Successful tech companies all have three key ingredients: a following of die-hard users, sleek customer experience, and high-performing technology. For tech startups, in which order are those things prioritized? There’s an old saying — if you build it, they will come. If that trope holds true in today’s business world, why does the crypto space act as if it’s different?
I recently wrote a blog post about how the blockchain industry needs to shift focus from a store-of-value mindset to a source-of-value mindset. I lay out a timeline of crypto’s history, starting the “infrastructure age,” where we saw our “first layer” projects (like Coinbase) begin to scale. It goes on to discuss the “application age,” where the the first big application for Ethereum, the initial coin offering (ICO) gained mainstream attention, and with it, consumer interest.
ICOs raised over $20.6 billion in 2018, according to Coinschedule. But nearly 70% of those projects are worth less than their launch price, as reported in CCN. And as a result, crypto investors are shying away from increasingly risky coin offerings, according to Forbes. Those are some staggering figures that should raise an eyebrow for anyone watching the blockchain ecosystem.
There are a number of ICO projects that have successfully launched their tech, especially in the Ethereum ecosystem. For example, Brave (BAT) launched their popular web browser that emphasizes privacy and an ad-free web experience. In August it was reported that Brave passed 10 million downloads.
Ethereum dApps are another promising tech sector in the space. However, this segment has struggled to capitalize on the huge communities they’ve harvested during the ICO rush. James from Loom explained this point pretty clearly:
“If you add up ALL the 100+ active DApps on dapp.review combined, it’s still less than 10,000 users in total who are interacting with an Ethereum DApp on a given day.”
“For context and comparison, Facebook has around 1.4 billion DAU, and Twitter 157 million. PUBG Mobile, just one mobile game out of thousands, has 10 million DAU.”
The major marketing activity for many of these projects focussed solely on growing vanity metrics to attract speculative ICO investors. For many projects, if you could get an audience of 10,000 Telegram members and create incentives for promoting the project, you were in running to raise millions of dollars off hype. For them, community was a driver of value as a mean to growing a market cap. The ICO market of Q4 2017 was a gold rush, but those days are over.
The dApp community has struggled with converting their token investors into users. As I’ve discussed previously, the future of the crypto industry will focus on simplicity of use and design. The majority of projects in this space are still far too complicated for the average person to use. Getting an app up to even 1 million daily active users is a struggle for the average tech company. And for an industry in its infancy, crypto needs to focus on improving upon existing infrastructure to reach a critical mass.
With speculation no longer driving the crypto markets, focussing on growing community can’t be the main focus of blockchain startups. Community does not drive value. But technology that looks good, that works, and that works better than what already exists does.
The more successful crypto companies in the space need to lead the way by creating value through their tech, and then leverage their community to spread that value outside our crypto bubble. Growing a community to increase market cap has been made irrelevant in the current market conditions. However, successful crypto companies are in the unique position to pave the way for the rest of the industry by building products that are easy to use, look good, and seamlessly integrate blockchain into a user’s daily life.