How To Invest In DeFi Tokens Early For Huge Returns, Crypto VC Stocks


  • Vance Spencer is the co-founder of Framework Ventures, one of the largest DeFi investors in crypto.
  • He spoke to Insider about the company’s investment strategy and two DeFi bets that have taken off.
  • Spencer also shared his take on what he sees as the next emerging trend in the crypto space.

Vance Spencer is, in his own words, really “not so much into bitcoin”.

For the 30-year-old venture capitalist, nothing is more exciting than exploring decentralized financial applications built on the Ethereum blockchain.

“The ability to make an insurance company with 20 lines of code and a bank with 30 lines of code,” he said in an interview. “When I saw that, it was kind of bulb moment.”

The co-founder of Framework companies is not afraid of its pro-Ethereum stance. In fact, he believes that many first-layer protocols, including Solana, Polkadot, and Avalanche, which some crypto traders have dubbed “ETH killers”, only stage “ETH murder attempts”.

In his view, the vast majority of the “most interesting and innovative concepts” still occur on Ethereum, which is further enhanced by Layer Two scaling solutions and side chains such as Optimism, Arbitrum and Polygon.

“Materially, we see Ethereum as the long-term winner in space in a way that hasn’t really been appreciated by the market yet,” he said.

The company’s focus on Ethereum and DeFi has paid off. With his co-founder Michael Anderson, Spencer launched Framework in 2019 and raised a fund of $ 15 million. In just two years, the company has grown to manage more than $ 1 billion in assets after raising $ 100 million for a second fund in May, according to The scoop.

Spencer attributes the team’s success to its unique investment strategy, which emphasizes actively participating in the growth of pre-seed and start-up companies. They also estimate their participation in the projects at around 5%.

These start-ups can be risky to invest and sometimes consist entirely of “two guys and a whitepaper,” but they are a group that has been largely ignored by other venture capitalists, he said. This gave Framework the opportunity to dominate in space.

By sizing their stakes to around 5% of a network through multiple towers, the team can focus on projects with the most disruptive potential.

“What that means is you really aren’t looking for a billion dollar result, it would only be a $ 50 million return if you own 5%,” he said. “You’re really focusing on a bottom line of $ 10 billion to $ 100 billion for these networks.”

To achieve this exponential result, Framework Ventures also relies on the team of 20 engineers mostly from its sister company Framework Labs, which creates proprietary software to help grow and move portfolio companies forward.

2 first bets that took off exponentially

For the company’s flagship fund, DeFi, Spencer is looking for decentralized networks that will disrupt centralized crypto services and therefore accumulate two to three times as much value. The company’s second fund opened up to emerging trends such as blockchain-based games, social tokens, and Web 3.0.

Aave (AAVE), an Ethereum-based borrowing, lending and money market protocol whose token has jumped 467.7% in the past year, is an example of the company’s successful bets. The protocol, which involves approximately $ 27 billion of the total unlocked customer value deposited there, has become the foundation of decentralized finance for Ethereum and other chains, Spencer said.

His team was able to meet Aave through another holding company called Chain link (CONNECT). Aave uses Chainlink’s decentralized oracles for price feeds.

“We actually run a number of Chainlink oracles that protect Aave by telling them what the price of a given asset is at any given second,” he said, “so they can calculate the amount correctly. of the guarantee and of the liquidations which must occur. “

True to his investment strategy of “active participation”, Spencer and his team have helped restructure the token economy of Aave, to sit on their multi-signature (which is similar to the board of directors of a company) and continues to be one of its biggest customers by creating software in addition to the protocol itself and using it.

“It’s pretty much an unstoppable combo where we can exercise a lot of our ability on this project and help them win,” he said.

Another bet of Framework’s second fund is the decentralized game studio Illuvium (ILV), whose token jumped 44.9% in the past month. The project is started by Kieran Warwick, the brother of the founder of derivatives

protocol Synthetix (SNX) Kain Warwick. (Synthetix is ​​also a Framework holding company.)

“They are building the first studio-grade triple-A game on the Ethereum blockchain,” Spencer said. “You earn governance token shares. You can earn cash flow from the game itself while playing this truly engaging game.”

As part of its “active participation” strategy, the Framework team not only helps Illuvium build and structure its token economy, but also begins to speculate on the playing fields, create player guilds and fund games. people who come to play. the game, he said.

The next emerging trend on its radar

Spencer believes people will be playing mostly blockchain-based games three to five years from now.

Just as free-to-play games like Candy Crush and Boom Beats have disrupted the traditional gaming industry, people will buy blockchain games that give them ownership through governance tokens and non-fungible tokens, he said. . Some of the players will also be able to achieve financial self-actualization as many of the Infinite Axis (AXS) players made in the Philippines.

He explains that right now, many indie game developers are struggling to find their place in the game industry because they have been pressed by the major game studios. As a result, many of them are entering the blockchain space to build decentralized game studios, which could grow into much larger conglomerates than the big game studios operating in the traditional space.

“I think that’s probably my prediction… that most of the big game studios in 2025 will be built on blockchain and open source,” he said.

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