Author: Dashan, Founding Partner of Waterdrip Capital
Over the past two years, the concept of AI has been soaring, with large models and decentralized technologies intertwined, causing many to be dazzled. As a VC, we have looked at hundreds of projects of all sizes and would like to share some insights—including the real cycles of the AI industry, why AI and Crypto are inseparable, and what we value most and are most cautious about when evaluating projects.
Note: This article is excerpted from the roundtable discussion “AI+Web3-The Real Revolution” held on April 28th as part of the “AI + Bitcoin, the Next-Gen Revolution – BTC Vegas Side Event.”
Although giants like OpenAI, Anthropic, and Google are currently dominating the scene, appearing to have the momentum to take over everything, our research has shown that the entire AI industry is actually still in a very early stage. Being in the early stage does not mean that you can blindly invest now, especially in areas like AI hardware manufacturing that have already been hyped up, which require more careful consideration.
In our view, the AI industry chain can actually be divided into seven different levels from bottom to top: Seventh Layer: AI Intelligent Agent; Sixth Layer: Token Optimization; Fifth Layer: Token Distribution; Fourth Layer: Large Language Models; Third Layer: GPU; Second Layer: AI Data Centers; First Layer: Power Infrastructure. Take the second layer, AI Data Centers, for example; this is a typical cyclical industry. Over the past two years, global capital has been frenziedly buying land and constructing data centers for heavy asset expansion. However, there is a time lag from the completion of this capacity construction to its actual launch into the market. Based on our observations, this massive capacity is likely to come online around 2028.
Every year, thousands of AI + Web3 business proposals can be seen in the market. After reviewing so many stories, we have distilled the most core screening principle into two words: honesty. We divide honesty into two levels: the honesty of the team, which means rejecting packaging and patchwork, and the honesty of the product, which means rejecting PPT-driven approaches and false metrics.
In the capital markets, projects that are dishonest, driven by hype and fraud, may temporarily boost their valuation, but their ultimate fate is inevitably zero. In contrast, projects that are honest and dedicated to their work often have a much longer trajectory. In investment, slow is fast, and those projects that can survive in the long term are the ones we are willing to invest in and strategically support.
Regarding future opportunities, our research has led us to the most anticipated: the deep integration of AI + Blockchain + Entertainment. Currently, most of the funds in the market are focusing on hardcore and somewhat dull B-side infrastructure such as AI payments and Decentralized Computing Power (DePIN). While these tracks are important, the competition is too intense, causing everyone to overlook the consumer side, which has the greatest potential to attract mass users and retain funds.
As large-scale models and agents mature, AI will replace the vast majority of repetitive jobs. In a future where productivity is highly abundant, human society will undergo a fundamental transformation where high-quality entertainment will be the ultimate destination. The future of entertainment should fully integrate AI, where games feature NPCs with consciousness and memory, while blockchain establishes “ownership” and economic order through tokens. We are actively seeking disruptors in this direction, which could be the next narrative to ignite the entire industry.
Disclaimer: This report represents only the author’s personal and institutional industry research perspectives and is provided for industry communication purposes only, not constituting any investment advice.
[BlockBeats]
AI+Web3 Convergence: Strategic Investment Opportunities in the Next Tech Revolution
The recent discourse from Dashan, Founding Partner of Waterdrip Capital, presents a compelling framework for navigating the increasingly intertwined landscape of artificial intelligence and blockchain technology. As a senior crypto market analyst, I find this perspective particularly valuable given its nuanced understanding of both industry cycles and investment fundamentals.
Industry Structure and Investment Horizons
Dashan’s seven-layer AI industry framework provides a valuable lens for crypto investors to identify value capture points. While infrastructure layers (GPU, data centers, power) represent necessary foundations, the real tokenization opportunities reside in the higher layers: AI Intelligent Agents, Token Optimization, and Token Distribution. This hierarchical understanding is crucial for capital allocation decisions.
The warning about AI data center capacity coming online around 2028 deserves serious consideration. We’re currently witnessing a GPU arms race with significant capital deployment, yet the time lag between construction and market deployment creates a potential oversupply scenario. For crypto investors, this suggests caution for tokens directly exposed to hardware infrastructure, with potential downside pressure emerging in the medium term as capacity utilization becomes a concern.
Investment Philosophy: Honesty as Alpha
What resonates most is the author’s emphasis on “honesty” as the core screening principle. In an environment saturated with hype-driven projects and inflated metrics, this contrarian approach focusing on genuine product development and authentic team composition offers a path to sustainable alpha. The observation that “slow is fast” in investment rings particularly true in crypto, where projects with strong fundamentals often outperform the hype-driven darlings over the full market cycle.
The Undervalued Narrative: AI+Blockchain+Entertainment
While market attention remains fixated on DePIN and AI infrastructure, Dashan identifies a compelling contrarian opportunity in the convergence of AI, blockchain, and entertainment. This perspective aligns with my own analysis that consumer-facing applications represent the largest untapped market for tokenized AI solutions.
The vision of AI-powered NPCs with consciousness and memory, combined with blockchain-established ownership, creates a paradigm shift in digital entertainment. Unlike infrastructure plays that face intense competition and commoditization, entertainment applications offer network effects and user stickiness that can capture more value. For crypto investors, this suggests looking beyond the current DePIN narrative toward projects creating genuine AI-enhanced entertainment experiences.
Risk Considerations
Several risks merit attention:
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Hype Cycle Volatility: The AI sector is experiencing significant hype, which often precedes market corrections. Projects without strong fundamentals may face substantial downside when sentiment shifts.
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Execution Risk: The technical complexity of integrating AI and blockchain creates substantial execution challenges. Many projects will fail to deliver on their promises.
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Regulatory Uncertainty: Both AI and crypto face increasing regulatory scrutiny, creating potential headwinds for projects at their intersection.
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Tokenomics Design: Successfully designing token economies that capture value from AI applications remains an unsolved challenge for many projects.
Strategic Investment Approach
Based on this analysis, I recommend a tiered investment approach:
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Core Holdings: Allocate to established AI infrastructure tokens with clear utility and tokenomics, recognizing the 2028 oversupply risk.
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High-Conviction Bets: Focus on AI agent projects with honest teams and demonstrable product-market fit, particularly those solving real problems.
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Emerging Opportunities: Explore the AI+Blockchain+Entertainment space, identifying projects with genuine creative vision and strong technical execution.
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Speculative Allocations: Consider smaller allocations to experimental AI token distribution models, recognizing the higher failure rate but potential for outsized returns.
The convergence of AI and blockchain represents one of the most significant technological shifts of our time. By maintaining focus on fundamentals, avoiding hype-driven investments, and identifying underserved market opportunities like entertainment applications, crypto investors can position themselves to capture value from this next paradigm shift.