Title: The Need for Simplification: Attracting Users to the Cryptocurrency Industry
Author: Matti
Translator: Luccy, BlockBeats
Editor’s Note:
The cryptocurrency industry is constantly evolving with new technologies and infrastructure. However, many developers are more focused on attracting venture capital rather than directly addressing user needs. Using Shopify as an example, Matti suggests that the cryptocurrency field should prioritize simplifying technological complexities and introducing more practical use cases to attract more users.
Matti believes that the complexity of technology and immature infrastructure hinder the adoption by mainstream users. Despite significant investments, many projects lack practical consumer-oriented use cases. Additionally, premature involvement of institutions and traditional finance may bring risks and further exacerbate market speculation. The following is the translated version of the original article by BlockBeats:
In this article, I will explore whether we need more infrastructure to attract more cryptocurrency users, and the ultimate conclusion is that we may actually need less technology. At the same time, technological narratives are actually gaining more value. In the pursuit of this obtainable value, we have entered the era of cryptocurrency entertainment, where everyone, including institutions, wants to participate.
Are you tired of hearing about the emerging infrastructure constantly receiving funding? Does the complexity of cryptocurrency technology really hinder its mainstream adoption? Or are we just delaying the answer to the real challenging questions?
I saw a video where the founder of Shopify mentioned that venture capitalists who missed the opportunity to invest in his company claimed that the total addressable market (TAM) was too small at that time. They estimated that there were only about 50,000 online stores. Now, Shopify alone has one million merchants.
Shopify created a new market by solving the technological challenges of creating online stores. So, for the blockchain economy, do we need more use cases to attract users, or do we need better technology? Or is technological speculation itself a use case?
Are developers the product?
Currently, more developers are developing products for other developers rather than actual users. It is easier to optimize for venture capital, and the more obscure your product is, the stronger the reflexivity of tokens. Now, we have more technology than actual applications.
To reiterate the above content, we must (at least) meet one of the following criteria:
– We need better technology to eliminate user barriers.
– Technology is not important; first, develop products for users, then build infrastructure (see Amazon/AWS).
– Technology itself is the product, and venture capitalists are the consumers and sponsors of the casino.
By comparing Shopify’s success story to the current situation of blockchain usage, we can conclude that the lack of useful applications is due to technological barriers. Shopify created a new market, so there was no actual total addressable market (TAM) before.
If this is correct, I believe we need to simplify the complexity of technology rather than adding more infrastructure. In other words, the answer should be to reduce technology rather than increase it. At the same time, we need better use cases beyond speculation to attract more funding.
Reasons to reduce technology
Blockchain itself is designed to be complex. It is based on redundancy and liberates state retention from closed databases. Block space is the carrier for updating the state, and its production is not easy, accompanied by complexity and costs. After all, there’s no such thing as a free lunch.
Developers and entrepreneurs have proposed various forms of chain abstraction schemes. These schemes aim to make it easier for people to interact with blockchain, such as bundling wallets, implementing cross-chain bridging, and deploying applications more quickly and cost-effectively. In a sense, they act as intermediaries between block space and users.
From a macro perspective, chain abstraction bundles block space with developer tools and composable infrastructure, and then provides them to users. But is it possible that we are moving towards centralization through these overly designed solutions? Does this mean that, in the end, we will have a complex multi-signature scheme as the “Amazon Web Services (AWS)” of Web3?
If you don’t think abstraction is the solution but still support technology supremacy, then you may be looking for the next ZK or FHE miracle that can scale and verify proofs so that our ordinary neighbors can use blockchain. Therefore, today’s solutions to technological frictions can be summarized as:
– Reduce technology: Simplify complexity (compromise).
– Increase technology: Scale and bridge (faster, cheaper, seamless transactions).
This means that to attract the next 500 million users, we need scalable and interoperable blockchains and simpler interactions for users and developers.
Developers are constantly promoting wallets and general applications, claiming that a better user experience is the way to attract new users to the cryptocurrency field or capture market share from Metamask. For users, cryptocurrency does not need a better user experience – it needs new use cases. Give people more interesting or useful things to do.
Proposing new use cases is much more difficult than replicating existing practices with slight modifications to make them appear original. The construction of many applications is based on “should” – “users should own their data or have governance” and “Twitter should not have so much power,” rather than actual needs.
Therefore, I do not believe that the problem lies in technology but rather in a lack of imagination in use cases. Currently, we need new applications. Given that there is more funding in the cryptocurrency field than ideas with good execution, we have ultimately fallen into the frenzy of the cryptocurrency cycle.
Lollapalooza’s Specialization
When you don’t know what to build, you develop more technology. When you don’t know how to spend money, you engage in financial operations. When you’re bored, you browse memes online. Cryptocurrency encompasses all of these in an escapism movement.
Cryptocurrency is currently in a macro cycle that I call “entropy reduction.” This can be summed up as “speculation is the wedge.” Speculation is devouring cryptocurrency, and cryptocurrency is also devouring speculation. I believe the past and future can be divided into the following macro cycles:
2009-2014 Cryptopunk Movement (Origin)
2014-2020 Entrepreneurialization of Cryptocurrency (Entropy Increase)
2020-2025 Cryptocurrency Entertainment (Entropy Reduction)
2025 and beyond Deployment Phase (Negative Entropy)???
Currently, the entire industry is caught in two extremes: dystopian memes without intrinsic value and utopian technological promises that cannot solve current problems. No one is focusing on answering the difficult questions (use cases). This is a true reflection of entropy reduction.
Do you want to make money or do it right?
At the end of the cycle, midcurve investors may be right again, but it may also mean that they neither make nor lose money. Cryptocurrency has become a reality of gambling on the future; everyone is both a technology investor and a meme investor, and everyone can participate in this era’s spirit without any barriers to entry.
Both left-curve and right-curve investors continue to play this pretend game because it can be profitable (midcurve investors will eventually be involved, as they become the liquidity during the exit). The rules of the game are simple. Sell tokens to anyone willing to buy them. What’s wrong with that? Lack of fundamentals?
This may sound like “so what-ism,” but when the economy itself relies on alchemy, and few can prove its rationality without relying on performance economics, how do we anchor it in reality? Some may argue that the $400 billion global consulting market is also a joke, but because it has been established, it is difficult for people to stop participating in this particular pretend game.
In fact, the market has largely become an entertainment industry, thanks to 24/7 streaming information’s impact on society. Cryptocurrency has found a good product-market fit in this peak era of performance. We are blurring the boundaries between games and reality.
C’est la vie. This is not a normative analysis; I’m not saying this is bad. I’m just pointing out how the financial game has evolved. This evolution makes some things that seem valueless now potentially priceless in the future (and most will become valueless again).
In today’s era, following the flow of funds means following the trend of Lollapalooza. If you can play this game – congratulations, you have the skills to sell faster than KOLs. But in my opinion, the current cryptocurrency industry is primarily an entertainment industry, and we are engaged in the business of token sales.
I don’t believe this is the ultimate form of cryptocurrency. I guess a huge disillusionment – a true disappointment – is still ahead. The cryptocurrency equivalent of the internet bubble has not yet occurred. Why do I think so?
– Most funded projects are technology for the sake of technology.
– Blockchain has not yet scaled to meet mainstream demand.
– Very few consumer-oriented use cases.
– Institutional involvement and adoption of traditional finance will be premature and ultimately foolish funding.
Regardless of how you think, we are not yet ready or deserving of absorbing trillions of dollars of institutional capital inflows, which is the final piece of the puzzle for me. If the inflow of funds is achieved through ETF approval, we will let the ultimate degens enter the final phase of the macro cycle that began in 2020.
From a high-level perspective, the success of cryptocurrency depends solely on bringing more funds into this game. In the short term, its success may become a self-fulfilling prophecy, and financial decadence will ignite the system that cryptocurrency attempts to replace. In the long term…
