Crypto Needs More Lighthouse Customers
Tony Sheng leads consumer venture investments at Multicoin Capital
This post is part of CoinDesk's 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world. Tony Sheng leads consumer venture investments at Multicoin Capital, an investment firm that invests in cryptocurrencies, tokens, and blockchain companies. Disclosure: Multicoin has invested in Tagomi, Bakkt, Torus, and holds MakerDao tokens at the time of publication.
Startups need users but getting users can be difficult if the startup offers something new and unfamiliar to the market. Users need to see how the startups product or service will benefit them before they change their behaviors.
Lighthouse customers are early adopters whose successes attract other customers. Like a lighthouse guiding a ship to port, lighthouse customers guide potential customers through an uncertain buying process. The success of the lighthouse customers assuage the buyers fears that the startups products wont work or will make things worse.
In some ways, adoption in the crypto markets over the last few years has been disappointing. The frenzy of 2017 and 2018 promised a dismantling of legacy institutions and a wholesale replacement by utopian token networks. This promise connected into the belief that institutional investors were to arrive in herds, buying up all the digital assets in sight. Instead, we saw relatively little demand for dapps and a conspicuous lack of coin-buying herds.
The best developers in the world will start to build on blockchains when they see companies creating real value, serving real customers, and making real money. Instead, this year they saw a cacophony of debate about core infrastructure, failed research and development, and a number of creative capital formation experiments. They didnt see lighthouses, only storms and shipwrecks.
Similarly, for institutions to really get involved in crypto they needed to see other institutions succeed at either allocating to the asset class or building on top of blockchain infrastructure. Trusted brands needed to offer tools like custody, pensions, and endowments allocating to funds. Instead, they saw several false starts for a BTC ETF, muted allocations from the largest institutions, and a lot of announcements about enterprise blockchains. But there were few, if any, signals of adoption.
But as I look into next year, I see flashes of light. Across the industry, Ive found functioning lighthouses that can serve as a welcome for the next wave of users, developers, investors, and customers.
On the application side, second-generation wallets like Argent and Torus have made dramatic UX improvements, lowering the barrier to entry for everyday users. For example, logging into Web3 applications using Torus is indistinguishable from the login flow for Web2 applications. Games like Gods Unchained ...