“Are ya winning, son?”
If you’re involved with crypto, chances are the past few weeks have been rough for you. Sure, the broader financial markets are also in turmoil with legitimate tickers like NFLX and SHOP down -70% and -66% YTD respectively.
Hell, even Gold is down over the past 6 months, despite being touted as an inflation hedge by some experts (sorry Peter Schiff).
Yet, despite the near universal losses across the markets, the pain of this correction stings a lot more in crypto. Why is that?
Perhaps it was because we thought we were different. After spending countless hours in Discord servers and on the Twitter timeline, at some point we started to believe that our magic internet money and jpegs were going to make us all rich.
We were the chosen ones. We were early. We were going to make it.
And then came Do Kown…
With one tweet, Do Kwon, the controversial founder responsible for 2 of the top cryptocurrencies by market cap, flipped an entire industry on its head.
I won’t get into the specifics of what happened with UST/LUNA, there’s plenty of resources that already have that covered. All you need to know is that a single coordinated attack (on what was basically a Ponzi from the get-go) was enough to erase ~$700 Billion in crypto market cap, and many people’s life savings, over night.
As if that wasn’t bad enough, a mere hours after the Terra fallout, Crypto Twitter was in shambles after learning that the founder behind one of the most successful NFT collections ‘Azuki’, had previously “rugged” (or at the very least failed gracelessly) on 3 previous NFT projects that people lost money on.
A lot of people are mad at Do Kwon and Zagabond, and the majority of this criticism is well-deserved. However, I’m not interested in dissecting these particular individuals or their projects.
Instead, I want to focus on how did we get here in the first place? Why does our industry seem to encourage these types of projects? And most importantly, what’s with the sudden Stockholm syndrome everyone is suddenly showing towards centralized institutions?
We have lost the script
I think it’s important we get one thing out of the way, and that is we need to recognize that crypto is still largely built upon speculation, full-stop.
While Web3 technologies have provided glimpses of the ability to provide meaningful improvements over the status quo, the reality is that the vast majority of crypto participants have never even had exposure to these use cases.
Look no further than DappRadar, for a glimpse into how far we are from true Web3 adoption. Last quarter, Facebook averaged 1.9 billion (yes that’s billion with a b) daily active users. How many users did the top Web3 dapp see yesterday? 340k.
Some would argue that NFTs have been crypto’s “killer app”, and to some degree I would probably agree with them. However, what is really driving the participation around NFTs currently?
The most avid supporters of NFTs will say that they are “in it for the art” or “in it for the community”. I have no doubt that a small faction of these people truly are here for these reasons; however, I am convinced that they are in the minority.
We need to look no further than an NFT mint this very week, for a reminder of some of the more nefarious patterns at play in the NFT space…
Around the time I began my week-long deep dive into Solana, a new NFT collection called ‘Okay Bears’ was beginning to blow up. This collection (which is debatably a derivative of Bored Apes) was important to Solana because it was probably the most serious Solana pfp project to date & was sucking liquidity from the Ethereum NFT ecosystem.
With Ethereum maxis worrying their bags were at risk, it didn’t take long for someone to launch a derivative project called ‘Not Okay Bears’, which consisted of flipping the Okay Bears artwork and minting them on the Ethereum blockchain. Within hours, the entire collection had already minted out, and the floor was rapidly rising on Opensea.
This of course led to outrage among the Solana community (who felt their bags were now at risk) and before long, OpenSea had delisted the collection and we had people literally crying on Twitter spaces over it.
People throwing their life savings into protocols with 20% “risk free” APYs. Sold out mints of a project that is a derivative of a derivative. What do these things all have in common?
They are the natural result of an industry currently fueled by speculation + greed, and has clearly lost sight of the fundamentals.
This is what we signed up for
Aside from the many people that unfortunately saw their hard-earned money completely wiped out over the past few weeks, the thing I’m most concerned about is the way people in the crypto community are reacting.
A large number of people have been quick to turn to regulators and ask them to step in, by punishing Do Kwon & offering a “bail out” to those affected.
This is to be expected from a distraught retail investor who just lost a lot of money they couldn’t afford to lose. But it’s concerning to me when one of, if not the biggest, voice in crypto jumps on this bandwagon.
This gives even more ammo to regulators who were already chomping at the bit to exert more control over the crypto industry. It should come as no surprise that Janet Yellen was calling for a regulation of stablecoins, a mere hours after the collapse of Terra.
Since many people (including the founder of Ethereum) have apparently forgotten why crypto even exists in the first place, here’s a quick reminder:
In 2008, Wall Street got so greedy and reckless with their lending and underwriting practices that they triggered the Global Financial Crisis, and literally almost took down the world economy in the process. In the fallout, people saw their houses and life savings completely wiped away.
The US governing bodies (FDIC, SEC, FRB) allowed this to happen by being asleep at the wheel, and rather than punishing these bad actors, they decided to bail them out instead. In this moment, it was clear to anyone that was paying attention that we were all playing in a rigged financial system.
In the wake of the financial crisis, someone recognized that there had to be a better way to build a financial system. In October 2008, the same year of the financial crisis, this person published a paper called Bitcoin: A Peer-to-Peer Electronic Cash System. This person is now referred to as Satoshi Nakamoto.
Missionaries not Mercenaries
“There is ugliness in this world. Disarray. I choose to see the beauty.”
- Dolores Abernathy, Westworld
One of the biggest fallacy’s surrounding crypto, and Web3 writ large, is that it’s some perfect utopian system. Let me be extremely clear: it’s not.
What Web3 presents is a choice. It’s the choice to participate in a system which encourages self sovereignty, relies on code/mathematics over human intermediaries, and has the potential (not the guarantee) to shift power dynamics from centralized organizations to individuals.
It also comes with its own set of risks and flaws. Anyone who says otherwise is dangerous for this space.
There are bad actors who are going to shill shit coins to unsuspecting people and dump on them behind the scenes. There are going to be anonymous founders who push ponzi schemes. There are going to be horror stories of people losing their $500K NFT in a phishing scam or losing their hardware wallet with no recourse.
These are all examples of the flaws that are inherent to this new system that we all willingly signed up to participate in.
When things go wrong it’s natural to want to seek out help; however, it’s important that people recognize that the institutions that they are turning to for help, are the same ones behind the original system that has proven time and time again to be stacked against them.
If we don’t want regulators to come in and destroy this new paradigm we have created, what can be done?
The short answer: Keep building.
Bear markets present an opportunity to stay heads down and focused on building projects that deliver real value, not bullshit scams built solely around the concept of “number go up”.
Over the past week I’ve already seen a decrease in the amount of people shilling scammy projects on my timeline, as well as twitter bots trying to implement phishing attacks. This is a positive trend.
In parallel, some of the most committed projects and builders I’ve seen in the space have continued to push new updates without a hitch.
Whether it’s enabling fans to directly support their favorite artists, getting paid to exercise, or allowing users to truly own their social graphs + content, there are new and compelling use-cases being launched every single day, even in a bear market. Or I should say, especially in a bear market.
Over the past 2 years we saw A TON of capital poured into Web3 projects by venture capitalists and retail investors alike. Now it’s time for these projects to earn it.
If these projects are able to deliver on their promises, we will move closer to having viable alternatives to the centralized systems. If they fail, it may just give regulators the ammo they need to make sure this was the last crypto bull run we ever see.
I’ll leave you all with one last story.
When I was at Miami Hack Week back in January, I had a chance to ask Anthony Pompliano a question at the end of his talk.
I asked:
“What’s the most important thing a Web3 project can do to grow its community.”
His response:
“Attract missionaries, not mercenaries.”
I thought about that quote a lot last week as I watched the candles turn red and the outbursts begin on Twitter.
I wondered if it was finally time to go back to a cozy big tech job with free meals and easy hours.
After a lot of contemplation, I finally realized that this has always been about much more than money for me. I’m here because I see the potential Web3 provides. Or put another way, I actually believe in the vision.
For myself and many others, we realized last week that there is no turning back. Bull or bear, we’re in this for the long haul.
The question is, will you be joining us?
I'm in! 😎
And I'll add: keep building and stop complaining.
Oh, definitely will be joining!