The 2022 implosion of several centralized crypto platforms revealed an important truth: These failures weren't unique to cryptocurrency, but rather mirror age-old risks in traditional finance. And while headlines focused on failures like FTX, the underlying decentralized protocols that are fundamental to blockchain’s ultimate viability have demonstrated remarkable resilience.
“Most of the well-known meltdowns in Web3… have happened to centralized companies operating trading, lending, and speculating businesses," wrote Katie Haun, founder of Haun Ventures, in a recent essay. "Many of the failures have been offshore and all of them were largely unregulated.”
Managing $1.5 billion across two funds, Haun Ventures splits its capital between a $500 million early-stage fund and a $1 billion acceleration fund, maintaining a deliberate deployment pace.
"We said we were not going to be one of those funds that deployed in months. We would pick years," said Haun in a fireside chat hosted by CNBC. "When we go back to the timing, where we sit right now, it seems that it was a very good time to launch a fund."
Before entering venture capital, Haun spent over a decade at the Department of Justice, investigating complex criminal enterprises and later serving in the National Security Division. This experience taught her to look beyond surface-level explanations and question established narratives.
"You have to figure out people's motivation," she says. "Different people are motivated by different things and you have to find out what those things are."
In the crypto space, she sees a number of early unsuccessful companies as motivated primarily by quick profits rather than sustainable innovation and prone to the same sort of risk-taking behavior that has plagued the finance industry for decades.
“The transition from Web2 to Web3 has been slow and messy, and many of the early Web3 companies have been copycat versions of what came before them,” Haun wrote. "That is where the risk has been in the Web3 ecosystem and what we need to move away from."
Infrastructure First
Instead of replicating traditional finance models with a crypto veneer, Haun advocates focusing on fundamental infrastructure improvements. Her firm has chosen to back projects addressing core technical challenges in areas like privacy and scalability.
One recent investment, Aleo, exemplifies this approach. The zero-knowledge-proof project spent years developing its technology before launching on a mainnet. "These projects that are years in the making take years to launch because they're such hard problems of distributed computing," said Haun.
The focus on zero-knowledge proofs illustrates the fundamental infrastructure challenges facing Web3 adoption. Current blockchain networks face a trilemma: They must balance security, decentralization, and scalability, often sacrificing one to improve the others. Zero-knowledge proofs offer a potential solution by allowing transactions to be verified without revealing underlying data, addressing both privacy and scalability concerns.
Today's blockchains still face significant limitations, but there remains room for projects to solve these foundational problems and realize the unique benefits of blockchain technology, rather than building consumer applications on top of flawed infrastructure.
Decentralization and the Regulatory Challenge
Haun defines the crypto sector broadly as "cryptographic proofs paired with economic incentives," encompassing applications beyond finance such as distributed computing.
This technological foundation, she argues, offers solutions to pressing contemporary problems. Take privacy: "The amount of information that we now have the capability as a society, as governments, as big businesses to collect is really frightening," Haun says. She points to the dramatic increase in electronic payments as creating unprecedented surveillance capabilities.
"For too long, we've gotten too lazy because there haven't been great technological solutions to privacy," she argues. "People say they like privacy. They really care more about convenience. But for the first time, we're starting to see more and more technologies come out that offer a chance for real privacy without sacrificing convenience."
However, the path toward this decentralized future still faces regulatory hurdles. Drawing on her DOJ background, Haun advocates for balanced oversight that doesn't stifle innovation.
"Crypto is an issue in not only the presidential race, but also in many Senate races that are coming, many house races that are coming," Haun notes.
After more than a decade of unclear federal oversight that frustrated industry advocates, comprehensive crypto legislation is gaining momentum in Congress. The Financial Innovation and Technology for the 21st Century Act, which passed the House in May 2024 and is on the agenda for 2025, could establish long-called-for lines of crypto regulatory authority between the Securities and Exchange Commission and the Commodities Futures Trading Commission.
Republican French Hill, the incoming chair of the House Financial Services Committee, has made passing a "regulatory structure bill for digital assets" a top priority, pledging action within the first 100 days of the new Congress. "We need a market structure for digital assets. We don't have rules of the road," Hill said recently. "Under [SEC] Chairman Gensler, we had just regulation by enforcement. This is not helping America succeed."
Stablecoins could be another area to gain more widespread support. Now the 18th largest holder of U.S. Treasurys and processing over $25 trillion annually, stablecoins demonstrate how crypto infrastructure can integrate with traditional finance while maintaining decentralization principles.
For Haun, this represents the true promise of Web3. "It is the promise of software that is not controlled by a company, but instead by an open-source community with built-in safeguards and increased transparency relative to today's tech and financial systems," she wrote.
