80% of Web3 Startups Launch on Ethereum and Solana

Ethereum’s ecosystem remains the preferred chain for new web3 startups, but Solana is quickly gaining ground.

On Oct. 21, Alliance, a crypto accelerator program, published a report examining which blockchains new web3 startups have chosen to build on since 2021. The report looked at the more than 3,000 projects that have applied to join Alliance’s program each year.

The report found that roughly 62% of startups are joining the Ethereum ecosystem, 59% of which are building on optimistic rollups — with Base, Optimism, and Arbitrum proving particularly popular.

Base has quickly emerged as a popular network for new ventures, hosting 28% of startups building on Layer 2s. Alliance also noted that Polygon is losing startups to optimistic rollups, with its flagship Polygon zkEVM chain lagging behind optimistic solutions when it comes to attracting new talent.

Solana and Bitcoin gain market share

Solana’s startup ecosystem has made significant gains in recent years, now accounting for 18% of projects after dipping to 8% amid the aftermath of FTX’s collapse in late 2022.

“Solana is the ecosystem with the strongest momentum at the moment,” Alliance said. “Many of the top products on Solana today were in fact built throughout the bear market and FTX fiasco… Given the trend of where startups are building today, we believe it’s likely that Solana will continue to attract startups and users in the coming 1-2 years.”

The Bitcoin ecosystem is also attracting an increasing number of projects with a 5% share of startup activity. Alliance attributes Bitcoin’s growth to the launch of non-fungible and fungible inscription tokens, which were pioneered by Ordinals in 2023, alongside efforts to expand the burgeoning BTCfi sector.

“Efforts to dramatically increase programmability of Bitcoin, such as BitVM and dozens of Bitcoin L2s, are now coming to market,” Alliance said. “We’re also seeing the duplication of DeFi projects pioneered on Ethereum onto Bitcoin, such as DEXes, borrowing/lending platforms, and stablecoins.”

While Alliance highlights the opportunity for new projects to tap into the $1.3 trillion BTC market, it suggests that Ethereum and Solana may be too far ahead of Bitcoin’s technical limitations, creating challenges for developers to offer differentiated products on Bitcoin.

DeFi remains steady while NFT segment shrinks

The majority of startups studied operate within the DeFi, with roughly one-quarter of new ventures operating in the vertical since the start of 2023.

By contrast, the market share of NFT projects has dropped by more than half since accounting for nearly half of new ventures during the first half of 2022.

Infrastructure, AI, and payments have posted significant growth since H2 2022.

VC funding picks up in 2024

Venture capital funding has picked up in 2024 after last year’s lull.

Analysis from Galaxy Digital identified 603 deals worth $2.49 billion in Q1, 577 deals worth $3.19 billion in Q2, and 478 deals worth $2.4 billion in Q3. More than 80% of the funding was invested in early-stage projects.

“After three quarters, venture capitalists have invested $8bn in crypto startups, putting 2024 on track to meet or slightly exceed 2023,” Galaxy Digital said.

However, VC activity remains far below $29 billion invested in crypto startups during 2021.