Do you have the feeling that blockchains NGMI? And that they look like Ponzis?
In this 𧡠I will share my reflections on the topic and what we should do to change this sentiment.
TL; DR (spoiler): Fix blockchain UX and get them users.
Blockchains are platforms - places where users and businesses meet and produce value. A portion of this value is extracted into a cryptocurrency behind the blockchain.
The difference between Blockchain and Web2 platforms is in the extraction mechanisms. For ordinary companies, "the platform fees" are simply appreciated as revenues. While blockchain value accrual is a complicated beast.
twitter.com/AlexAuroraDev/status/1523635464632414208
But everything else is essentially the same. So let's take a sneak peek at the biggest IT platforms of the world: e-commerce.
A nice high level overview can be found in this article, I'll highlight some important points:
preventdirectaccess.com/ecommerce-stats/
The biggest market is B2B ($8.5T, 64%), while B2C is substantially smaller ($4.9T, 36%).
The amount of retail users that participate in e-commerce is HUGE: 2.14B, which translates into ordinary transacted value of below $2300 per user *per year*.
(and $6300 per user per year for the whole market, including B2B)
Obviously, median check size for B2B sector is way higher and the number of participants is much lower.
When we look at social platforms these reveal similar data: vast retail user base, low value/revenue per user.
What are the stats for Blockchain? Well, we can take an extremely conservative approximation of $3.7B transacted per day (only Bitcoin!) and a rough estimate of 80M wallets, which probably mean that number of actual users is lower. Let's take 40M.
blockchain.com/explorer/charts/estimated-transaction-volume-usd
This leads us to an astonishing $33.8k per user per year in transacted value. More than x5 comparing to e-commerce.
Note that these estimates are not even taking into account the values of NFTs, Ethereum and side chains!
Why?! Is Blockchain a luxury? Is it expensive? Is it only for rich people?
Obviously not. Transactions on Ethereum nowadays costs less than delivery from AliExpress. And the country with the highest blockchain adoption is Vietnam, not Switzerland!
I strongly believe that this is happening because "Blockchain users" are for the most part investors, and not just everyday users.
If we look at the structure of communities we will find support for this opinion.
Blockchain communities are formed around protocols and tokens, not around products, which is typical for an ordinary world.
Baby shark lovers, WoW players, Off-grid/van-life believers, TikTok-ers. Are there any "tokens" for these?
Instead, a blockchain "user" knows everything about RSI, golden crosses and head&shoulders. Oh, yeah, and since this year, a Wyckoff Distribution too.
investopedia.com/articles/active-trading/070715/making-money-wyckoff-way.asp
So, we end up in a situation with lots of investors and not a lot of users. I mean EXTREMELY LOW number of users comparing to any sizeable web2 platform.
Why does it matter?
For IT, the platform flywheel looks like this: investors bring money, which flow into development, which result into apps, which bring users, which increase market size and allow investors to invest more. This is how AppStore works (+ 30% fee ofc).
But if you remove users from the equation, you'll get a typical blockchain-style flywheel: investor money bring developers; they develop apps, which because of farming incentives bring new investors.
As a result we see developed constructs: mercenary capital, rug pulls, market manipulations. New investors becoming exit liquidity for previous ones.
In TradiFi they call such markets Ponzi.
From the other side, users are not coming because of two main reasons: first, the tech is complicated and early-stage (its' guts are exposed to the end users). Second, people are just scared to touch it, because of the developed sentiment.
It already took 7 years explaining to my father (PhD!) why I believe blockchain would change the world. And I'm still not quite there. On the contrary, my mother constantly blames me for discouraging her buying Bitcoin at $3500 in 2018. π€·
Quick recap:
Blockchains don't show the structure similar to other platforms. The core distortion is in the ratio of investors to users (similar to Ponzis). Users are not coming because of the complexity and negative sentiment.
OK. We've just translated some feelings into tangible problems. Take a breath. Thanks for reading up to this point.
But we still have some things to figure out...
What would help? Bringing users back into the equation. And we *really* need to do it fast.
Because web2 tech giants are trying to incorporate blockchain values into their messages already.
Changing sentiment? Let's elaborate on this option...
As a vertical we started our comms with anon thesis and failed it with Bitcoin used on Silk Road.
Then starting from 2014 we continued with traditional cult of individuals. At first it worked great.
But then we got into late 2017 and devastating summer/autumn of 2022 which proved that deification of weak humans turns them into scammers and ends up with billions being lost.
All of the above results into legislators putting in place more regulations to protect investors from scam.
And this is what actually works in traditional markets.
But, seriously, why on Earth people care about FTX more than of ghost guns, which are now 50%+ of all firearms in the US? π€·
Let me answer this in simple words...
We, as an industry, suck at marketing.
So, it would be extremely hard to do anything with the sentiment fast.
The only way forward is enhancing user experience and bring the blockchain down the stack. After this, everyone would keep their eyes on the blockchain *values* (remember above mentioned Apple?), leaving specifics to nerds like us.
When people use Internet, do they care about TCP/IP? Even the "secure connection" concept is now omitted! A user can get detailed info on the connection IFF he performs some additional moves.
Why do we force people to keep the blockchain in mind every time they use it: gas cost, gas price, base tokens, priority fees, stuck txs, etc.?
We really need to remove it. Only then we would be able to compete with web2 for users.
Kudos to everyone working on this!
And for anyone who is seeking for the tech that solves this problem, check out Aurora.
In short, all Aurora txs are gassless transactions with ability to hide blockchain concepts from the user completely. It's demonstrated in Aurora+.
aurora.plus/
We have a great 20-min Aurora+ release event that explains all the concepts and outlines the roadmap (follow the updates, new releases are coming soon!).
I invite builders who are waiting for Account Abstraction on Ethereum, to come to Aurora, use similar tech and test the hypothesis you have in mind right now!
Build hard through these times and fight the dark centralised side. May the force be with you.