The first public blockchain -the bitcoin network is a little over a decade old. Since 2009 after Bitcoin blockchain went live just less than a year after the global market crash, we have since been faced with a deluge of cryptocurrencies whether they are coins or tokens.
Fast forward to 2019, barely 2 years later after Bitcoin attained its all-time high, there are well over 1600 cryptocurrencies many of which may never escape obscurity yet the list keeps growing.
Before 2017, bitcoin experienced its fair share of bashings from mainstream media, big banks such as JP Morgan and central banks of nations. With its ability to facilitate monetary transactions in a trustless manner, the threat to conventional institutions that have since time immemorial fiercely fought to maintain their control over people’s finance appears to be under serious threats. Every now and then over the years, we saw the price of Bitcoin dubbed the new “digital gold” fluctuate like mercury over every blow of the wind. From the Silk road saga to the Mt. Gox Exchange hack and even the DAO hack not peculiar to bitcoin but Ethereum, Bitcoin is said to have died many times and resurrected from the ashes.
As the road to mainstream adoption becomes more and more convoluted each passing day, we have seen many established businesses like Fiverr, the global freelance giant reneging on its support for bitcoin, Starbucks debunking rumours of its plans to start accepting cryptocurrencies, Expedia the travel giant backing down, Stripe in the same year it started accepting bitcoin pulled the plug on it. Most of these industry giants citing volatility and delay in transaction confirmation as their major reason for hacking down on their earlier support for digital assets. It’s no news that bitcoin on chain transactions capacity hovers around 3 to 7 transactions per second with just 1 confirmation every 10 minutes while Lightning Network (LN) an offchain solution still in development touts to solve this problem promoting ultra fast and fee-less transactions via interconnected offchain payment channels.
Moving over to the crux of this article which bothers on the key reason most crypto related startups fail if you’re familiar with cryptocurrency projects and how most of them launch(ed) out, you could always draw similar patterns on how they all pilot their activities. From lustrous whitepapers to big plans, to a larger than life ecosystem where it will be employing multiple use cases of its tokens to disrupting multi-billion dollar industries, it’s actually a Scroll when reeled out which will require curation to save time in making any meaningful sense of it. “We will be the next unicorn” many founders indoctrinate their community who have been seen to engage in nothing other than optimistic speculations on the price of the soon to launch unicorn, becoming overnight millionaires. Little wonder the phrases “when moon?”, “when Lambo?” became established in the crypto community even though they were grammatically offensive.
What exactly is the key reason many of these projects have kept falling in their numbers? Having studied not less than 250 crypto startups as both an independent reviewer and working with a crypto review project, I found out one recurring factor common among all the failed projects my analysis covered. And it’s just this —
Not focussing their attention on a core problem to solve.
I’m sure by now your mind would have cast back to that project that reeled out about 15 use cases for its token whether symmetrical or diametrically unaligned and how robust its ecosystem will be. Some founders if not many even go as far as speculating on what the price of their tokens will be in the future. “in about 3–5 years from now our token should be worth $5 per token and our company worth around $300 million. We have it all thought out.” this has led to the dying off of most projects launching within the cryptospace.
Digging deeper to investigate why what seems to be counterproductive is still being pigheadedly adhered to, let’s explore.
A major enduring character of digital assets lies in their volatile nature. Cryptocurrencies jive about in their prices even the stablecoins said to be backed by fiat or scarce metallic resources like gold swing around. We saw this in USDT and TUSD. Trying to solve volatility would be like sweeping off water from the seashore trying to get that place dried up. Hilariously I asked one of my client partners how he proposed stamping out volatility in the wake of the launch of his digital asset powered startup. He looked at me suspiciously as though I was out for his jugular, “Even Bill Gates or Elon Musk couldn’t do that with their share prices when the charts graphically danced around, so don’t think you can stamp it all out” I said to him.
Most founders have come to settle within themselves the indestructible presence of volatility inherent in crypto assets, therefore have sought to build as many use cases as they can within their token’s ecosystem to drive up demand together with a finite supply helping to either stabilize price or keep it in an upward trajectory over time. What we have always seen is a project having 10–20 use cases without even one of the use case being strong enough to establish that startup within its niche. In one of my recent articles where I talked about Launching a Viable Tech Startup in the Blockchain Industry, I spoke about the over bloated ambition most founders of tech startups within the blockchain industry portray which is hinged on unrealistic beliefs that they will solidify their presence. For most internet companies, profitability and survival hinge on adoption. Yes, adoption of your product or service and not the claims, whitepaper or hypes but everyday use of the product or service your startup is known to churn out. Adoption of blockchain related products or services in the mainstream hasn’t been quite easy especially with the friction that exists with applications such as Metamask and a few other factors. Thanks to projects like Aave and Melonport who are braving the odds to make things easier with their innovative ways of building. Yet, it’s still long shot!
When their counterparts in Silicon Valley is scrutinized, you see they are actually focusing on one core area. If you consider Facebook, though it has Messenger the business is still very linear, connecting Friends and Families. Instagram is just a Photo and Video depot. Telling stories with photos. We also have Twitter which is and has been a microblogging platform. What is Uber doing? What is Airbnb doing? Just the business of aggregation. They are exploring and exploiting the market of the Sharing Economy. Others which are doing businesses on multiple fronts actually started off with one and grew to where they are today. Google, for example, started off as a Search Engine. Now we have several offerings by Google. It was quite interesting that after Google was restructured with its parent company being Alphabet, it became very clear how much Google has grown from a Search engine to one of the world’s most valuable company. We also have Microsoft, Apple, Intel, Dell etc. These firms started focusing on core areas and then grew it before they were able to branch out to other areas. Startups who rather are not bogged down with one too many uses but seeking to onboard as many users they can on their core platform stand a better chance over their wandering counterparts. These Silicon Valley companies have built with the intent to accommodate everyday users of their platform with little or no friction without much differentiation of the varied functions their platforms afford their users. Looking at some of the relatively successful firms in cryptodom, Binance, Blockchain.com, Bitmain, Coinbase etc. These firms focused on the core area solving singular problems which have paid off as they are the go-to for those in need of quality service in their respective niches. An intending founder should take a cue from these.
Therefore as a Crypto Startup, in the wake of launch, it’s imperative you critically evaluate your offering(s) to see if you’re not just running after the unfortunate trend of aggregating multiple use cases which isn’t of much significance. Also if already running your own firm, the story of how Instagram became what it is today after stripping off features which weren’t needed will help in defining where you need to go. Having multiple use cases as a project is not a bad thing necessarily but the execution and sustenance is what matters.While Founders may think each use case of the project can be spawn into its own separate firms, startups still have to understand that it’s in focusing of the heat of the sun via a lens can fire be produced. This is why burning energy on the obviously unproductive is no sign of wisdom.
I consult with tech projects and startups in blockchain and others. Connect with me on LinkedIn.