The End of My Crypto Explorations
My crypto journey started in late 2012 when I encountered Bitcoin on the Internet while reading about the free banking system for my high school thesis...
My crypto journey started in late 2012 when I encountered Bitcoin while reading about the free banking system for my high school thesis. As a fan of Hayek and Von Mises, I was fascinated by the idea of a currency free from the government's manipulation. I downloaded bitcoin core (the blockchain was less than 10GB!), made some transactions, and looked for things to buy.
There were few people to transact with and nothing interesting to buy beyond the stuff on Silk Road. Bitcoin was volatile; its price collapsed from $1000+ in late 2013 to $200ish in August 2015. I watched the space on and off, which I perceived as a gigantic casino. Remember Namecoin, MaidSafe, Bitconnect, and Bitshares? All these coins had billions in volume and later disappeared, leaving investors shirtless.
I started Doctrine, an AI company operating in the legal industry (think Bloomberg for lawyers). I witnessed the 2017 crypto bubble with thousands of projects raising tens of millions for non-existing products tackling non-existing problems. I was sickened by these pumps and dumps and delighted to use AI to create value for thousands of customers!
I ignored the space until 2018, when our first teammate, Antoine Riard, started to contribute to the Lightning Network, a protocol to make instant and cheap Bitcoin payments. Bitcoin has survived, and my friends kept building on Ethereum despite a 90% drop in price. Speculation had dried out, and promising use cases were emerging. I started running a Bitcoin and Lightning Node on the weekend to understand the state of the technology.
Fast forward, I moved to San Francisco in August 2021 and decided to launch my next venture in crypto! I was thrilled to join revolutionary young builders working on decentralizing the Internet and improving our financial system.
As a Bitcoin enthusiast, I looked around infrastructure products to sustain the lightning network, like node managers or stablecoin on lightning, via RGB. It was tough because no one had yet built a successful company on the lightning network. First, it will take years to develop the network - a thing I've learned running the SF Lightning Dev Meetup - and, second, most people don't want to pay with crypto, especially when current payment systems are improving rapidly (see UPI in India or Pix in Brazil)!
Most of my friends were building on Ethereum and Solana, so I jumped on the bandwagon. I made it clear that I wasn't interested in building for speculative use cases. In my opinion, trading is a negative-sum game in which market participants lose their savings while exchanges and intermediaries capture gigantic fees.
The unfortunate truth is that the current crypto killer feature is the creation of a global, permissionless, gigantic casino of worthless digital assets. This is quite far from the ideas of decentralization, privacy, and unstoppable digital assets we read in The Sovereign Individual.
Those ideals are worth fighting for, so I started to believe that speculative use cases were temporary anomalies. Yes, token pumps and dumps were disgusting, but tomorrow we will have equity tokens that are way better than the current paper shares. Yes, NFT collections of ugly profile pics are useless - a guy bought a picture of a rock for $1.8M - but it's the premise of NFT as digital property rights on a decentralized and open ledger!
That was my thought process for accepting today's crypto industry, but that wasn't easy. I met daily with crypto founders raving about their latest multi-million fundraising round or their secret NFT mints in which they flipped a jpeg for thousands of dollars. I asked questions regarding product usage, pain points solved for customers, and the business model, and I haven't felt so old in my life!
I was a 27 tech founder, but I thought I was a 70-year-old guy asking what seemed like irrelevant questions. An avalanche of money from investors and retail traders can easily fake a product-market fit.
I had the great opportunity to help Nanoly's founders, the largest data aggregator in decentralized finance.
Hundreds of thousands of retail investors visited the website to find the best yields for their digital assets. Yield farming was all the rage with juicy APY of a couple of hundred percent. Tokens were created out of thin air to reward token liquidity providers. I met with full-time yield farmers and people who worked full-time launching tokens to feed this loop. WTF...
Ultimately the high-yield farming market collapsed, leading dozens of companies and funds into bankruptcy. Most of my contacts moved to NFT, creating several collections of profile pictures and selling them to gamblers. Again, this use case sucks, but the promise of NFTs as unique digital property rights stored on a worldwide and permissionless ledger is fantastic. I dug into crypto infrastructure products but came to a harsh realization.
Crypto speculation is a vast and fast-growing market, while other use cases are small.
I've done hundreds of customer interviews and learned that most crypto organizations weren't buying crypto software, which explains why crypto products, from analytics to dev tools, struggle to generate revenue. I understand the narrative that these startups are waiting for the market to grow, but the difference between the Internet in 1999 and crypto today is that Amazon or Netflix had viable customers and growing revenue back then.
The May 2022 bear market helped me to have honest conversations with founders. Most of them have raised millions and enjoyed the hype but are now wondering if they will one day reach product market fit. Talking about fundraising, I got more offers while exploring crypto and with better terms than I could have dreamt with my previous web2 startup (with dozens of millions of ARR, fast-growing and profitable)!
I think there are monster businesses to create in crypto around the casino use case. Anything that reduces the cost of trading or makes trading more convenient will be a big business. Most great businesses in the space are wallets with a trading feature (Metamask, Phantom, Fireblocks), exchanges (Binance, FTX, Opensea), fiat on-ramp (Moonpay, Transak), etc.
Many founders I've met are iterating in crypto, hoping to launch a startup unrelated to trading. I made the same mistake of finding niches only to realize that the market wasn't there. If there are no viable customers, no traction, then there is no market - even if the idea seems valuable for humanity.
In short, it's a good-looking technology looking for problems to solve. Note that crypto is complex; it takes months, if not years, to get a decent understanding of the tech stack. Adding to that difficulty, it's evolving fast, so you have to keep up with the latest developments - proof of stake, sharding, zk-rollup - making developing in the crypto industry harder than in web2. Exploring crypto from a tech perspective is fascinating and takes a long time, but what's today's use case beyond speculation?
Even Vitalik Buterin, in a Time interview, recognized that: "The peril is you have these $3 million monkeys, and it becomes a different kind of gambling," adding that "there definitely are lots of people that are just buying yachts and Lambos" and "those are often far from what's actually the best for the world."
I had a fantastic year and met very talented builders and explorers; many of them will build great companies inside or outside this industry. Crypto combines the best dreamers pushing the frontier of a decentralized civilization and the worst snake oil scammers. The positive energy in the space and the amount of creative destruction are breathtaking. I do not doubt that the industry will mature over the following decades!
I've decided to stop exploring crypto and focus on other sectors and technologies that suit me better. It's hard to understand the stress and anxiety caused by the constant ups and downs of being a founder. I want to thank all my friends and family for being by my side in my entrepreneurial journey!
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The 24h casino is exhausting, but some communities are still grassroots and stick to the Cypherpunk's manifesto, dreaming to build a future where decentralization work and privacy is preserved. Far from the NGU mindset too many have. Those communities are small, and you have to go deep down the rabbit hole to find them, but once you do they are eye opening and worth investing a lot of time.
Good luck with your next endeavors!
I'm both sad and glad for you for this next chapter. After a while, it does feel like there isn't much of a use case in crypto outside of speculation, especially post-crash when the curtains are drawn.
The best part here is when you wrote that it's a technology waiting for an application/use case. Made me feel that it should be the other way round for something to really take off.