A take on web3/DeFi
Most use cases for crypto are in an imaginary space. Lot of the details like “why does the customer care?”, “why will they pay for it?”, etc are not necessarily thought out clearly. Most products ask me to “Imagine a world where everything is de-centralized”.
So, what do I think will come out of web3/DeFi mania?
First off, currently crypto and web3 is really great currently for trading/speculation related use cases. Solving for capital efficiency, security, infra makes sense in long term.
Then what? Retail investors? Gaming? NFT/Collectibles? Countries run as DAO’s? Its very hard to come up with future (>10yr) use cases but we can look at some analogies.
- Comparison with Internet:
Commonly used in super bullish crypto circles, the comparison has some rough edges. Internet started as a way for education/military bases to talk to each other. It started from day 1 solving for a single use case(comms) only instead of 1000 other possible things you can build on top of it. While it didn’t have distribution initially, it took like 15-20 years for apps to go mainstream. People kept building iteratively on top of it.
While it may work as a great branding for VC’s, here it just becomes a speculating exercise on potential use cases 10yrs down the line. This is sort of the reverse order as the internet. Imagine somebody trying to raise money for Snapchat in 1990.
If you have to borrow analogies from the internet, solving for infra and for specific user personas/use cases today makes the most sense. The internet did it for 15years for some niche user personas.
- In web3, we started directly with a compelling vision of no single counter party/no centralised institutions/everybody owns everything/trust less/permission less and then tried to work backwards into solving for use cases.
- Funnily, most successful crypto companies are currently centralised. While starting like this isn’t necessarily bad, lot of them are not on a path to de-centralisation.
- There is definitely some value in the space. Expectations are currently super high to become a $100 Billion business for everybody but today, it may just be a $1 Billion niche for the time being. When you pump $50 Billion into the ecosystem, it makes it hard to differentiate between utility vs speculation vs any other perverse incentives. Some products assume PMF because of wash trading/bots etc. If you look at the top gas spenders on AVAX/Polygon, it’s mostly bots inside a game or wash trading NFTs. Ponzi schemes, unnatural yields through looping money around etc have become commonplace too.
- It may solve for some specific use cases in the future like remittances (cross border payments, a $5 billion use case ) or market making/infra for trading which is again maybe a $30 Billion business.
I hope in the future, we can solve legitimate problems with this tech. Luckily since this space basically speed runs through everything, the cycle length to actual mass products may not be as long as the internet.
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