4 min read

The evolution of crypto – It’s time to ship some product

Robert Neivert

Venture Partner

Published

28.08.18

Is crypto just another trading platform or can it evolve into something with real long-term value?

If you’re reading Cointelegraph, Cryptonews, or other industry outlets, you’ll notice the news is dominated by coin trading information, from BTC price changes to the analysis of alt-coin price movements. To a casual observer, crypto is highly focused on coin trading, much of which is driven by speculators.

There’s less of an emphasis on the long-term value of the underlying products in crypto. Functional products are few and far between, and the majority of coins have little practical use as a way to pay for products or services.

Speculation does have some positive effects on the ecosystem. More speculators buying coins tends to drive prices upward, making coin offerings more attractive for companies, and driving more initial funding for new projects. As long as traders think that there will be someone else willing to buy crypto assets from them for more than they paid (the bigger sucker concept), they will continue to trade, even if there are only forecasted products and revenues indirectly driving funding for projects.

So what is the problem?

Crypto is evolving. Without the rapid deployment of functioning and revenue-generating products, I predict the trading system will collapse as people lose faith in future gains, and traders flee a system with falling prices.

I think we are already starting to experience this nearly across the board, from BTC, to EOS, and many other alt-coins losing more than half their value since April. Unless the crypto community starts generating real products and revenues I would expect this to continue and perhaps even get worse. Without the gains from the coins, speculators exit, and a lot of projects will struggle to get their early funding, even well-deserving ones.

To avoid this downward spiral, there needs to be a focus on delivering real products and services that people will pay for in order to drive the coin usage from pure speculation to actual usage on the platforms.

This is why I am looking at fewer platform plays and instead focusing on applications that can take the existing platforms and generate useful products for end customers that generate revenues and not just investment. I will still look at platforms, but only when there are not similar well-funded ones already in place.

Ripple is one good example of moving quickly to applications. They quickly moved to provide real value to banks, allowing them to do international transactions dramatically faster and with lower fees. The platform has an application that does something that customers are willing to pay for, and does it before the coin traders lose faith.

I also appreciate the way that Dock.io rapidly released their initial product just a few months after starting the company. You can already log in and perform some basic functions, including doing a scan of breaches. Although a small thing, it shows a clear drive to immediately provide value for customers. The token usage of course will kick in as applications begin sharing data, driving utility value for the token. There are already strong signs that this will begin taking form later this year and begin moving the token value from pure speculation to real value.

What I really want to avoid is the Microsoft phone problem. Remember Windows smartphones?  Windows smartphones had apps, but not very many, and their competitors (Android and IOS) had a lot. The apps determined the winner in this case and I think something similar will happen for Crypto. I suspect in the long term the applications will absorb a lot of the profitability due to increased competition among the platforms. Vitalik Buterin talked about a similar concept comparing Ethereum to a smartphone and ERC20 tokens as apps on that smartphone.

Apps drive usage, useage drives validity, validity drives value.  

At the end of the day, platforms are just a way to enable apps. If you delay app development too much, you risk failure of the platform, and I believe we are closing in on that point now in the crypto space. It’s time to focus on shipping practical, working apps and scale back all the world-changing platform development or we might find ourselves with a whole lot of “Microsoft phones.”

The revenue generation is a necessary next step in blockchain’s evolution and will enable the market to slowly migrate from a trader-dominated marketplace to one where the utility of the coin drives the value and not just the bigger suckers.

Got a great blockchain project?  Our applications are open here and I am happy to chat more on Telegram: NoOneof Significance or use old school email: Rob@500startups.com

Robert Neivert

Venture Partner

Rob is presently a Venture Partner at 500 Global specializing in B2B seed investments. Previously, he was an executive for startups having founded or worked at eight companies with four exits and four companies still operating. Rob was CEO for the last two venture-funded start-ups. He also maintains a broad domain of expertise, having held leadership positions in products, marketing, and operations. Academic credentials include a BA, BS, MS, and MBA degree from Stanford, Wesleyan, and Santa Clara. In addition to his role at 500 Global Venture Partner, he is a mentor/advisor for Cardinal Ventures, Stanford iFarm, and Stanford’s Treehacks program as well as an executive advisor for over 15 funded startups, and previously held the position of Executive in Residence at Quest Venture Partners.

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