Compilation of the original text: Deep Tide TechFlow
Compilation of the original text: Deep Tide TechFlow
A bear market is a great time to consider investing in cryptocurrencies. Working in a 24/7 industry has social, mental and physical costs.
Because of the way tokens work, in the blockchain ecosystem"success"The definition of a founder is slightly different from what used to be in the traditional world.
You may often see founders with no product, users, or business model making incredible money for themselves and their investors - purely based on hype.
In the crypto industry, you don't need traction, sticky users, or revenue to run a"billion dollar deal", many so-called significant"success"Doesn't make any meaningful difference to the lives of people outside the industry.
Whenever regulatory authorities try to create laws around technology, it speaks to the area becoming a focal point, especially in emerging markets.
I can say that our industry is a case of Peter Pan Syndrome: a person grows up with an adult body but a child's mind. It describes a dilemma:Even though the technology of the games we play often seem naive to founders, investors, and users, as long as there is capital to monetize these games, there will be players and the games will continue.
But to reach the level of Coinbase, FTX and Binance, different capital parties need years of hard work.
Consumer-facing mobile apps have been the biggest driver of growth in the industry over the past five years, which explains why Wyre and Moonpay are valued at $1.5 billion and $3.4 billion, respectively. Because they are the key infrastructure for apps to penetrate retail users through microtransactions, mostly via mobile devices.
If cryptocurrency has to want to get out of Peter Pan syndrome, it has to reach ordinary people who don't want to care about private keys and protocols, the means by which we unlock the next trillions of value is by caring what people outside of Twitter want.
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Why choose PC?
In order to understand why most of today's Web3 applications are PC-oriented, we can recall that most of the users who remain in cryptocurrency today may have entered between 2017 and 2019. Around $25 billion in that era went to more than 8,000 ICOs. It was a golden age when anyone could trade and make quick money. But as with most deals, your edge depends on how quickly you can get information.
In that era, the user experience for the average person entering the space revolved around an ICO and then hoping it went public with a large enough multiple. Once a token is listed, you look for the next ICO to deploy funds. This is very different from before 2017, when you could only transact (send/receive) or trade digital assets. That's when wallets like Myetherwallet and Metamask started to carve up the industry pie.
As the DeFi ecosystem eventually morphed into the behemoth it is today, desktop-based apps became the standard for users to interact with the industry.
In my opinion, there are two reasons for this:
First of all, before deploying the funds of large institutions to the DeFi protocol to accumulate TVL, a secure infrastructure is required. While this is usually only possible with browser-based wallets like Metamask, smart contract interaction and adding new tokens is easier to do through a desktop-based interface.
Second, the flywheel incentivizes developers to build for a small number of users with a majority of capital.first level title
Why switch to mobile facilities?
I see mobile as a vehicle for Web3 applications because I think it's the device that holds the most human attention.Even when we use devices like televisions—which, by design, are attention-drainers—smartphones have the upper hand. It is our interface to new ways of being educated, dating, entertained, buying groceries, paying our bills, and finding an antipathetic presence. By 2013, the amount of time we spend online on our mobile devices has surpassed the amount of time we spend online on our laptops or desktops.
Building on mobile also allows the ownership element to be experienced by people who have had little or no access to it in the past. Mobile-first apps accelerate digitization, compress costs, and make services more affordable.
In the past, obtaining complex financial products and realizing ownership products was a high-cost, low-margin product. This explains why banking the unbanked has historically been a huge problem. Employee hours scale linearly, while customer base scales exponentially. Serving a growing user base without digitization would take a lot of time, so banks screen.
Traditionally, for one lender to issue loans to 10,000 users -- that means hiring credit assessors proportionally. When digital banks emerge, AML/KYC and distribution functions grow exponentially, reducing the time spent on this - allowing digital platforms to scale with smaller teams. As the user base grows, the cost of servicing each new user decreases.
Taking Compound and Aave as examples, since the smart contracts run on Ethereum, the costs incurred will be lower. DAOs do not run the infrastructure itself (the underlying blockchain). This does not include the fact that their credit assessment or AML/KYC costs are zero.
Digital banks disrupt inclusive unit economics.Suddenly, banks no longer needed to have offices in remote parts of the world. Instead, they can reach their users, perform the necessary KYC and provide banking services through the connection of mobile devices. Nowhere is this more evident than in India. A state-run payments network in the region called UPI has expanded from $4 billion a month in transactions to more than $120 billion in four years, with Indians digitally conducting 72 billion transactions a year.
DeFi promises to make investment banking grade products accessible to everyone. This is a variation on what ICOs promised, and the idea was that now everyone can invest in early stage projects.In general - this is true, but it rules out the fact that people tend to want simple, set it and forget it, not ones that require constant monitoring. I have an example to demonstrate this and that is the case of JarHQ from India. The app consistently ranks in the top 20 in the region for UPI transaction volume, why are users doing so many transactions? To buy gold, the price is as low as $0.05.
Historically, buying gold in India has been an act of the rich, where people pay enough for much less. Jar flipped it's unit economics upside down, by focusing on digital gold depository, they reduced the amount of capital needed to buy gold, so people flocked in where most of their traditional, store-first counterparts couldn't speed of scaling up.
How does all of this translate to DeFi? From what I understand, most founders have moved on to building products for institutions. Why? Because you can care less about user experience, focus on just a handful of customers, and claim billions in TVL. Since your customer base is almost exclusively seasoned financial managers, little effort will be spent on educating users.
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Mapping User Motivations
I am interested to learn more about user motivations and behavioral patterns of wallet users in emerging markets. Ravindra from Frontier Wallet was kind enough to provide information he observed on his product. Frontier Wallet is one of the first smart contract-based wallets on the market, allowing users to easily track their portfolios across multiple blockchains without interacting with each chain's browser.
Ravindra observed that Frontier users, who are more cryptocurrencies-savvy than the average user storing assets on the exchange, saved an average of $1,000 to $10,000. The average user of an Indian exchange has a wallet balance of close to $150 to $200. These users interact directly with multiple smart contracts, interested in generating USD-denominated yields. In an inflationary region like Turkey (one of Frontier's larger markets), there is a lot of interest in being able to store digital dollars and generate yield.
He has seen different subsets of users seeking to use Web3 as a consumption track, typically engaging with music or game-related NFTs on-chain. In his view, the next wave of digital asset users will not come to the chain for speculation, but for entertainment.
In my opinion, the user growth arc in terms of digital assets will follow a pattern very similar to what we are witnessing in terms of digital consumption in India.The data above reveals how many years Indians spent consuming different app categories in a given year. Social media and entertainment are the passive apps that find the most users.
Consumption patterns follow Maslov's hierarchy almost in a very loose sense. In this case, people start by having their basic needs met—a place to spend their attention. And then, up the arc, financial services for transactions and savings, and a little bit towards education or upskilling. I try to make Maslov's Hierarchy of Needs based on the above data.
In Web3 - we've turned this relationship upside down.Most of us spend our time on Telegram, Discord and Twitter.The market is a source of entertainment, but it comes at a huge economic cost.
Today's Web3 applications focus on financial applications or speculative layers, if the industry is going to be relevant to the vast majority of people on the Internet, it needs to address the majority of people on the Internet today. Like, apps that don't require a purchase, but entertain or connect people.
That's not to say we're not working in that direction. Axie Infinity's surge in 2021 is due in part to the team spending two years building the largest Web3, mobile-first user base. Recently - Sweatcoin, a Web2 application with ~3-4 million DAU, has launched a token economy within its application.
Apps like Mirror, Coinvise, and OpenSea allow creators to create stronger commercial connections with their users.But in almost all of these cases, we assume that users will participate in transactions, and our focus should be on enabling passive participation. A user can benefit without actively transacting or posting, and there is one class of apps that may lead the way.
That category is games.They have rich digital assets, have the largest user base, appeal to different groups of people, and have the lowest purchase requirements. Unlike most cryptocurrency apps today, games bring community and entertainment to users.
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what is the future?
Today's Web3 is a community of tech bros in a speculative climax explaining how groundbreaking it is to trace a small picture and then discover a wallet address.
But we need to think clearly about how people interact with technology if it has to permeate the fabric of society. We need to build tools that change the way humans think about why they should care about this technology.
There are a few companies already working towards this vision. For example, Bluejay is developing a stablecoin for emerging markets, and Goldfinch has issued over $100 million in loans to SMEs globally.
therefore,
therefore,In some parts of the market, we're making a meaningful difference - but with mobile, it scales to everyone.
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