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At the end of 2020, I gathered up the opinions of nine startup founders who shared their views of 2021, and in this article you will find out how they answered.
The past year saw both a deep correction and an unprecedented bull market for Bitcoin. The price spikes continued well above $33,000, putting the currency in uncharted waters. This time, the year-end rally holds several crucial differences from the brief record at the end of 2017.
In 2020, trading infrastructure has become more robust with a variety of centralized and decentralized exchanges available to everyone. One of the big boosts for crypto liquidity was the introduction of multiple dollar-pegged coins. Tether (USDT) supply expanded to above 20B tokens, from below 1B tokens in late 2017. Competitors to USDT still hold a smaller share, but act locally to boost liquidity on Binance and other exchanges.
Deeper changes in crypto infrastructure were made as well, with more blockchains available to perform financial operations. In 2017, only Ethereum was a tool for tokenization. In 2020, multiple networks established themselves as a basis for tokenomics. TRON, Algorand, Tezos, ChainLink, and multiple other blockchains now carry transactions in USDT. The smart contract infrastructure is also growing, with projects like Maker DAO ensuring DAI liquidity for trading and other decentralized finance operations.
As a result of the token and network infrastructure, the decentralized app market evolved. At the top, decentralized exchanges and finance apps continue to bring in more users. Gaming and gambling come in a close second. Decentralized apps promised a lot back in 2017, but it took years to actually develop their most powerful use cases.
A startup in 2021 will face a wildly different financing and fundraising climate. 2017 was the first year of highly active token sales, or ICOs, which raised millions in ETH and BTC within minutes. That trend extended to 2018. But in 2020, fundraising was limited to Initial Exchange Offerings (IEOs). In 2017, newly launched tokens had to wait for months for a listing on one of the centralized exchanges. During the past year, UniSwap and similar protocols allowed each token to start trading within hours of its launch and quickly gain liquidity. New token users gained incentives for holding onto their tokens instead of waiting for a listing to dump. Still, new token prices were highly volatile in 2020, with some catastrophic crashes for yield farming tokens.
In 2020, the crypto space showed enthusiasm for new projects, mostly due to the innovative sources of liquidity. New tokens no longer lingered with stagnant trading, and instead offered incentives for higher activity.
In this climate, building a startup makes use of new technologies and algorithmic trading, while also finding a new set of users willing to expose themselves to risk.
Brendan Mannion - Founder of ClinTex
Being a crypto startup founder in 2021 will not be all fun and games. You may have to navigate uncharted, dangerous waters. First, there is no knowing where the market rally will go from its peak. Will Bitcoin continue to conquer new highs, or will altcoins and tokens follow? Make sure your project is prepared both for a bull market, but also for another dip into bearish territory.
Second, regulators are circling for new reasons to scrutinize crypto assets and startups. After Ripple’s XRP faced a series of delistings, some investors may realize new tokens or assets are rather risky. Make sure to pick the right jurisdiction and be aware of security law. After years of reassurance, XRP is getting delisted from major exchanges as it faces a lawsuit from the US Securities and Exchange Commission. Check multiple times if your tokenomics are not breaking any laws in the traditional financial system.
The next big challenge is to hack-proof your project. Even audited smart contracts have been exploited in the past year, and there is a high chance 2021 will see more of such breaks. If you rely too much on the incentives of DeFi yield farming or liquidity mining, make sure there is no way to have your token exploited. The sudden, deep losses and chaos may cost you the trust of your users, as well as the value of any tokens left for development purposes.
Despite those things, 2021 looks promising in comparison to previous crypto cycles. Users are more open to wallets and investing through apps. A lot of coins, tokens, and flawed exchange models did not survive, clearing the space for competition among successful platforms with powerful teams. That infrastructure was not here during the previous crypto boom in 2017, and it now opens even more opportunities for startup founders. Check out our token.
Focus on building amazing products, generating customers and a revenue stream, and creating an outstanding user experience. Identify what is missing in the market or even how a product or service can be improved that already exists. Do not be discouraged if you have an idea and someone beats you to the market. No one still uses Mosaic, Bing, or even AOL.
Do your own thing and trust your own judgment. It's fine to listen to other's opinions and take them into consideration, but you can't please everyone. You'll waste more time doing that than working on what you want to build. Be willing to delegate. You can't do it all yourself. Find people who want to support you in your vision and know that it will take time to achieve.
Ian Friend - COO of Ferrum Network
1. At Ferrum, we found a tremendous product, market fit with our staking-as-a-service, which essentially can turn any Ethereum-based token into a DeFi project. In the past six months, we have signed up over 45 clients, including big names like Bondly, Aubit, and Geeq, and now have over $15 million TVL across all our client's staking contracts. We continue to sign up multiple projects per week and use those funds to buy back FRM. It feels great to finally have a strong business in addition to the other utilities of FRM.
2. One mistake I think we made early on was underestimating the importance of influencer marketing. But now, with over 2.5 years of experience in this industry, we understand the power of influencers and have connections to many of the best ones. Leveraging those relationships will allow Ferrum to reach a massive new audience in 2021.
3. One thing I would have done differently is to create a governance committee earlier on. We recently created a governance committee tied to our new sustainable governance token - FRMx. The participation, value, and friendships being created are absolutely incredible. Ferrum owes a lot of its recent success to those in the committee… thank you!
2020 has taught us to be prepared for everything - and in our plans to proceed from the chaos of events and markets, and not from their calm and stability. The founder of a crypto startup must always be prepared for chaos, for rapidly changing markets and conditions
Yes, 2020 was very successful both for many projects and for entire layers of industries, like DeFi, DEX, NFT. Since we are constantly working with projects, we can see the trends.
The most successful projects are still those that are fundamentally strong - they have a strong idea and ideally an MVP, they have a strong team, and they are open to trends.
You also need to be as mobile as possible in terms of promotion, as building a community is the basis of almost any project.
Now from general to practice. I think that the DeFi industry still will have very strong positions. Based on this, there’s a rising trend in crypto fundraising - IDO, Initial DEX Offering - the new alternative to IEO and ICO. Hosted on different decentralised exchanges it can be a really good good option for many projects as it’s cheaper than IEO and can connect projects with its community directly. More and more projects just list their tokens at DEXs and work with market making and marketing together to drive traders to buy their tokens at secondary markets.
Another big trend is NFT. It has many interesting implementations and can be a real new revolution in crypto.
There are also more interesting projects to come - for example, those who are built on PolkaDot, those who will form the new infrastructure of ETH 2.0 and so on.
But still the main driving factor and the biggest challenge for blockchain start-ups is building a community. Community members are those who move the project forward, spread the word about it, test it, invest their time and money in it. So for most of the projects to build a very strong, active and big international community is the most important thing in long term conditions. How to make it?
Well, currently we see the high quality AMAs in big Telegram and Discord chats work very good. Also, we pretty often work with influencers - they should not be always super huge, but they should have real, active communities. You can attract more members with different activities - from testnet trials to different quizzes, challenges and involving promotions. And there is much more to do and test.
With all this, we have helped many projects this year to become successful and will continue to do it in 2021. Otherwise, you can read about my predictions for the crypto industry for 2021 in my article on Hacker Noon and in my Twitter
In 2021, crypto startups will launch into an atmosphere of much greater price hype. Bitcoin is again the king, which means that attracting attention to crypto projects may be easier. But convincing people that your project is worthy and will not be another failed token or obscure coin may be harder. The good thing is, projects are not just applying blockchain to anything, hoping that it will be a good solution. It is clear there is great demand for trading and blockchain-based finance tools. Those tools need not exist in themselves, but they already have the chance to become part of a greater ecosystem of DeFi projects, exchanges, trading platforms, and other tools for fast and cheap token transfers.
The biggest hurdle to a new crypto startup is to convince users it’s there to build things for the long run. Too many projects became the hot new thing, only to see their token price crash. I advise new startup founders to think hard about their token economics, incentives and potential activity. Afterward, to focus on building up their user base through an intuitive product. There are big markets to grab, still hungry for new investment tools and projects.
A crypto startup can look to both untapped communities and newcomers in the crypto space, but also to well-organized networks that are also open to new projects. In 2021, the success of a project will rely on its community and the possibility to gamify and incentivize the usage of new platforms. Cooperation with oracle projects and decentralized exchanges will be key to building a reliable product.
Ivan - Co-Founder of cryptotask.org
Starting a blockchain startup may be ungrateful in 2020 because the competition is sharp and it all looks very similar to the previous bull market; however when the dust settles, only a handful of great projects and companies will survive. Persistence will make sure you are the one among them.
This is the most important thing in blockchain, a lot of people won't and can't recognize high-quality projects because they are being overwhelmed with copycats, however only the truly good ones will survive the next winter, and there lies a chance to be recognized.
It's important to have a great marketing team. No matter how good your product is, someone needs to show that to the public, because the noise is high. I would suggest getting a great team or at least a great CMO, and build, build, build.
DeFi products are community-driven products - from one side, we need a product, and from another side, we need the community. One needs both, and one needs them in the balance.
It's not about just having a product without the community or vice versa. Therefore - you shall not have a fear of having to release early products - because both, your product and community, will learn and grow together!
The key to launching a successful blockchain startup in 2021 is… sticking to all you already know about launching a startup: deliver value to solve a real problem. The tech is a mean, not the goal. At Amplify, we have chosen to tackle the problem of SME financing, and we decided to use DLTs because they naturally support the business case.
The number one mistake that is important to avoid is overcomplicating your MVP. Stick to delivering as much value as possible with quick-to-launch features. If I could go back in time I would definitely choose to build the MVP directly as a PoC. I’d find a real business that believes in the concept and build the MVP for them for free.
Brandon Smith - Co-Founder and CEO of Bondly Finance
I’m Brandon and I’m a co-founder of Bondly Finance. I’ve spent the past 15 years of my career in financial services, like Citi, Santander, HSBC, and realized: Banks suck and making apps for them sucks even worse. Cryptocurrencies provide a way for us to recreate many of the products and services that we like about banking, without the limitations. This is why we’re so excited about Bondly, because we are building the tools to empower the next generation of financial products and digital assets.
As a founder in the blockchain space, we are constantly looking for new ways to innovate and, through our NFT based card game, BCCG, we have been able to make progress on this mission. Digital assets and NFT’s create opportunities for artists to display and sell their art in an open market. This new ecosystem will help the $4 Trillion Digital Assets Market that will be entering into crypto throughout the next bull run.
As a crypto founder in 2021 and beyond, it’s so important to have clarity around a vision and stick to that vision no matter what. As this industry moves at such a fast pace, it’s easy to get distracted or discouraged by constant news, price action, and more - but as a founder it is so important that you stay focused on your delivery over everything else.
The year-end for 2020 arrives with a total crypto market cap above $731B. The valuation looks to be on track to beat the early 2018 record of above $761B. But the coins and tokens making up that valuation are vastly different. Many of the hot projects of 2017 are already forgotten, having been delisted long ago or facing fines from regulators.
At the end of 2020, BTC still reigns over altcoins and tokens. The biggest difference is the heightened interest from companies buying up significant BTC portfolios as a store of value.
Perhaps the biggest shakedown for the crypto space is the crash of XRP in December 2020. Having been one of the top coins for a long time, XRP was delisted from most top exchanges and brokerages, including Coinbase. The XRP rally broke and the asset lost more than 60% of its value, crashing down to $0.20. In 2021, the crypto space may see the final verdict on whether XRP is a security.
The coming year will reveal any repercussions for other crypto coins and tokens falling under the scope of the US Securities and Exchange Commission or other regulators. In general, 2020 has seen much more restrictions on crypto trading for US-based owners. China and other Asian countries, however, make up for some of the lost volumes.
But the world of crypto trading and investment will never return to the free-for-all opportunity it was back in 2017.
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