in the industry.

Tracking 30+ new Venture Capital funds focus on DApps — Kyle Ellicott

The Turning:

After having tracked the greater blockchain industry since 2018, I’m calling this moment in time, “The Turning” — the moment when technical adoption becomes the default and decentralization is a target milestone for more than less. The timing couldn’t be more in line with the industry needs as digital assets reaching a $2T, that’s trillion with a T, dollar market cap, billions transacted in digital goods and marketplaces that once did not exist two years ago, infrastructure upgrades & applications growing in adoption.

In summary, here are some things that I have noticed aggressively happening in this first half of the year and something I’m so incredibly excited about around decentralized applications (DApps) and continue to strengthen my thesis around them:

1. Protocols and their foundations are partnering with traditional venture capital to built ecosystem-focused funds.
2. Venture capital is adding “DApps” to their thesis AND launching new funds specific to/for protocols.
3. DAOs (decentralized autonomous organizations) are taking an early position from investor syndicates & governance to an alternative corporate structure and a milestone for many DApps.
4. We’re seeing the re-emergence of investing through SAFT(tokens) and token launches, however different than that of the 2017–2019 boom — traditional venture capital & other institutional investors are playing at scale.
5. Exchanges are positioning to own NFT ecosystems (i.e. Binance, Korbit (Korea), Wazirx (India), FTX, etc) expanding to alternatives assets and traditional.
6. Needs for security and stability with the underpinning or leveraging of Bitcoin’s blockchain network. Bridges are being built at rapid speed to allow for exchanging between blockchains not yet interoperable.
7. Consensus mechanisms expanding beyond Proof-of-Work (PoW) & Proof-of-Stake (PoS) to the likes of Proof-of-Transfer (PoX), Agreement (PoA), etc.
8. Cloud companies are in acquisition mode as they’ve been unable to match the pace of decentralized infrastructure developments
9. More corporations, governments, and small businesses are adding digital assets to their balance sheets.
10. Business models like “Play-To-Earn” will drive greater mass adoption faster and with the desire UX

A full breakdown is now available as a video, including an in-depth overview of the landscape, significant trend analysis, new companies & business models, areas of opportunities, use-cases, and a view for the remainder of 2021.

⬇️ Download for the hi-res PDF is available! Enjoy!