Until cryptocurrency is accessible to people for non-investment purposes, the market’s growth runs the risk of stagnating.
With success comes a survivor bias ― the logical error of concentrating on people or things that made it past a selection process while overlooking those that did not ― as well as, potentially, a superiority complex ingrained in those who survived.
This has led to a preponderance of financial products in crypto because of their successes thus far, but a paucity of products and marketplaces for real trade. Entrepreneurs in the blockchain space do not cater to what was supposed to be the most common class of user, and those who do often end up shipping products that fail at commercialisation.
Blockchain and financial economy
The 2016-2017 era of crypto startups saw the launches of many companies promising blockchain-powered products ― blockchain social networks, phones, logistics, legal tech, ecommerce tech, and many, many more. Most of these projects failed for common reasons, such as lack of product market fit or a lack of network effect driving traction to the product.
The winners of the early blockchain product era were mostly financial products, which found their customers among the many chasing asset appreciation as they swapped from currency to currency. These were also the only products that provided interfaces that didn’t force the user to interact with the chain directly until they needed to make a withdrawal, and also had millions store their assets on the exchanges instead of protecting themselves with native wallets.
In fact, blockchain’s focus on the financial economy has been so disproportionate that we’ve basically abandoned a real economy, in a sense. Most crypto products target the same financially-minded user. If you look at virtually any well-funded product in the space, it is, in one way or another, focused on providing solutions for speculators. Most of the industry is competing for the exact same attention.
We’re seeing before our eyes the growth and maturation of decentralized finance ― the introduction of nonfungible tokens and the growth of decentralized exchanges, for example. From a product perspective, it is extremely important to follow how the industry develops as a whole. Cryptocurrency must evolve into an efficient marketplace where one can easily use cryptocurrency to purchase services and products; that is, to use it also as a medium of payment for a diverse assortment of easy-to-use and intuitive products and services, not just for financial speculation.
Again and again
Until we make cryptocurrency accessible to people for non-investment purposes, the market’s growth runs the risk of stagnating. At its current state, the market is saturated with products targeting the same pool of users. If we want to grow the category and grow the market, we need to start putting cryptocurrency into the hands of people who are not investors or speculators.
For well over a decade, blockchain-enabled products developed at a rapid pace, yet the industry’s most successful companies and their products are almost entirely focused on augmenting the financial economy. The biggest opportunities remaining in this space are ones that aim to target the utilization of cryptocurrency as a medium of exchange, putting it into the hands of non-technical people who wish to conduct business using non-government-issued currencies. El Salvador is pioneering this approach, for example.
Today’s winners, companies that process trillions of dollars in daily transactions, are the outcomes of the “financial product era,” and it’s up to us, the engineers and entrepreneurs, to build the next generation of companies and products. Survivor bias may dictate that the best and brightest minds in this industry ought to be working on next generation CeFi and DeFi platforms. In reality, now is the time when we start deploying the products that will take cryptocurrency and blockchain-powered assets and put them to use in the way they were intended to be used ― as peer-to-peer currencies, powering the exchange of goods and services.
That’s because, as survivorship bias suggests would happen, the most sophisticated minds and product designers in the blockchain space have been focused on what has proven to work ― financial products. That opens up a great opportunity, in areas where people are not focusing their attention, to design a different set of products to solve a different problem.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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