Alliance accelerator: DAO and NFT are out, DeFi is in for crypto startups in 2024

Alliance noted a shift in crypto startup trends for the first half of 2024. DAO and NFT projects were already on their way out, while infrastructure and DeFi were in.

Alliance is one of the leading accelerators for crypto startups, tracking the trends in real-time. The organization vets and supports 3,000 startups per year, and has a direct connection to industry trends. The next cohort of startups can apply until November 20, with a potentially different set of trends.

Alliance organizes two rounds of applications per year, and recently released the report of startups for H1. The major trends are already shifting, with DAO and NFT startups on the way out. New crypto startups in 2024 focused on infrastructure, DeFi, payments, and AI features.

Some of the key trends this year are extending existing technologies and approaches. Ethereum is still the dominating ecosystem, with two-thirds of startups choosing it for their product. Solana taps 18% of the market, still in recovery after the collapse of FTX. Building on Bitcoin draws in only 5% of startup applications to Alliance.

For Ethereum-based startups, 59% are building on one of the three L2 chains, Optimism, Arbitrum, and Base. Polygon is losing the startup game, and relies mostly on legacy projects. The Polygon ZK EVM compatible platform now survives through activity on Polymarket and a handful of older games and apps. Startups rarely choose niche L2 chains, based on Alliance’s internal data. Base has been the L2 to catch up most quickly with Polygon, erasing its first-mover advantage as one of the busiest Ethereum-scaling platforms.

Alliance also notes a shift in the origins of startups. The USA still leads with the most funding rounds. However, when it comes to acceleration, Alliance is getting most of its applications from Europe (31%). North America had a 29% share, while Asia contributed 21% of the startups in H1. In 2021, North America was a leader with 45% of startup applications.

US investment may be suffering from overly-aggressive regulation and an enforcement strategy from the US Securities and Exchange Commission (SEC). Lawsuits against crypto startups remain unpredictable, limiting the potential for new launches. While the SEC loses or settles in many of the cases, a lawsuit can crush a startup at the wrong moment.

The expansion of stablecoin usage also allows more startups to develop globally, by accessing liquidity and cross-border payment channels. Startups outside the most developed regions are making use of the new liquidity trends to drive real on-chain adoption. Alliance also notes increased mentions of stablecoins, payments and RWA in their applications for H1, tapping one of the best product-market fits for the emerging market.

For Alliance, the share of North American startups has been declining in the last few batches of applications, while growing the interest from Asia and Africa. 72% of crypto startups are globally distributed and work as fully remote organizations. Founders move in from S&P500 organizations, while 12% of applicants come from top 100 universities.

Alliance’s startup portfolio covers major crypto narratives

The startup buzzwords for Alliance’s startup portfolio track some crypto trends that are already losing traction. In H1, applications were made for chain abstraction, meme projects, SocialFi, prediction markets, liquid staking and re-staking, new stablecoins, as well as L1 and L2 chains. Startups often mention ‘data availability’, ‘sidechain’ and ‘appchain’ in their accelerator applications, focusing on scalability. More startups are building app chains, often built around a single central app.

Despite Bitcoin lagging as a building platform, Alliance notes projects are trying to catch up. Turning Bitcoin into a programmable ecosystem became one of the trends in 2024. Alliance notes Bitcoin builders may try to replicate the Ethereum L2 ecosystem, with dozens of new projects attempting to break into the market. Based on applications, Alliance notes Bitcoin enjoys the biggest mindshare since tracking data.

The crypto AI narrative was among the noisiest, and may have peaked, estimates Alliance. Most of the crypto startups for AI focused on infrastructure, rather than actual products.

DeFi remains a lasting theme for crypto startups, as well as payment systems. Those types of startups achieve the most predictable project-market fit, while making use of the return of DeFi.

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