a16z Crypto is one of the best-known backers of web3 and blockchain startups. Since its launch, the firm has helped shape how capital flows into the industry, often signaling what’s next for builders and investors alike. The direction of a16z’s capital tells founders and VCs where the strongest bets and biggest risks now lie.

Since 2020, a16z Crypto’s investment focus has shifted in direct response to rapid tech progress, regulatory changes, and new user behaviors. Lower network costs, the rise of Layer 2 solutions, and explosive growth in stablecoin usage have all played a role. Just as important, increased adoption and new rules around the world are shaping which projects get backing.

As the stakes grow, it’s essential to track how a16z’s priorities respond to shifts in infrastructure, market momentum, and policy. What kinds of startups now fit the firm’s thesis? How has a16z responded to new compliance environments? What should founders know about where the firm is placing its bets next? The answers reveal much about where crypto is actually heading.

Core Investment Themes in 2020: Beginnings in Infrastructure and DeFi

When we look back at 2020, a16z Crypto’s investment decisions reflected a strong focus on laying the groundwork for the next phase of blockchain growth. This period marked the early push into infrastructure and decentralized finance (DeFi), two areas that would set the stage for the booming crypto ecosystem we see today.

The firm was betting on the essentials of the blockchain world: building out the systems that make decentralized applications scalable, secure, and accessible, while also backing projects that challenge traditional finance with decentralized alternatives. The groundwork was being laid, even as the broader market was still emerging from a relatively early stage.

Infrastructure Investments: Building the Base

Infrastructure was the backbone of a16z’s early 2020 approach. The goal was clear: finance the tools and protocols that enable the blockchain ecosystem to grow without hitting technical bottlenecks. Here’s what made infrastructure a core investment theme then:

  • Layer 1 and Layer 2 Networks: Investments targeted base-layer blockchains like Ethereum, Solana, and emerging Layer 2 scaling solutions. These aimed to handle more transactions faster and cheaper.
  • Developer Tools and SDKs: Funding focused on tooling that helps developers build better applications with less friction, accelerating innovation and adoption.
  • Node and Data Infrastructure: As usage climbed, reliable node infrastructure and data services became crucial to maintain performance and security.
  • Scalability and Security Upgrades: Supporting projects that improved transaction throughput and safeguarded the network helped sustain long-term growth.

Infrastructure was about more than just technology—it was about creating a foundation that could support millions of users and thousands of projects. Without these investments, the explosive growth in on-chain activity later in the decade wouldn’t have been possible.

DeFi: From Novelty to a New Financial System

DeFi was still relatively nascent in 2020 but capturing a16z’s attention because of its potential to reimagine the financial system without intermediaries. The firm’s early bets gave it a front-row seat to the revolutionary shift unfolding. Key DeFi themes in 2020 included:

  • Decentralized Exchanges (DEXs): The move away from traditional exchanges started here with protocols that allowed trustless and permissionless token swaps.
  • Stablecoins: Essential to the DeFi boom, stablecoins offered a bridge between cryptos and real-world value, enabling more reliable financial products.
  • Lending and Borrowing Protocols: Platforms allowing users to lend, borrow, or earn interest on crypto assets took off, showing new paths for asset utilization.
  • Yield Farming and Liquidity Mining: Incentive programs that rewarded users for providing liquidity unlocked large-scale participation and capital flow.

In 2020, DeFi was less of a finished product and more of a laboratory of financial experiments. a16z’s investments helped incubate projects that proved decentralized finance could be more than hype—it was becoming a foundation for more open, accessible, and programmable money.

How Did These Themes Set the Stage?

By focusing on infrastructure and DeFi in 2020, a16z made a clear bet on foundational capabilities rather than flashy end-user apps. This approach raised questions that still shape investment outlooks today:

  • How can crypto systems scale without sacrificing decentralization or security?
  • Will users embrace decentralized financial services over traditional banks?
  • What infrastructure gaps need filling before mass adoption?

These themes weren’t just trends; they were critical building blocks for the next five years of crypto innovation. They helped shift the conversation from speculative tokens toward real-world utility, infrastructure robustness, and financial inclusion.

The seeds planted in 2020 have matured into the diverse and complex crypto ecosystem a16z supports today. Understanding these origins shines a light on why infrastructure and DeFi remain core to the firm’s strategy—even as new themes rise.

Emergence of Layer 2s and Scalable Infrastructure: 2021–2022

Between 2021 and 2022, the blockchain space faced a pressing challenge: how to scale popular Layer 1 (L1) networks like Ethereum without losing security or decentralization. The native throughput of early blockchains was unable to handle the surging user demand. That’s where Layer 2 (L2) solutions came in—offloading transaction processing from the congested base layers to faster, cheaper second layers that still anchored their security on L1. This shift was not just technical; it was strategic, setting the stage for widespread crypto adoption by reducing fees and improving speed.

Layer 2s such as rollups (both optimistic and zero-knowledge), sidechains, and state channels offered distinct trade-offs. Rollups, in particular, became the focal point because they batch transactions off-chain and submit proofs to L1. This preserved Ethereum’s security guarantees while scaling throughput up to thousands of transactions per second—a dramatic improvement over native L1 limits. These advances answered a key question for the broader ecosystem: How can decentralized platforms process mainstream transaction volumes without sacrificing trust?

At the same time, the emergence of scalable infrastructure put interoperability into sharp focus. Multiple rollup chains, sidechains, and Layer 1 alternatives meant that value and data needed to flow seamlessly across different blockchains. This period birthed new bridges and protocols addressing compatibility, fuelling a multi-chain future. Investors like a16z recognized that scaling was multi-dimensional: not just faster chains, but also networks that communicate fluidly and securely.

Key Investments: Rollups, ZK Proofs, and Interoperability Projects

a16z’s funding in 2021-2022 zoomed in on companies innovating at the intersection of scalability and interoperability. Their bets primarily focused on:

  • Optimistic Rollup Projects: These rollups assume transactions are valid by default and use fraud proofs to challenge bad actors. This approach increased throughput with strong compatibility for existing Ethereum smart contracts. One prominent a16z-backed player is Offchain Labs, the team behind Arbitrum. Their solution quickly became a go-to for developers seeking faster and cheaper Ethereum interactions without rewriting contracts.
  • Zero-Knowledge (ZK) Rollups: ZK-rollups generate cryptographic proofs (like SNARKs or STARKs) confirming state transitions instantly, delivering even faster finality and security. Matter Labs, with its zkSync protocol, was a major a16z investment here. zkSync addressed previous limitations by enabling native Solidity smart contracts on ZK rollups. This unlocks a broad spectrum of applications, from DeFi to NFTs, scaling Ethereum’s capabilities without sacrificing security.
  • Asset Bridges and Interoperability Protocols: As Layer 2 ecosystems expanded, moving assets safely between chains became equally important. Technologies supporting cross-rollup and multi-chain interoperability received attention for reducing friction in a fragmented network environment. Projects focused on seamless composability were critical to prevent user experience from breaking across chains, an area a16z also actively supported.

Why did these investments make sense for a16z at that moment? The move toward optimistic rollups and ZK proofs aligned perfectly with the pressing need to scale Ethereum’s high-traffic network, while maintaining decentralization and security. Moreover, interoperability projects addressed the overlooked but crucial aspect of how different chains would work together as the ecosystem diversified.

The momentum behind these projects illustrated a clear tradeoff in scaling: no single Layer 1 blockchain could solve every problem. Instead, layered solutions and greater cross-chain fluidity formed the infrastructure backbone for blockchain’s next phase. Through these early bets, a16z positioned itself at the heart of Ethereum’s scaling journey and the broader multi-chain future that followed.

The question for builders and investors alike was no longer if Layer 2s would matter—they’ve already proven their value. It’s now which solutions will become the dominant paths forward as networks grow more interconnected and user demands increase.

Shifting Toward Apps and Broad User Adoption: 2023–2024

As the crypto ecosystem expands in 2023 and 2024, a16z Crypto’s focus has clearly moved beyond foundational infrastructure toward applications that drive mass adoption. The firm is placing more emphasis on user-facing apps that solve real-world problems, especially those that promote stable, reliable digital money and sustainable decentralized finance. This shift reflects a recognition that broad user adoption depends as much on straightforward products and solid business models as on technical innovation.

a16z now backs projects that connect blockchain technology to everyday financial activities, enabling millions of users globally to interact with crypto in practical ways. At the same time, their investment in DeFi has matured, focusing on platforms with clear paths to long-term profitability rather than speculative growth. Let’s look closer at two key sub-themes shaping a16z’s current crypto thesis.

Stablecoins and Payment Platforms: The 'Killer App' Thesis

Stablecoins and payment infrastructure have grabbed a16z’s attention because they represent the clearest route to millions of users adopting crypto in daily life. Stablecoins, especially USD-pegged ones like USDC and USDT, provide a reliable, fast, low-cost alternative for cross-border payments and remittances in a world where traditional financial rails can be slow and expensive.

By 2024, stablecoin transaction volumes have grown to trillions annually, outstripping traditional payment systems such as Visa in some metrics. This explosive volume is supported by major Layer 2 networks that have reduced fees to fractions of a cent and sped up transaction finality. For example:

  • USDC transfers on Base cost less than $0.01, down from several dollars on Ethereum mainnet in past years.
  • Total stablecoin transaction volume hit $8.5 trillion in Q2 2024, showing massive demand for fast, borderless value transfer.

These numbers tell a clear story: stablecoins are not just crypto experiments anymore, they are becoming core infrastructure for digital payments worldwide. a16z sees building on this trend as a prime opportunity for startups creating payment rails, merchant tools, and wallet integrations that make sending and using stablecoins seamless.

For builders, this means the “killer app” is not a flashy new DeFi protocol or NFT game alone but real, everyday payments powered by stablecoins and supported by scalable blockchains. This focus opens broad markets, especially in regions with underbanked populations where mobile money and crypto payments can leapfrog legacy systems.

DeFi’s Maturation and Shift to Sustainable Business Models

a16z’s view on DeFi has evolved significantly. While early investments in DeFi targeted rapid growth and novel financial primitives, the firm now concentrates on projects showing healthy business fundamentals. The focus is on DeFi protocols and platforms that deliver:

  • Real revenue streams based on usage, fees, or innovative monetization.
  • Positive on-chain profits rather than reliance on token inflation or speculative rewards.
  • Margin expansion that points toward operational efficiency.
  • Sustainable growth trajectories that do not depend solely on hype or large subsidy programs.

This change mirrors a question many founders and investors face: How do we build DeFi projects that last beyond initial token hype cycles? a16z expects projects to demonstrate genuine product-market fit, user retention, and economic viability.

Examples include lending protocols with consistent interest revenue, decentralized exchanges with growing fee income, and asset-management products that balance risk with rewards responsibly. These protocols benefit from lower gas fees on Layer 2s and enhanced security from formal verification tools, making them more attractive for long-term users.

By focusing on sustainability, a16z signals that DeFi’s future lies in projects that act like real businesses—transparent, compliant, and with clear paths to profitability. This approach should encourage more disciplined growth strategies and innovation focused on user value rather than speculative capital flows.

These trends in stablecoins, payments, and mature DeFi models show how a16z’s investment lens has sharpened toward usability and economics. The firm bets on crypto applications that will bring billions of users on-chain through affordable transfers, reliable payments, and financial services with honest business foundations. If you’re building a crypto startup today, aligning with these principles can position you well in the evolving market.

Multi-Chain and Interoperable Future: The New Bet

The crypto world no longer revolves around a single blockchain ruling all. Instead, the shift towards multiple chains working together is clear and gaining momentum. This multi-chain ecosystem promises greater scalability, specialized use cases, and resilience but comes with challenges, especially around user experience and security. For a16z Crypto, this movement represents a significant adjustment in their investment focus, recognizing that success lies not in betting on just one blockchain but enabling networks to interact smoothly.

By backing interoperability, a16z signals confidence in a future where users move assets and information freely across different blockchains. But can this coexistence produce several winners, or will the market eventually crown only one or two dominant platforms? Let’s explore how a16z sees competition and collaboration among protocols playing out.

Competition and Collaboration Among Protocols

It’s tempting to think blockchain is a zero-sum game—that only one or two projects can dominate. But a16z approaches this differently. They believe multiple blockchains can thrive simultaneously if they serve different roles and connect through strong bridges. This view accepts diversity as not just inevitable but also beneficial for the ecosystem’s overall health.

Here are the core ideas behind a16z’s stance:

  • Protocol Diversity Is Strength: Different blockchains excel at different features: some prioritize decentralization and security, others focus on speed or low costs, and some target niche industries or geographic regions. Supporting a range of protocols caters to various user needs and application requirements.
  • Cross-Chain User Flows: The real power lies in enabling users to transfer value and data effortlessly across chains. Interoperability protocols enable assets to move between Layer 1s, Layer 2s, and sidechains without friction.
  • Cooperation Over Exclusivity: Instead of competing solely to capture isolated market segments, protocols that work together through shared standards and secure bridges unlock larger network effects. Developers and users benefit from accessing composable services spread across multiple chains.

This perspective raises a few important questions for founders and investors:

  • How do you build products and services that operate seamlessly in a multi-chain environment without confusing the user?
  • What security models and incentives ensure cross-chain bridges do not become weak links in the ecosystem?
  • Can governance and compliance requirements align across diverse chains while allowing innovation?

a16z’s investments increasingly reflect these considerations. They support projects that accelerate interoperability tech such as LayerZero, Axelar, and other protocols specializing in cross-chain communication. These investments aim at building a backbone that lets users and apps flow naturally across blockchain borders.

Ultimately, a16z bets on a future where many blockchains conquer their niches but interoperate so smoothly that users feel as if they’re navigating a single, powerful platform. This fosters innovation, reduces systemic risks linked to relying on one chain, and broadens the overall market infrastructure.

Understanding this shift in a16z’s investment focus helps explain why some of their recent bets are not about a “winner takes all” assumption, but about connecting the dots across multiple blockchains to unlock the full potential of decentralized finance, digital assets, and web3 applications. This approach signals a broader, more interconnected vision for crypto’s future.

Evolving Regulatory Landscape and Community Governance

Since 2020, the world of crypto investment has had to keep pace with shifting regulations and new governance experiments. Among these, Decentralized Autonomous Organizations (DAOs) are central. They not only represent a new way for communities to govern shared projects but also offer fresh business models and investment opportunities. a16z Crypto has been deeply involved in exploring this space, recognizing how DAOs blend governance, community, and capital into one ecosystem.

Decentralized Autonomous Organizations: Investing in Community-Led Protocols

DAOs offer a unique structure where governance happens through transparent, code-driven rules encoded on blockchain networks like Ethereum. Instead of traditional hierarchies or boards, token holders vote on proposals directly, giving the community control over decisions, treasury use, and project direction. This model aligns incentives among participants and builds a more democratized approach to managing decentralized projects.

a16z has actively participated in this shift by backing protocols governed or heavily influenced by DAOs. The firm sees DAOs as both a new kind of organizational layer and an investment vehicle. Why? Because DAOs pool capital, coordinate diverse stakeholders, and allow for collective decision-making without centralized intermediaries.

Several real-world DAOs illustrate the opportunity a16z pursues:

  • Uniswap DAO: One of the largest decentralized exchanges governed by community token holders, managing billions in transaction volume and treasury assets. Its governance tokens grant holders voting rights on upgrades, fee adjustments, and ecosystem grants.
  • Balancer DAO: A protocol DAO overseeing a decentralized asset management platform worth hundreds of millions in locked assets and responsible for strategic treasury allocation voted by its token community.
  • ShapeShift DAO: After transitioning from a centralized company to a DAO, it relies on member voting to steer protocol upgrades, acquisitions, and ecosystem growth funding.

These DAOs demonstrate how capital under management can soar into billions, turning communities into powerful economic entities. a16z’s strategy taps into this evolving market by supporting DAOs early, anticipating not only the protocols’ growth but also the value of governance tokens as both functional and financial assets.

There is more than just capital involved. Beyond treasury size, DAOs signify a new governance frontier. They bring challenges around voter participation, potential concentration of token power, and legal ambiguity, but also offer unprecedented transparency and participation. a16z closely evaluates these factors when investing, prioritizing projects that showcase:

  • Active, engaged communities rather than just token distribution.
  • Clear governance processes that balance decentralization with effective decision-making.
  • Growth potential through treasury management and protocol incentives.

As DAOs grow from experimental collectives to institutional capital allocators, they pose intriguing questions for crypto founders and investors:

  • How can a DAO maintain genuine decentralization while scaling governance complexity?
  • What legal and regulatory frameworks will support DAOs as recognized entities?
  • Can token-based voting systems evolve to encourage broader and fairer community participation?

a16z recognizes that DAOs are not only a new business form but a method of governance that could reshape how organizations operate globally. By investing in community-led protocols with strong governance models and meaningful capital backing, the firm aligns with an innovation that is as much about power distribution as it is about protocol growth.

In summary, a16z's investment in DAOs reflects confidence that community governance structures, combined with significant treasury control, will drive the next wave of protocol innovation and value creation. This approach positions a16z at the forefront of backing projects where capital and community shape each other's fortunes.

Conclusion

a16z Crypto’s investment focus has clearly shifted from building infrastructure and early DeFi experiments in 2020 to supporting scalable Layer 2s, multi-chain interoperability, and user-friendly applications today. The firm now prioritizes projects that drive real-world usage, especially stablecoins and sustainable DeFi protocols with strong business models.

This evolution mirrors broader market changes: lower fees thanks to Ethereum’s upgrades, explosive stablecoin transaction volumes, and an expanding global user base. Regulatory clarity and new governance models like DAOs also shape where a16z puts its capital.

Looking ahead, the key question remains: what will be the next major investment theme that captures broad adoption and creates durable value? Founders aiming to attract top VCs should focus on solving real user problems in a multi-chain environment, building compliant yet innovative models, and demonstrating clear growth paths that go beyond hype.

How will crypto evolve as more blockchains interoperate and mature businesses emerge? Watching a16z’s shifts offers essential clues for anyone building or investing in web3 today. Your next move could define the future of decentralized finance and digital assets.