The Exclusivist Syndrome: Why Crypto Projects Don't Last

Almost two decades after Satoshi Nakamoto’s brilliant sketch of what a decentralized system should be and Vitalik’s improvement, decentralization still seems achievable only in theory. Satoshi would probably be beaming with doubts right now.

L2s are centralizing decentralization, opportunists are posing as CEOs to create tokens and get rich, and fake friends are using chains not for their performance but because their clique rolls with it. Backdoor deals are carried out in ‘decentralized climes’ like Eigen Layer to enrich employees with $5 million worth of clients’ tokens as “thank you” fees. Chains like Polkadot are splashing $37m on silly aesthetics like racing bikes, soccer club sponsorship deals, and private jet branding only to end up with less than $50k in TVL! Crypto games moved from creating fun games to targeting underdeveloped countries as their play-to-earn audience and then wonder why the token prices drastically drop.

Real-life events are scheduled to adore Web3 jargon and discuss why UI/UX is the reason everyone else thinks crypto is a scam. Then they return to building projects with no utility, like one that helps to send someone to space with a blockchain or another that supports breathing when you hold some amount of tokens! And every day on Twitter, there's a debate about whether Zk rollups can save the world or if L2s are efficient, or if we need L3s, L4s, and many more layers—like lasagna.

Sixteen years later, and we are forced to believe that it's still day one…

Exclusivism Problem

Being ‘right enough’ for discussions in Web3 conferences often means citing issues like UI/UX and low funding as reasons why crypto projects fail and struggle to appeal to the masses. We've forgotten that as far back as 2009, over 100 million people were actively using Facebook. Nobody cared about how the app looked. The appealing force was that it connected friends and family and allowed them to send and receive texts and pictures in real-time. The core value that brought those 100 million people together was connection. Since no other platform had offered such a scale of connectivity, Facebook—despite any design flaws—was (and still is) solving a problem far greater than design alone.

Don't get me wrong, technology is evolving and users are having better experiences online so it's great to beat any experience they're having elsewhere if you want to get their attention. At the same time, nobody cares about using an app because the brand colour is sleek; all that matters is that it solves their problem and in this context, solves it better than a ‘Web 2’ alternative without boring anyone about the tech stack.

If you asked them where they worked, they would say, “I work in Web3”. You'll never hear someone at Facebook say, “I work in Web 2”.

Exclusivism was also the reason for NFT hype a few years ago. Web3 folks felt you can sustain a product off mere hype without anything substantial backing it.

Let’s talk about conferences – regular meet-ups with the '96 set’ in Singapore, Dubai, Berlin, Tokyo, and other crypto-friendly spots where they snap cool pics and shill their projects to each other. It's possible that events are the closest to product market fit in crypto. Plus it looks pretty good on social media. Honestly, I wish I could give @divine_economy a million dollars for this tweet:

hot take, but the reason crypto is so obsessed with conferences is because we’ve all just accepted that what we’re building is only relevant to other people in our industry

we truly think the endgame is traveling around the world every month to all shill each other

this is why i’m not going to token — because i would be seeing all the same people i see at ethcc and devcon two months apart instead of shipping

enough is enough

Btw, leave a 🙋 if you’re already in Singapore for Token2049 while reading this 😀👀

Another weird observation with this exclusive problematic trait is building fragmented tools to augment an existing blockchain. More often than not, these projects are not solving real problems but may stagger to thrive for a while because they have backing from strong VC firms. At the end of the day, they die a natural death. I love to think that there is an obsession to build projects that solve nonexistent problems in Web3, at least if you sprinkle highly technical Web3 jargons on your website, it could seem like you're building the next big thing especially when you've launched a token and drafted a caricature of tokenomics.

Speaking about tokens, it always amazes me how much is spent for a token launch when a product is not in existence. It's an obsession with token price whilst providing zero utility. This exclusive mentality has made set ‘96 think they can skip having a product to give freebies and then beat their chest that they are building a long term brand.

I came across this tweet from @Irettig that makes a lot of sense.

A shockingly large percentage of crypto founders can’t answer the basic questions, “What are you building and why should I care?” in one or two coherent sentences. Ngmi frens. Work on those answers before going back to building.

About two weeks ago, I had a conversation with a team building a depin project. One key observation was how much technical information was scattered across their website, which could intimidate their target audience. It would make people think the project pertains to only developers, even though one of their user persona is people who own mobile phones. You can’t appeal to a larger audience if all you speak is your language. Set’96 that ain't cool– do better!

Opportunist problem

The anonymous nature of the decentralized internet has made it easier for scammers to pose as CEOs, create tokens, and then disappear with people’s funds—only to rebrand and build another project. These individuals aren't interested in the future of Web3 but rather in exploiting the freedom it offers, which is why they prioritize tokens over providing actual utility. The Eigen Layer team could also fall into this category. Despite being in a position to build tools that strengthen an ecosystem like Ethereum, they chose to abuse their authority and go against the ethos of decentralization to enrich themselves.

Main Character Syndrome

Blame the exclusivists’ mentality for this — inflating numbers to make them feel good. It's impossible to focus on onboarding 1 billion people into crypto if the whole idea is merely to put it down on paper because it looks good. A recent report states Coinbase's claim that 52 million Americans own crypto is highly dubious.

This would suggest that more than 20% of adult Americans hold crypto. Even higher figures have been presented, including estimates as large as 100 million, or more than one-third of the adult population. The thinking goes: if such a large proportion of Americans own crypto, they will surely support crypto-friendly candidates at the ballot box.However, this number is highly dubious.

Premature Projects

Exclusivists and opportunists have made it quite difficult for the government to see crypto in a positive light, and this is why so many genuine projects can't thrive. Somewhere in Africa, a person building a project to help businesses receive payments through crypto will be clamped down on because the regulations don't favour crypto transactions, let alone crypto businesses.