EV3 Ventures — Investor Letter (Q2’25)

Public Markets

Crypto ended June with a $3.4T market cap (+24% QoQ), outperforming both equities (S&P: +11%) and physical commodities (Gold: +6%). Bitcoin returned +30% as an explosion of BTC treasury vehicles drove >$10B of speculative inflows. Excluding Bitcoin and Ethereum, the rest of crypto (+9% QoQ)—and DePIN specifically (+6% QoQ)—lagged equities.

Institutional allocators drove roughly $25B of new money into Bitcoin (and to a lesser extent Ethereum) last quarter. About 60% went to unlevered low-fee ETFs; the remaining 40% was corporate treasury vehicles (led by MicroStrategy) adding BTC to balance sheets. The success of these vehicles has inspired >20 publicly listed entities to replicate the playbook for BTC and increasingly for assets like Solana and Bittensor.

Premiums to NAV persist because: (1) investors expect BTC‑denominated yield (e.g., via convertible debt sold to hedge funds harvesting volatility), and (2) a class of investors unwilling or unable to transact on crypto exchanges pays a premium for equity‑listed exposure. As volatility subsides and more vehicles launch, these premiums should compress; secondary buyers will underperform spot crypto, while pre‑launch, in‑kind contributors can still do well if residual premiums offset fees.

Meanwhile, crypto‑exposed equities saw a surge in demand. Circle’s IPO blew open the window and rallied dramatically in its first month of trading, stoking debate on whether equity markets are overpaying for access to stablecoin economics. A simple back‑of‑the‑envelope DCF shows the market is pricing in aggressive growth, margin expansion, and improved take rates from distribution partners.

Retail distribution & exchange dynamics

Fintech platforms like Robinhood and Nubank (a combined 150M users with $250B of assets) are expanding crypto listings and distribution. Today, a Robinhood or Nubank listing can be worth more than a Coinbase or Binance listing due to untapped retail reach. Liquidity and price discovery for top assets is also shifting toward decentralized venues like Hyperliquid, pressuring CEX oligopolies to accept lower margins and standardize TGE playbooks in IPO‑like fashion.

Regulatory outlook & DePIN token implications

Forthcoming U.S. legislation prioritizes stablecoins (GENIUS Act) followed by market structure (CLARITY Act), delineating SEC‑regulated securities vs. CFTC‑regulated commodities. Assuming passage, we expect platforms to list spot products for CFTC‑jurisdiction tokens in 2026 and derivatives in 2027. In the interim, Robinhood/Nubank lean into low‑risk listings like L1/L2 leaders and memecoins.

Onchain Revenues & Reflexivity

Onchain buybacks funded by protocol revenues are the most durable inflow source. In Q2’25, two of the top five tokens—HYPE and VIRTUAL—generated ~$175M and ~$9M in quarterly fees, respectively, with revenue‑generating tokens outperforming YTD. Per DeFiLlama, protocols generated ~$18B in onchain fees in the past 30 days (~$215B run‑rate)—dominated by trading, gas/MEV, and lending/staking—while DePIN sits near ~$75M annualized, still early.

Revenue quality matters. Token‑denominated “financial” revenues are reflexive—algebraically a product of token prices and activity volumes—and can collapse in bear markets. By contrast, DePIN generates fiat‑denominated revenues more insulated from price swings. We frame this with first‑order (DePIN‑like, resilient base) vs second‑order (financial, highly cyclical) reflexivity, à la Soros. A thought experiment contrasting HYPE (trading fees) vs HNT (wireless data) shows the resilience tradeoff across cycles.

Where are DePIN’s Revenues?

At the end of Q1’25, DePINs were at ~$37M onchain ARR and ~$10M onchain buybacks; by Q2’25, onchain revenues doubled to a ~$75M run‑rate. Key contributors:

• IO.Net ($IO): GPU marketplace revenue grew from $20M (off‑chain) to $27M (on‑chain) ARR (+35% QoQ); now verifiable onchain.
• Helium ($HNT): Wireless revenues from $2.4M to $4.4M ARR (+80% QoQ), excluding $3M non‑recurring fees and ~$6M off‑chain revenue at Nova Labs (implying ~$13M total run‑rate).
• DIMO ($DIMO): ~$1.0M ARR from developer subscriptions onchain; expanding to Japan and Chile.
• NATIX ($NATIX): Mapping/subscription revenues from $0.7M to $1.0M ARR (+40% QoQ); launched VX360 product (Tesla‑focused).
• Silencio ($SLC): ~$0.3M ARR verifiable onchain from noise‑data sales, subscriptions, and burns.
• Impossible Cloud ($ICNT): Token live; ~$6M off‑chain ARR (+15% QoQ), targeting onchain migration.
• Decentralized CDNs (Titan, Aro, Pipe, Gradient, Mawari, Rilla): VC‑backed, each privately reporting ~$1–10M ARR; could rival GPUs near‑term.

Headwinds included Filecoin’s fee growth driven largely by slashing (paid storage shrank), weak demand for decentralized cold storage (incl. Arweave), and various networks with QoQ declines as teams iterate toward PMF. Given current trajectories, we estimate DePIN ends the year at ~$100–150M onchain ARR.

DePIN’s Path to $1B+ ARR

1. Cover the full spectrum of digital infrastructure. Fixed wireless, hot storage, residential solar, pluralistic identity, wearables, and food delivery—all large markets—are underrepresented onchain.
2. Align tokenholders and shareholders. Greater transparency and potential corporate–protocol unification (e.g., proposed Nova Labs ↔ Helium Foundation merger) can reduce “junk equity” dynamics and attract institutional capital.
3. Introduce debt financing. Equity‑funded global infrastructure doesn’t pencil. DePIN can leverage exogenous miner loans (on/offchain) and endogenous, in‑protocol debt (e.g., redeemable future‑value claims) with careful rate/redemption design.
4. Build deeper ties with AI companies. The majority of current DePIN revenues derive from AI demand (compute and data). Product design should explicitly target these customers’ needs.
5. Expand to User‑Generated Services (UGS). Use crypto incentives to coordinate user‑owned resources to deliver fiat‑denominated services. DePIN is the hardware‑subset of this broader UGS universe.

2030 snapshot: Compute remains largest by ARR; wireless and energy grow fastest (~$200M each). Identity/ads surprise to >$100M ARR with defensible moats. Mapping, labor, logistics converge; wearables slower; positioning grows but with margin compression.

Private Markets: Adtech Thesis

We published an “Advertising from First Principles” deep dive and have grown conviction in crypto‑enabled adtech. Three founder‑driven insights stood out:

1. Agencies are ideal early customers. They control large budgets, maintain an experimental allocation, tolerate higher take rates if performance is superior, and can scale successful channels across accounts.
2. Simplify and systematize emergent behaviors. Daisy pays influencers to like/comment/repost sponsored content rapidly, using zkTLS for real‑time attribution and stablecoins for near‑instant payouts—collapsing the path from onboarding to cash to <24 hours and creating sticky usage. Outside the portfolio, Whop’s clipping marketplace shows how formalizing “what users already do” can scale to meaningful GMV quickly.
3. Measurement is the moat. The third wave of attribution is cryptographic. Opacity enables brands to verify engagements across third‑party, login‑gated contexts (with user consent), powering granular, verifiable ROI and “vampire” user acquisition from competitors.

Portfolio Update: DAWN

Dawn (Andrena) unveiled the Black Box—a $2K home device targeting “solar‑like” economics for wireless: replace a $50–75/mo ISP bill with $30/mo to DAWN, yielding $20–45/mo savings and a 4–8 year cash payback (often faster when including multi‑network DePIN rewards mined in parallel). At 10K+ devices, BB becomes a crypto platform; at 1M+, a sovereign computing platform for private data and local apps.

The team brings deep wireless hardware experience (industry‑leading margins while undercutting incumbents), capitalization (>$30M raised), and distribution (>2.5M extension installs; >500K followers). Near‑term focus: scale to 100K devices, then 1M.

Outro

Rails are stronger; sentiment is weaker. Markets demand revenues and disclosures yet indiscriminately bid crypto‑exposed equities. Regulatory clarity is closer for fundamentally valuable projects while memecoins dominate attention. Price discovery is migrating onchain. “DePIN” was too narrow, then too broad—hence our broader “User‑Generated Services” lens.

— Your partners,
Sal & Mahesh