Part 1 of a multi-part series exploring how new users end up in crypto and how the industry can reshape perceptions through organic discovery.
“Men have in their minds a picture of the way the world will be. How they will be in that world. The world may be many different ways for them but there is one world that will never be different and that is the world they dream of”.- Cormac Mccarthy, The Crossing
We have built something special. It’s programmable freedom. Why are people buying pictures of cartoon monkeys? Because the discovery process of crypto is truly broken.
You turn 18, off to college, get a debit card, learn to spend less than you make, get a credit card– you are now a member of the banking system. You need to get somewhere, you walk, bike, run, you take a train; it's too far, there’s no public transportation, you hail a cab, there are no cabs so you call an uber– welcome to convenient transportation. You want to sell goods, open a store, you don’t have money for a brick and mortar, sell online and use shopify– you can now be a merchant from your bedroom. You move to a new city and need friends, join facebook, facebook is lame now.. it's ok, join instagram to make friends– you are now a creator.
Welcome to the discovery process. You have problems and these tools have solutions.
The discovery and selection process into crypto is different from almost anything that has previously existed and currently exists.
From the inception of BTC till 2016 the onboarding flow for crypto was: You are a libertarian cypherpunk who has a deep mistrust of the government or you want to purchase illicit substances in varying quantities from strangers on the internet– you are now a proud holder of Bitcoin. This discovery was organic, there was a need, either rooted in principle or demand.
The flow from 2017-2021ish was: You saw people make a lot of money and you would also like to make a lot of money– you are now a member of the Dogecoin community. Discovery shifted to inorganic as crypto companies, armed with new capital, sought to sell a dream of financial freedom. The user’s need was not confined to a use case, buying drugs or having impenetrable money, but extended to the disappearance of all of life's problems through expeditious wealth creation and the proposed panacea was crypto.
Obviously these are massive oversimplifications but failures in discovery need to be addressed. The majority of current crypto market participants entered the market within the last two years, largely as a result of widespread crypto exchange advertising campaigns, speculation flavored social media promotions or through armchair experts opining on the next 500x token via their sponsorship subsidized youtube or spotify channel. The campaigns used buzzwords like ‘financial freedom’, ‘leverage’ and a personal favorite, ‘Fortune Favors the Brave’. They featured A-list celebrities, global role models & in the case of FTX, Tom Fuc**** Brady. I don’t blame these entities for their choice of wording or the celebrities they used. These outreach campaigns were a result of pre-existing market dynamics, a coagulation of users previous actions and entity specific incentives.
Naturally, the resulting cohort of users that engaged with these pieces of content and onboarded into crypto were self-selected as risk-loving– ‘leverage’, ‘freedom’, ‘bravery’, all words associated with risk and verbatim to what was used in ad campaigns. The call to action that hooked users was the ability to get rich quick. A very effective pitch but incredibly polarizing in its volatile nature. It’s all or nothing. As users began to enter the market they did so by spending capital in exchange for digital assets all the while being reminded of the massive risk they were taking:
Once they surpassed the obstacle of building enough conviction to purchase, they did so largely through centralized exchanges and NFT trading platforms. If they chose the incorrect assets or purchased at the wrong time they likely lost their entire initial investments and churned from the industry or lost a portion and decided crypto was a scam/remained dormant. This was very easy to do when the top assets touted by search engines are:
If they chose the correct assets or had a stroke of luck on timing they may have made money and decided to layer on more risk through lesser known assets and leverage or experiment on-chain. This path led to a more gradual demise, but similarly left the vast majority of participants worse for wear. The expectation of new entrants was to get rich quickly and the resulting outcome was more than likely the opposite. This happened frequently:
Traditional asset classes have tangible services and deep enough penetration that their properties are known. Everyone on the internet has used Google so they may very well understand that purchasing Google shares is a strong investment. They buy a coffee from Starbucks and pick up on the increased drive through volume and the three new locations opening up across neighboring towns so they can mentally model a rational case for investing. The upside to these investment opportunities are also known to be more gradual. It takes time to grow a business, conquer competition and increase profitability. Individuals inherently understand this because they’ve been employees.
Crypto had little to no penetration prior to 2020. It was something completely new on the bleeding edge of technology. Very few people had heard of crypto and nearly zero people had used Bitcoin, Ethereum, Doge in any legitimate real world application– which made the discovery process much more difficult. The result of this lack of information, lack of tangible experience and lack of baseline expectation setting by crypto firms was pure sensationalist driven discovery distributed solely through advertisements. You discover products as you need them and in crypto, there was no need so the flywheel had to be kickstarted by FOMO.
Shopify gives you a digital storefront but no guarantee of profits, Instagram allows you to curate your profile but doesn’t guarantee mass appeal & Uber gives you a ride but doesn’t promise the driver will be playing your preferred genre of music. All of these services give you tangible value with an expectation of limited downside. This level of baseline expectation setting results in less churn and a more stable user base.
The tangible value in crypto was the dream that you may become handsomely wealthy and the resulting expectation was that this wealth could be achieved quickly and easily. When the opposite occurs you not only lose users, but you shatter trust and create enemies.
Spotify has a simple question: do you enjoy music? If yes, you can listen here. If no, you are an enigma. Crypto’s ask has been much different in its evolution. In the beginning it was never a matter of massive financial gains, it was about personal beliefs. Do you believe in self sovereignty and the right of individuals to custody their own assets without reliance on intermediaries? Do you wish to purchase drugs from a man in Arizona?
The ask from the last bull cycle was: Do you have excess capital and do you want to get rich? In the ZIRP-era this worked like a charm. There was never more excess capital and with many industries forecasting an uncertain future there was never a better time to try and get rich. Now the question is much more complicated. If I had to distill it I think it sounds like: Are you aware of the massive financial risks associated with cryptocurrency and the fact that you’ll need a VPN to use this exchange and then you’ll have to do research on these tokens to find which ones you actually want to buy and then that token may not exist in 6 months because they are a Delaware based C-Corp and under Case 1:23-cv-01599 this is illegal etc etc etc.
So we have an industry disproportionately represented by mercenary actors, those who entered to reap the financial benefits, that is now in the midst of an identity crisis due to declining asset prices and regulatory pressures. The people who remained have become shell-shocked defi-mavens hungry for the next greatest innovation in risk-curve-yieldification and the new entrants are few and far between.
We ended up with Monkey pictures because we plastered the world with bananas.
Crypto, despite its tendency towards speculative fervor and grift, is fundamentally a liberty technology. When developed and executed correctly it brings decentralization and transparency to the digital world, providing one of the few countervailing forces we have against technology's tendency to aggregate and centralize value, truth, and power. It will take collaborative, dedicated, and principled builders to realize this conclusion, but I also believe it is inevitable and will make the world a better place.
*views in this piece are largely a representation of North American crypto usage & should not be viewed as representative of ALL usage (crypto has been tremendously meaningful for Argentina, Turkey, Ukraine, Brazil, Vietnam etc).*