Ethereum Projects More Resilient Than Solana, BNB Chain – DL News

In the fiercely competitive world of DeFi projects, Ethereum-based startups have demonstrated greater resilience than those on Solana, as well as ventures on the BNB Chain.

According to a report from Lattice, a venture capital fund, approximately 20% of Ethereum projects ceased operations in the last two years. This is a better outcome compared to the 26% closure rate seen among Solana projects.

The study evaluated blockchains that housed at least 15 crypto startups funded during 2022.

Interestingly, projects based on the BNB Chain proved the riskiest, with around one-third folding.

Driving Factors in Crypto Ventures

Lattice identified that a surge in speculative capital during the bull market led many projects to overextend. This oversaturation, compounded by significant market downturns such as the collapse of the Terra ecosystem and the FTX bankruptcy, pressured startups to shut down, as indicated in closure statements from founders.

Moreover, nearly 80% of Ethereum-based startups successfully launched products since 2022. In contrast, just over 60% of Solana projects managed to do the same.

While Solana’s value has increased by 32% this year, the data underscores the severe impacts of the industry’s turbulent two years preceding 2024’s rally.

Market Influence on VC Interest in Emerging Projects

Investors committed over $5 billion to almost 1,200 crypto startups in 2022, marking a 150% rise from 2021, as per Lattice. This figure is lower than DefiLlama’s recorded $19.5 billion due to Lattice’s more focused accounting on blockchains with at least 15 funded projects.

Around 30%, equating to $1.4 billion, was directed towards seeding Ethereum-based startups. On the other hand, early-stage Solana projects attracted 7%, or $350 million.

Buoyed by the buzz around NFTs, the metaverse, and web3 gaming, capital flowed generously into these sectors. Many crypto entrepreneurs leaped at the chance to capitalise on these trends, although this strategy often resulted in negative outcomes.

Lattice Capital Co-Founder Regan Bozman highlighted the high failure rates in gaming and metaverse projects, with $700 million invested in their seed rounds yet many faltering before shipping any products, as he noted in a tweet.

Challenges in Sustaining Momentum

Following industry scandals and failures, it became increasingly difficult for startups to secure additional funding. Only 12% of the 2022 cohort managed to raise subsequent funds.

Although 72% of funded teams have released products since 2022, 18% have yet to deliver or have ceased operations entirely. Ethereum-based startups led the way with an 80% success rate in product launches, compared to 61% for Solana-based projects.

The Path Forward in Crypto Investments

Looking ahead, DL News forecasts a $12 billion investment in crypto projects for 2024, with a portion likely allocated to nurturing new startups.

Lattice highlighted growing investments in privacy-enhancing technology, artificial intelligence, and decentralised physical infrastructure networks (DePIN).

Earlier this year, global asset manager Franklin Templeton recognised Solana as a leading network for DePIN, underscoring its ongoing relevance in the evolving crypto landscape.

Osato Avan-Nomayo is a Nigeria-based DeFi correspondent. He covers DeFi and tech. For tips or story information, reach out to him at [email protected].