Why Do So Many Blockchain Firms Fail? Analysts Weigh In
Blockchain Companies Are too Much in Fantasy Land
Will Cong – faculty director of fintech at Cornell University – says the problem lies with the tokenomics of these many blockchain companies. Many of them don’t have their priorities straight. They don’t have necessary reserves in play, and don’t have what it takes to stay afloat for long. He commented:
Platforms also can’t even write down a logical objective for their token supply and allocation policy.
Dan Edlebeck – director of ecosystem at Archway’s core contributor Phi Labs – also threw his two cents into the mix, saying these companies are not realistic about what’s required to remain in operation. He mentioned:
It’s understandable that growth for the sake of growth and getting users above all else became the most dominant early days’ metric. Things were just so new, and all this stuff is Greek to most people. Today, however, when we’re on the edge of commoditization, projects will have a much harder time selling one-dimensional value propositions that have to do purely with performance tech specs of a chain, like time to finality and such.
He continued by saying that too many of the firms are also operating in the past and employ strategies that would have worked nine years ago but may not work today. He said:
When most chains compete equally in those areas, give or take, both users and investors will want to understand actual key differentiators in operational models. Is there an equitable financial model for all stakeholders over the long run? Does the team sustain business functions and cycles? If not, I predict an eventual extinction event for even some of the most dominant projects of Q2 2023.
Griffin Anderson – CEO of Phi Labs – says his firm Archway is working hard to address the many problems blockchain enterprises are facing. One of the company’s big priorities is to help redefine the blockchain landscape and reward developers that contribute to further activity. He said:
Archway is addressing the economic incentive problem for developers by giving them a portion of network rewards, providing them a sustainable business model to build off. The community feels this issue is so important that it’s the overriding driver of virtually everything they work on.
Asking the Right Questions
He concluded with:
Most of the web3 community is focused only on scaling… building a faster mousetrap. We’re at a critical crossroads in blockchain where it’s prudent for any participant to look around at all the factors, consider where the lion share of upside goes in any ecosystem, and ask yourself, ‘Am I involved with a single cycle chain?’