Is Crypto Durable and Long-term?
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“Not your keys, not your crypto” - satoshi probably
Over the last 6 months, we’ve seen the crypto market brought to its knees. Celsius, 3AC and now the king of them all, FTX, has met its match.
For a lot of people, this is as good as a death sentence for crypto.
When a company that was so hyped, and so widely used among consumers, falls in under 48 hours, it makes you question the longevity and durability of an ecosystem built on trading and speculation.
A few months ago, I wrote an article chastising the ‘fake’ innovation happening in web3. The number of copycat projects built looking to make a quick buck was annoying and definitely stifled the legitimacy of crypto.
We’re now in an even more precarious spot, with many legitimate projects, builders, VCs and contributors in the space being hit at varying levels of scale. However, I’m weirdly bullish after all of this, despite the continued fear-mongering that’s being perpetuated on Twitter.
Crypto was created to overhaul centralised control, and to make governance transparent. Funnily enough, we're in this position because of poor corporate governance and an overreliance on centralised entities. History continues to repeat itself I guess.
But just like every other hack or large-scale meltdown that crypto has faced, this next period of time will allow the real builders in the space to double down and think carefully about how they want to make their mark on the space.
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Looking to the future, I’d like to see a few things emerge from this:
Sustainable building: Through the 2020/21 bull run, crypto was known as the industry that never sleeps.
On a daily basis, something new and innovative was being released. Builders and speculators thrived in this environment as it offered strong short-term opportunities to make money and challenged and pushed people to iterate and build faster.
Yet, this led to poor product quality across the board. This resulted in expensive hacks and created a cycle of burnout and a lack of care for what was being built.
Numerous projects also experienced short-term PMF fuelled by simple incentive structures that favoured speculative behaviour. Over the next few years, these businesses will undoubtedly suffer through zombie startup hell. Enough money to survive, but no users to learn from.
VCs also have a part to play in creating a better building environment for founders through thoughtful capital deployment. Low levels of DD and high levels of competition among VCs led to substandard projects being funded. At the end of the day, the founders are the ones who suffer as a result of this. They are sold on false dreams and waste years of their lives building something that likely won’t go anywhere. I’d like VCs to be held to a higher standard on their DD procedures.
Improved UX: Crypto as a whole has a UX problem that was ignored in favour of reverting back to centralised norms.
People rightly assumed that users didn’t want to jump through the hoops and hurdles of accessing DeFi protocols. Therefore, they built centralised entities that sat on top of decentralised protocols. This created an unnecessary middleman, which crypto was designed to eliminate. It also created a different type of counterparty risk that is completely unnecessary for people to take on.
Self-custody of assets should not be synonymous with poor user experience. Take a look at Minke, for example. It takes 5 taps to go from creating a wallet, to having USDC in my wallet and with a few more taps I can access 6.05% yield on mStable, a non-custodial, decentralised stablecoin protocol.
If Minke can do it, so can you.
Be more forgiving: This is kinda hypocritical given the two points above, but across the crypto landscape, people are too quick to point fingers and chastise founders and operators for their actions.
There are countless occasions when a protocol might not work as intended, or an NFT project momentarily drops in value and the pitchforks immediately come out. This is not a healthy environment for builders to build in. In many cases, founders don’t iterate with intent and instead prefer to sit back and build their protocols passively, looking to appeal to the masses. This immediately stifles any creativity that founders and operators might have due to the fear of retribution.
Whilst it’s 100% not okay to commit fraud and to knowingly mislead users or commit any other crime, it is okay to make mistakes and to iterate on them over time. Crypto projects and protocols are startups after all. The founders and operators behind them are likely doing things for the first time in an intimidating and intricate space. Let’s give them the time and room to build peacefully.
And for those wondering if crypto is durable and long-term, well, the decentralised portion of web3 has stayed the course and has demonstrated its resilience in light of immense pressure from exogenous market forces. Time and time again, smart contracts have delivered what they promise and demonstrated their importance in the future of crypto. If crypto is to survive, our future will be increasingly commanded by smart contracts, and conducted on-chain.
Crypto has a long way to go to dig itself out of this hole. However, the level of innovation beyond the speculation and trading give me a sense of optimism for the future. Let’s see where the next 12 months takes us.
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