Building Digital Pickaxes for the Blockchain Community

Whenever I witness an emerging trend or viral phenomenon…I go back to this one question:

Who made the most money during the gold rush?

I was first introduced to this question via Chris Dixon’s blog:

There is a saying in the startup world that “you can mine for gold or you can sell pickaxes.” This is of course an allusion to the California Gold Rush where some of the most successful business people such as Levi Strauss and Samuel Brannan didn’t mine for gold themselves but instead sold supplies to miners — wheelbarrows, tents, jeans, pickaxes etc. Mining for gold was the more glamorous path but actually turned out, in aggregate, to be a worse return on capital and labor than selling supplies. — Chris Dixon

It turns out, we can apply this same framework for thinking about how to build companies.

When a major new technology trend emerges — say, the rise of online video or social media — entrepreneurs can try to capitalize on the trend by creating a consumer product (mining for gold), or by creating tools to enable consumer products (selling pickaxes). There are many exciting technology opportunities emerging today: some are horizontal like mobile, location, and local; others are vertical like fashion, art, real estate, education, finance and energy. If you are an entrepreneur thinking about starting a company around these trends, consider selling pickaxes. — Chris Dixon

While Dixon’s article was originally published back in 2011, I believe that there is still, of course, a massive opportunity to build digital pickaxes that complement today’s evolving trends.

For instance, interest in blockchain (and cryptocurrencies broadly) has exploded over the past few months.

via Google Trends

Whether or not you personally believe in the short/long term implications of crypto, there is clearly an opportunity to capitalize off of this mad rush.

In unpacking this further… I think about what “digital pickaxes” my friends and I can build to provide for this budding ecosystem.

As a test, we launched CryptoTab — a coin tracker that lives in your browser. And we now have over 750 users!

This is just one, super tiny example of how you can build out little pickaxes that provide value for this community.

THERE ARE SO MANY MORE OPPORTUNITIES.

Immediately, some ideas that come to mind are:

• Systems that help “gold miners” AKA crypto investors
• Systems that help the next generation of “blockchain entrepreneurs”
• Systems that enable a decentralized future

Imagine Bitcoin and decentralized systems are the metaphorical gold…what can we build? What is the Levis of this rush?

While we are still in the very early days of this developing space, there are a number of entrepreneurs and companies who are already producing and selling their “digital pickaxes” at scale.

For instance, look at popular blogs/forums like Coindesk, 99bitcoins, or The Bitcoin Pub.

They are providing a consistent stream of helpful resources and tutorials for the rush of newbie investors looking to invest in crypto.

There are also opportunities to build automation tools to help crypto-investors allocate their capital and reduce friction:

• Coin exchanges/exchanges
• Investing tools
• Crypto-tax guides

And finally, there are a number of other blockchain projects developing different elements of this “decentralized future”:

• Steem: A decentralized Reddit of Sorts
• IPFS: A decentralized file storage system
• Augur: A prediction market

They are focused on building out critical components of a future-state blockchain world.

Look at platforms like TrustToken, that are bringing us closer to a “tokenized future.” They are borrowing from Elon Musk’s frame of thinking and “accelerating an inevitable shift,” bridging the gap between blockchains and real world assets. Partnering with a number of leading institutions like Stanford and StartX, they are rolling out the first “legally enforceable protocol for blockchain-based ownership and control of real world assets.” You will be able to securitize a number of different tangible assets, encompassing everything from timeshares to small businesses to rental properties. This shift to tokenized assets will enable a new age of liquid markets.

These projects are raising money by creating and then selling their own tokens through crowdfunding on a blockchain. At first glance this just looks like a new way to raise money, much like how a normal company issues and sells stock to raise capital. At second glance it goes far beyond that. — Fred Ehrsam

There are a few key components to these tokens:

- They are the currency that is used in the app itself.

- Contributors to the app are directly paid for their contributions in tokens. This can be extremely granular.

- The tokens are easily converted to any local currency since they are on the blockchain.

As the space grows to become more developed and mainstream, it will be interesting to see which projects are here to stay.

Meanwhile, I’ll be selling:

What digital pickaxes are you thinking about?