We see VC money moving from digital assets over to AI and prediction markets. What does this mean for crypto?
Thanks ChatGPT for making this image
This blog was not written with AI, except to help with research on VC portfolio allocations over the last few years.
In 2025, VCs like Sequoia, A16z, Lightspeed, and Y Combinator invested in AI companies en masse, and we saw some outflow of money from crypto to AI. Not to mention the price of cryptocurrencies in general recently tanked.
Sequoia
Data collected using publicly reviewed disclosures
A16z
Data collected using publicly reviewed disclosures
Lightspeed
Data collected using publicly reviewed disclosures
Y Combinator
Data collected using publicly reviewed disclosures
I’ve seen many people who came into web3 with me back in 2019/2020 start to leave, to join an AI company or prediction market.
As someone deeply devoted to the success of blockchain and decentralized finance, there are a few ways to react to this.
Good riddance, they didn’t believe anyway
There is an allure to, similar to a bad breakup, “hate them on the way out”. “It’ll be better now that only the true builders are left” — type. I think this isn’t the correct approach. We want people to work in our industry, even if they don’t share the same fundamental principles we do. If we keep the visionaries, then we are always going to need people to help work to make those visions come to life, and many people are looking to live a good life, not change the world. I think there is no harm in that either. In life, it’s great to have people:
- Deeply passionate
- Less passionate, but willing to work to make themselves better, and do something good too
I think of these as “rock stars” vs “superstars” in a sense.
Crypto is doomed, pivot to AI
This is the topic that I want to focus on most here, and here is the line that I want to drill into your soul.
The world’s finance being solely powered by cryptocurrencies is inevitable.
Let that sink in. Let that sit with you. Once you accept this, it makes less and less sense to pivot to AI. Yes, AI is booming, yes, AI is awesome, but AI is a tool to help build other things, and one of those “other things” is the future of finance.
At the same time, do what’s right for you. There is a hype train calling your name in the AI world, perhaps. Go for it. But I think you’ll be missing out.
Why is blockchain inevitable?
The same reason gold has a market cap of $35T today.
I’ve given this rant many times about “what is money”, especially in my explainer of stablecoins. Money provides 3 functions:
- Store of value
- Medium of exchange
- Unit of account
To find a credibly neutral and convenient money has been basically impossible for all of history, until recently. Gold has been accepted as the “credibly neutral” money; however, it’s not particularly convenient. Cryptocurrencies are the solution here. They give us the same benefits gold has given us for over 1,000 years, with the convenience of the modern era.
The exponential factor
To me, this is interesting in itself, but the excitement goes astronomical when you look at this combined with smart contracts. Take the stock market, for example. The NYSE does about $80B in transaction volume a day, whereas Uniswap might do $2B. That’s a whopping 40x difference, but factor in how much it costs to run the NYSE.
The parent company of the NYSE has ~12,000 employees. Whereas Uniswap could hypothetically be run with just liquidity providers, and only has ~200 employees. This is a reduction of 60x the overhead! Just on costs alone, running a decentralized exchange is massively reduced.
And don’t even get me started on the censorship resistance and credible neutrality, which is the whole purpose of the technology! I’ll save you the rant on why credibly neutral financial products are the future, because if you just look at the numbers alone, running DeFi is substantially cheaper, while also being a fairer technology.
A lot of people are unconvinced by the rationale of credible neutrality, so I’m going to skip over it in this article. Many of those people come from first-world countries and will never begin to understand how impactful a technology like this can be on a less fortunate country. However, I do still think it’s the top motivator for why this technology is inevitable. But a lot of people can look at the overhead our current financial infrastructure has and start to ask, “Why am I paying such massive fees for my stock trades to clear 2 days later?”
Summary
Sceen from the Wolf Of Wall Street
You can go if you’d like, but I think you’re going to miss the adoption happening, where the opportunity is even better than it ever was.
A lot of the “opportunities” historically in crypto were bullsh*t to some extent. NFTs, liquidity mining, and meme tokens were all amongst the “products” that exploited people’s misunderstanding of the new technology, trying to get in on something new. We have passed that. We know they were dumb. And now, we can get institutional and retail adoption of products that actually make their lives better. Aave, Uniswap, ZK Privacy, and Stablecoins are all here to provide financial products to anyone in the world at a fraction of the cost and with less censorship.
Smart contracts and cryptocurrencies are:
- Cheaper
- Faster
- Fairer
And the whole world will be running on its infrastructure, and I want to keep busting ass to make that come to life.
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