Even in the midst of what many consider a bull run — Bitcoin up 126% and Ethereum up 53% year-over-year — retail investors are feeling a sense of stagnation in the token markets. Earlier in the year, memecoins stole the spotlight, but as the dust settles, it's clear that only a small fraction of investors actually profited. Now, with even the most hyped infrastructure projects showing declining charts, the question looms: where should retail investors put their money next?

The answer lies in identifying blockchain ecosystems that offer builders the tools to build, launch, and scale real companies with sustainable valuations — opportunities with genuine long-term potential, rather than just another meme-driven gamble. One that will start to resemble an actual stock market of sorts.

In the current Web3 landscape, the consensus is clear: people are growing weary of yet another infrastructure company raising funds; instead, they're eagerly awaiting the next big consumer application. While defining what a "consumer application" entails could be an article in itself, it's crucial first to understand why venture capitalists (VCs) continue to pour money into infrastructure. The reality is that venture capital is driven by the pursuit of a 100x return — like finding the next Solana. Many large VCs hedge their bets by diversifying their portfolios, hoping that one big win will offset the losses from those that didn't pan out. However, even among VCs, there's a growing recognition that infrastructure investments won't yield returns if there's no surge in applications building on them.

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A common criticism of venture capitalists is that they aren't willing to invest in consumer applications, but that’s not entirely accurate. If we look back to 2021, after Axie Infinity’s success, nearly every VC funneled billions into the GameFi industry, hoping to replicate that success. While it’s likely that little of that money will ever be returned to investors as profits, it's clear those investments were aimed at consumer applications — or at least, attempts at them. Even if most of these GameFi projects were essentially DeFi applications disguised as games with Ponzi-style tokenomics, they were still consumer-facing efforts.

VCs will invest in consumer applications once they spot a winner. For instance, we've seen 40 replicas of Polymarket (my estimate) since its recent success. The main takeaway here is that, despite the expectation that VCs should have contrarian views to generate returns for their investors, they often resort to being copycat investors, playing a financial version of "follow the leader.” Who those leaders are tends to coincide with who has the most money.

This brings us to the concept of actual applications being built on a robust blockchain infrastructure within a healthy ecosystem of apps and users. While some envision a future with a billion users, others argue that the technology isn’t ready to scale, and skeptics dismiss the entire space as a bubble waiting to burst. Rather than getting caught up in speculation, it’s more productive to consider what a truly thriving community of blockchain applications might look like. The specific blockchain isn’t the key factor here — no single chain has emerged as the clear leader. Much like how telecom companies have found regional success worldwide, we’ll likely see multiple blockchains thriving in parallel.

What a healthy ecosystem looks like

So, assuming the ideal blockchain infrastructure is in place, what would it mean for tens or even hundreds of millions of users to seamlessly interact on-chain in the future? And, crucially, how does this scenario create opportunities for retail investors and even VCs to achieve returns on their investments?

In a market like this, builders from around the world would have the freedom to choose their preferred blockchain based on their specific needs and the resources those blockchains offer. From there, these builders would ideate on the companies they want to launch, start building, and eventually bring their products to market. Ideally, they would then raise venture capital to scale their operations once they gain traction. After proving their model, they might launch a token on exchanges to grow their treasury, using those funds to fuel further growth according to their tokenomics.

Importantly, these companies would likely be raising money at more realistic valuations, as they would need to demonstrate they are building genuine businesses with sustainable revenue models. In this model, the blockchain would generate revenue from the blockspace used by these products, builders would profit as the value of the tokens they own increases, venture capitalists would see returns through token unlocks, and centralized exchanges would earn from the buying and selling of tokens by users. Or, perhaps, larger companies would acquire these projects in a way that is financially beneficial for everyone involved.

If this model sounds familiar, that's because it's similar to Web2. Then, a common path for companies is to build a minimum viable product, gain traction, raise venture capital to scale, and eventually either get acquired or go public through an IPO. These companies raise funds at realistic valuations and focus on creating sustainable businesses, with investors who believe in their long-term potential.

For retail investors, this model presents an exciting opportunity. Instead of pouring money into infrastructure projects with already inflated valuations or gambling on memecoins with near-zero chances of success, investors could back companies launching on different chains at smaller, more reasonable valuations with real growth potential. Savvy investors in this space might invest in a company whose token initially launches at a $10 million valuation and watch it grow to something like $100 million, based on their confidence in the company’s ability to deliver value to users over time.

We'd likely find ourselves in a scenario with multiple iterations of projects across DeFi, SocialFi, GameFi, and various consumer applications. Each project on different chains would require a fresh set of metrics to determine which ones are primed for success. This dynamic environment would be particularly exciting for savvy investors eager to explore innovative methods for evaluating and capitalizing on on-chain companies.

There would undoubtedly be missteps in valuing and investing in these companies. However, over time, the market would stabilize, shifting away from gambling for returns and toward more strategic investments. Investors would begin to identify the diamonds in the rough through solid investment strategies, and the ecosystem would gradually mature into a more sustainable market. This isn’t to downplay the inherent risks that always accompany investing, especially when valuing companies at the cutting edge of innovation. Web3 is already rife with scams, so it's likely that a more sophisticated investing landscape could also give rise to more elaborate schemes. But, despite these risks, the potential upside in such a market could be enormous.

As the blockchain industry matures, it needs to shift from pure speculation to investments that resemble a traditional stock market. For years, the industry has created and lost value without establishing real business models. However, as we enter the next phase — where blockchain is taken seriously by regulators and major businesses worldwide — it’s crucial to demonstrate that we’re on the path to turning blockchains and the applications built on them into real, sustainable businesses. By doing so, builders, users, and investors can finally reap rewards in a way that fosters a healthy and lasting blockchain ecosystem.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.