An Incomplete Field Guide to Crypto Adoption

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February 3rd, 2021
Lebbeus Woods, 1995
Lebbeus Woods, 1995

“Lock picking is a craft, not a science.” - The Mit Guide to Lock Picking

The winning playbook for how crypto projects gain mainstream adoption has not yet been written. So how should new crypto founders start getting traction? How does that traction inform other functions like product? And what unique considerations does crypto introduce to traditional go-to-market? This post will attempt to answer some of those questions.

Background

There’s a lot to love in crypto. New experiments and breakthroughs in engineering, game theory, monetary policy, capital markets, political philosophy, memes, etc. All happening in the open and evolving at breakneck speeds. But there is a risk that all the activity isn’t driving the results that matter in terms of user adoption. Quantifying this risk, compare the number of active crypto developers to virtually any traditional dev platform:

  • Crypto: 350 Bitcoin devs; 900 DeFi devs; 2,400 Ethereum devs (Electric Capital).
  • Traditional Tech: 2M using Docker; 5M using Twilio; 12M using JavaScript (Slash Data).

Admittedly, the comparison is imperfect. Crypto isn’t singularly a web development tool and the crypto data excludes substantial closed-source projects like exchanges, miners and wallets. Furthermore, crypto is delivering impressive metrics, many unique to crypto in both category (e.g., hash rates, miner fees) and their radical public availability (on-chain transactions). But eventually, the dev numbers and resulting end users will need to materialize for crypto to cross the chasm to the mainstream.

This post will focus on three areas to help teams think through gaining traction:

  • Product: How to align core product and adoption strategy.
  • Audience: How to identify target users.
  • Execution: And how to optimize when launching a product.

In addition, this post is intended to be helpful for crypto-native projects (L1’s, L2’s, on-chain applications) whose primary audience are developers vs. more consumer-driven applications that incorporate crypto (Square Cash, Robinhood) but likely benefit more from traditional growth approaches.

Crypto-native projects are in relatively uncharted waters when it comes to adoption, hence “incomplete” in the title of this post. Feedback on Twitter on things that should be added for future versions of this playbook is greatly appreciated.

Product

Most decisions are path dependent on core product, meaning the product’s nature will determine the most important choices (vision, goals, culture). It’s worth being very clear upfront about what the product is trying to achieve. In crypto in particular, what the product expresses directly informs how and why it gets adopted. For example, Bitcoin’s mission, as self-sovereign money or however it’s interpreted, is front and center in its adoption even as it gains mainstream attention far from its cypherpunk roots. One exercise to articulate the product vision is through the lens of subversion which is embedded in crypto’s DNA. Understanding what you’re subverting is a useful tool in articulating the new world the product will introduce (e.g., Bitcoin subverting trust in financial institutions or Uniswap subverting exchange rent extraction).

Any adoption strategy’s primary goal is to inform and improve the product, with a growing and increasingly engaged user base as an externality of the better product. Feedback cycles in crypto can be especially powerful. While it’s common for early users of traditional web services to get rewarded through incentives and subsidies, with crypto, users have a direct ownership stake in the product. This alignment creates fervent engagement that is especially useful to early stage projects where the feedback process can be an end in its own right. One of my favorite examples where you see this in action is in incentivized testnets that Cosmos’ Game of Stakes nailed and as a result became part of the network launch playbook (Celo’s the Great Stake Off, Near’s Stake Wars).

In addition, a successful adoption strategy should eventually become embedded and find its home in the product itself. You see this in several crypto projects where their target audience is explicitly expressed in the product, namely in how they abstract crypto’s complexity with interfaces tailored to specific developer groups such as game devs (Flow and Forte) and artists (Zora and Foundation).

Audience

If you don’t know who you’re building for, you don’t know what you’re building. But there is an inherent bind in defining target users: if you’re building something new, then the user base has yet to be aggregated by the product. You don’t really know who wants to be a taxi driver until it’s accessible. There are two common ways to address this dilemma, both riddled with challenges:

  • The first is to default to yourself as the target user and extrapolate this to your broader community. There’s a seductive honesty to scratching your own itch. It also complements crypto’s early stage. Crypto is riddled with glaring UX challenges that will eventually become someone’s opportunity. The challenge with this approach is that it risks objectivity. Your itch may be so idiosyncratic that no meaningful number of people experience it and you’ve failed to right-size the market. A common reaction to this is to default to the nearest adjacent community where there’s an even greater risk that the proposition is second rate (e.g., competing L1’s sponsoring an ETH hackathon).
  • The second is the opposite - default to the largest possible addressable market. For example, there are 24 million developers in the world that could build on crypto if only this new tool you’re building. Success means AWS is your oyster. But this risks diluting the product. An incumbent may find some discrete value in using crypto but their incentives lie in protecting existing business. As a result, a direct relationship emerges between the intrenchment of a user and how marginal their application of crypto becomes (e.g., I struggle to come up with a better example of a marginal application than avocado tracking). One way to manage this risk is to build with a highly specific use case in mind that is underserved by existing solutions (e.g., creator monetization). This removes the broad scattershot approach of targeting a mainstream audience with an effective wedge or insertion point. Ultimately however, non-native audiences will struggle with the awkwardness in crypto’s most basic mechanics (e.g., funding an on-chain wallet) so the mission becomes some version of make everyone crypto native.

But there’s good news. Crypto products have an inherent competitive advantage: the lack of an established community is a growth opportunity for new users. This means ruthlessly targeting users whose number one priority is growth. Bonus points if existing solutions have actively hindered their growth. For example, banks deplatforming crypto exchanges was Tether’s opportunity. Now that the growth opportunity for crypto exchanges has materialized, banks compete to service exchanges and Tether liquidity is through the roof. Targeting high growth users is hard because at first, the audience will appear small or non-existent. But taking a risk on your customers is the best way to get rewarded by them in turn. So, how do you identify high growth users?

  • Pay attention to users who are “all-in” on your product. All-in means they build natively on the platform, with all core functions of their applications living on-chain. Crypto networks are multisided (users, liquidity providers, developers, etc.) and network effects have the best chance of taking off when all application logic is publicly available. This enables third-parties to build custom UIs, plug-ins and entirely new applications built on top. Early on, the all-in developers look like idiosyncratic enthusiasts. But long term, these initial insiders become a powerful distribution engine (developer relations, support, content, memes, etc.) You can see this in action as most platforms exhibit the Pareto Principle where 80% of activity comes from 20% of users. Crypto follows this as well. As Electric Capital’s graph demonstrates below, becoming a top crypto project (1,000+ active devs) can be broken down to winning over 100 all-in developers. Driving a small but passionate core is more valuable than a large but barely engaged mass.
Crypto developers by frequency of contribution, Electric Capital
Crypto developers by frequency of contribution, Electric Capital
  • Another way to identify high growth users is to aggregate the longtail of some fragmented behavior. This dynamic appears not once but twice in AMMs. First, while AMMs look like an overly simplified mechanism to a professional trader, there was a longtail market of users looking to provide liquidity if it was easier. Second, there are a longtail of token projects seeking liquidity but are unable to access traditional exchanges. Empowering longtail audiences aligns incredibly well with crypto’s permissionless architecture. Democratizing access, where every user has root access, is crypto’s superpower. Also, if longtail users are successful, the opportunity will become too big for mainstream users to ignore.

Execution

There will be many ideas on how to go about gaining adoption and the problem will be that many of the ideas are pretty good. One tool to sort ideas is timing: while the idea makes sense, probing whether it makes sense right now can surface the right decision. Some ways to think about timing:

  • Internal: Is the team or product ready? Do we have the resources to support the idea effectively and make it successful? There are already great lessons in crypto about sequencing that projects like Compound have demonstrated.
  • External: Is the market ready? Will the users show up and will they have sufficient motivation to grow together? Given crypto’s brief but dense history, this factor is the reason you see many ideas resurface more successfully a few years later (DEXes, algorithmic stablecoins, even loyalty points).

Another tool is simplicity. Adoption strategies that work can be stated simply. This allows them to scale across team members who understand it, partners who implement it, and users who repeat it. As an example, Facebook’s adoption strategy to get to 1 billion users was essentially summed up as “get any individual to 7 friends in 10 days.”

And finally, be opportunistic. When the product launches, pay attention to more emergent behaviors. This is especially true in crypto where most projects are in fairly unchartered waters and signal will most likely come from unexpected sources. This applies to more traditional considerations such as product / market fit but also challenges that are of particular focus in crypto such as community building.

Conclusion

While we can see rays of light on crypto crossing the chasm, the playbook for crypto adoption is still being written. The good news is that areas with unwritten playbooks have the best opportunities. To recap:

  • All decisions are path dependent on the core product, including the adoption strategy.
  • Product feedback is the main goal of adoption. Crypto can accelerate this.
  • Target users that want to grow at all costs and are all-in on your product.
  • On execution decisions, be aware of timing and simplicity.
  • Post launch, be opportunistic about emergent user behaviors.

A big thank you to Ahmed Moor, Alex Pruden, Asheesh Birla, Brett Seyler, Georgios Konstantopoulos, Howard Wu, Joe Lallouz, Maria Shen, Nick Chirls and Philipp Banhardt for their review and helpful contributions.

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