Bitcoin and the rest of the crypto industry as we know it have been around for 12 years. In that period, Bitcoin has been adopted as legal tender in El Savador, Play2Earn games have given us a whole new way of earning money, and the formation of decentralised autonomous organisations or DAOs have generated a lot of enthusiasm in the investment, art and activism spaces, one of which recently came together in an ultimately failed attempt to bid for a rare copy of the US Constitution.
Despite all these exciting innovations, these developments represent only the tip of the iceberg and opportunities in the space are bound to grow exponentially. This is evident in the stratospheric rise in crypto such as the 10 times rise in value of DeFi Total Value Locked since 2021 to over $200B. L1 chains like Avalanche, Solana and Terra are continuously seeing record transaction growth and active users.
At Iterative, we are excited over the possibilities. We've made a few bets in Web 3.0 and crypto, but hope to unearth more. Here are four areas that interest us:
From CEXes and DEXes to hot wallets and cold wallets, there's a spate of knowledge that needs to be acquired before users can be proficient in adopting the technology. This, along with high barriers to entry and poor user experience, means that the crypto ecosystem is still ways off from being used by one billion people. There are a few ideas that we think could help accelerate adoption:
- Learning Crypto by doing—I love Rabbithole.gg because Rabbithole fosters participation in the crypto industry by allowing users to "acquire XP, level up, and earn rewards for interacting with well-known blockchain protocols". It incentivises users to actively participate in various products by using crypto as the incentive. This is promising because it encourages adoption by being immersed in the technology as opposed to passively absorbing knowledge through watching videos. More of such products and services that help users acquire the proficiency to participate is needed in order for crypto to be adopted by the next 1 billion people.
- Lowering cost of participation—The transaction fees on blockchains like Ethereum help maintain the network capacity. But the fees can be so high that newcomers can get priced out. High transaction fees have to be addressed by scaling to make block confirmation more efficient. There have been innovations in Layer 1s (by switching to more efficient consensus protocol) as well as Layer 2s (by taking the load off Layer 1s and then reporting back to it, like ZK Rollups). More innovation that will scale the blockchain and lower transaction fees will go a long way in broadening participation from new entrants.
- Usability—Today, the user journey in crypto typically starts with a cumbersome process that takes five to seven steps—from downloading plug-in wallets, like Metamask to working with an Central Exchange like FTX to get KYC'ed to start purchasing crypto. This contrasts with most Web 2.0 applications that are widespread today that offer a more streamlined experience. We would love to see services that simplify this process for users— this could be using your Wallet as a single log-in across applications and services amongst other things, similar to how we have Social Log-ins right now.
Treasury Management for DAOs
DAOs are going to play a much larger part in how the world does business in the next five to ten years. Existing DAO treasuries are already massive (over $20 billion in value) and they are going to grow exponentially. However, DAO treasuries are only putting less than 1% of their treasury to use. In traditional businesses like those in the Fortune 500, this would really be frowned upon. Assets in the treasury aren't meant to just sit there, some of it is meant to be productive - definitely more than 1% should be productive.
Treasuries are important to any organisation as they fund development, grow network and attract talent. They also play a huge part in ensuring that organisations can withstand significant shock or prolonged drawdowns in the event of a Black Swan or bear market. Here are some things we hope to see in DAO Treasury Management:
- External DAO Infrastructure—As DAOs mature and begin to interact with TradFi or non-crypto folks as clients, revenues that are derived from services provided will likely be denominated in Fiat or Stables. Figuring out on-ramps and off-ramps with proper KYC, having low fees and easy user experience will be crucial for DAOs to work closely with external parties. Another thing that will be required for DAOs to operate more like businesses is the need to incorporate. As more DAOs start to incorporate as LLCs to do business, financial reporting becomes an ever more important issue. Tools to help with standard reporting is going to be extremely crucial for compliance purposes.
- Internal DAO Infrastructure—Contributors need to be paid and how can this be done as DAOs start to scale, on time and with easily accessible records. Yes, it is true that we can query all of this on-chain. But these transactions cover payroll, receivables, invoices and more. And so tools to help Treasuries diversify and turn their native tokens into productive assets will solve a big pain point. Examples of this include Ribbon Finance and Thetanuts that help protocols sell premiums of their native tokens, allowing them to earn yield on their native tokens that they cannot find elsewhere.
It's only been a few years since Income Sharing Agreements have come up, but here at Iterative, we believe that Web 3.0 will open up new avenues for creators and individuals to monetize their individual brands.
Right now, creators and brands alike are subject to the rules and regulations that are set by the platforms that they are on. This means that they are unable to bring their followers and fans to a different platform should they choose to switch or if they are de-platformed for any reason. This is a big problem.
Social Tokens allows creators to personally control their brands outside the constrains that currently exist in today's platforms and share any upside directly with their fans. This does not only apply to individuals but also to brands that are looking to actively engage their communities. Some Web 2.0 companies that are looking to equip brands with the tools to better engage with their community include OctaneAI (zero-party data) and Grin (Influencer Management).
Play2Earn - but with primary focus on Playing
The current hot thing in Crypto is P2E games like Axie Infinity, Sipher and Crabada. It is incredible watching how Axie has grown into a $35billion behemoth over the past 12 months. But the current crop of P2E games are heavily focused on the earning aspect of games, and less so on the playing side of games. Barriers of entry have been artificially inflated due to the incredible growth of Guilds that have been raising a lot of money. These Guilds then need to deploy capital to continue recruiting more scholars to generate income, and they do this by buying up game assets and driving the floor prices up really high. For example, Crabada where you currently need to buy about $4000 of in-game items to even start playing. That makes the games inaccessible to large swaths of the population who might just be interested to simply to play the game and are less focused on the earning.
We are looking for games that can be played by anyone, anywhere, not just a privileged few. Crypto-gaming is still in its infancy. What does the Candy Crush of Crypto-Gaming look like?
Crypto is not going anywhere, it is here to stay. There will certainly be peaks and troughs, but Crypto is going to be massive and here at Iterative, we are looking forward to helping founders navigate on this journey to building our future.