M-Ventures Partner Leo Zhao: What Are The Future Trends and Opportunities of Web3?

This article is a recent speech by Leo Zhao, a venture partner of M-Ventures under MEXC. He talked about the opportunities and prospects of the cryptocurrency market in 2023 from an institutional perspective, and the core points are as follows:

  • The maturity of scaling solutions like L2 and ZK technology
  • Adoption by main stream users
  • Transparency and compliance

The following is the transcript of Leo Zhao’s speech:

Review of the current market

  1. The Ugly
    1. LUNA and FTX
  2. The Bad
    1. The significant drop in Crypto Market cap and Defi TVL
    2. The decrease of crypto developer activities
  3. The Good
    1. VC keeps investing in the industry
    2. The merge of Ethereum, the boom of L2 TVL , accrual in value
    3. NFT gets the mainstream spotlight

I bet everybody heard about the move The Good, Bad and the Ugly. I think that metaphor summarizes the current situation well. Throughout this year, record-high inflation and Fed rate hikes have led the capital market to severe decline.

When the tide recedes,the market de-leverages quickly. There are many people who have been swimming naked in the tides all the time. The peak market cap of Luna and UST was 40b and 20b respectively. FTX raised about 2 billion funds,while it withdrew 8 billion liquidity from the market. Therefore,many people have lost faith in the industry. The faith needs to be restored by taking more genuine actions.

Let’s look at the bad part. The global cryptocurrency market cap has retraced from 3 trillion to 0.8 trillion with a 73% decrease. The total value locked(TVL) on different blockchains dropped from 218b to 54b with a 75% decline.

Developer activities for EVM and non-EVM chains have both decreased significantly. (Source: The Block’s Data Dashboard)

However, VCs with deep pockets are still investing. Historically, the bear market is the best time for investments.

People who said the Ethereum merge will never happen, have witnessed the historical moment. It has been 97 days since the Ethereum merge. The total supply only increased 2,000 ETH. Without the merge, it would have inflated 1.1 million ETH, which worth about 1.2 billion USD that could have been dumped by miners.

Problems faced by the crypto industry

  1. Infrastructure limitations
  2. Web 1 UI/UX
  3. Transparency and Compliance

To recognize the opportunities, we need to know the problems. We believe right now there are three problems need to be solved.

First and foremost is infrastructure. Infrastructure does not only mean laye1 or layer2. There are still many centralized parts of blockchain that we need to tackle. For example, GitHub can easily censor Tornado Cash codes,cross-chain bridges are frequently hacked.

Secondly, we claim that we are in web3, but our UI/UX experience is not even as good as web2 . Seed-phrase is terrifying to keep for average users.

Lastly, we need more transparency from centralized institutions and a clearer regulation framework.

Trends and Opportunities in 2023

  1. The maturity of scaling solutions like L2 and ZK technology
    1. TVL of Arbitrum, OP is increasing
    2. ZK
    3. Other modular blockchain solutions
  2. Adoption by major users
    1. NFT everything. People no longer need to ask “what is NFT”, instead “which NFT should I ape into?” Gaming, Social and music
    2. MPC wallet and Smart Contract Wallet
    3. The migration of Web2 users
  3. Transparency and Compliance
    1. CEX is forced to provide more transparency or kicked out by Defi
    2. More clarity on the crypto assets regulation framework
    3. Hong Kong

To solve these bottlenecks, we believe these are the trends and opportunities that will rise in 2023 and the following years.

First, scaling solutions are maturing. TVL on Optimistic Rollups like Arbitrum and Optimism is increasing quickly. Although the TVL in USD terms peaked in May this year, in ETH terms it has increased from 250k to nearly 4 million in ETH. We believe more activities will migatrate towards to layer 2. There are also many interesting opportunities in this sector. Layer 2 as a service for specific apps. More reliable bridges and bridge aggregators.

Secondly, ZK rollup solutions are also catching up, with zkSync and StarWare learning the game. There are great opportunities in this sector, including ZKP hardware, personal data marketplace, and ZK powered cross chain bridges.

We also believe that NFT will further flourish. The graph shows the number of wallets that own a Lens profile. Lens Protocol aims to be a permissionless, composable,and decentralized social graph. In Lens Protocol, all of your social graphs become NFTs. Your profile, followers, posts and comments becomes NFTs to be easliy integrated by other developers. We believe this will revolutionize the way social apps are built. Not only in the social sector, there are also huge opportunities in the combination of NFT & Gaming, and NFT & music.

Another huge improvement in UI/UX will be coming from wallet design. Semi-custudial, social recovery and login with your web2 accounts are like Google and Facebook. Invite your family via email to co-manage your account. (Source: 1kx)

Gaming is another sector that will benefit. The left chart from Playtoearn.net shows that most web3 games are still in web page games era, whereas in the tradational gaming world, mobile gaming donimates the market with 90 billion revenue. The web3 games just started. Gaming infrastructure including web3 game distribution platform, gaming nft marketplace and game engines are filled with opportunities.

Last but not the least, transparency and compliance will also be an accelerating trend. Centralized institutions might be kicked out by Defi, if they do not provide enough transparency. Governments also need to provide more clarity on regulation framework to pave the way to welcome the next billions of users.


To conclude the speech, if you are a developer, keep developing these great oppotunites. If you are a VC, keep investing in these solid ideas. The future is still bright and let’s keep building a better financial world! If you want to access this report, please feel free to follow our Twitter page for the complete version.

About M-Ventures

M-Ventures is a crypto fund under MEXC, with $100m+ AUM and 300+ portfolio investments. We constantly study the market and the different sectors of the crypto industry to search for the next billion-dollar ideas. It’s my pleasure to take this opportunity to share with you some of our observations.

About MEXC:

MEXC is the world’s leading cryptocurrency trading platform, providing one-stop cryptocurrency trading services for spot, ETF, futures, Staking, NFT Index, and more. MEXC currently serves more than 10 million users worldwide and embraces the philosophy of “Users first, MEXC’s Changing for you”. Visit the website and blog for more information, and follow MEXC and M-Ventures.

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