Where are the crypto products? – Carolyn Reckhow

Who are they? — Probably young (under ~45), with above average digital proficiency, and somewhat financially literate. This isn’t your grandma; this person has probably mastered most of silicon valley’s consumer offerings, and they fit the mold of ‘early adopter’ — they’re curious enough about the next tech trends to dip their toes in.

What crypto products & experiences are available to them?

• Investing — They’ve heard about crypto and believe it could be a good investment. They turn to the most accessible tools (legacy mimicking experiences with web2 account based log-in) to buy and hold BTC or other cryptocurrencies on Coinbase, Cash App, or Robinhood. Maybe they also get into trading on Coinbase or delve into altcoins on Binance.
• Payments — Trying BTC as an alternative to banking systems or fiat payment services, either for sending cross-border payments cheaper & faster or payments within industries considered risky/institutionally blocked (i.e. adult industry, political censorship). Users can use many of the same apps mentioned above, but there are also targeted products/currencies like Bitspark, Bitwage, Spankpay, Dash available. The benefit of payments as a crypto product can’t stand on its own yet, there is still a lot of friction. Take cross border transfers for example — if both parties are looking to start and end the transaction in their native currencies this can take just as long and cost as much as bank payments and traditional remittances. Exchanges like Coinbase charge fees and rely on your bank’s hours & policies to buy BTC or transfer your BTC back to US dollars/local fiat.
• Education — I’m including education as a product/use case because it’s often the experience people who are motivated to use a crypto or a crypto product fall back on, unfortunately by necessity. At this introductory level people encounter books, podcasts, mainstream & tech media (i.e. WSJ/NYT, Techcrunch), and perhaps Coinbase earn. In the west these materials are English biased (I can’t speak to resources in Asia).

What’s Going on at Level 1 —

If the goal of the crypto industry is to reach mass adoption, we’ve done quite poorly here. There are very limited reasons and opportunities for a non-crypto enthusiast to use crypto products. The conversation is broad and active on why — we suggest everything from lack of education, poor UX, bad incentive design, to low maturity of the technology and industry. A less examined but important way to answer this question lies in dissecting initial user motivation. People in this first level try crypto for one of two reasons:

1. Commandeered Attention — Crypto has landed in their vicinity in some way or another. Maybe they’ve got a friend who won’t shut up about it, it keeps popping up on their newsfeed, whatever it is — it’s captured an adequate amount of interest to be motivated to learn more, possibly even by trying it out for themselves.
2. A Market/Financial Need — They’re actively looking for a new/riskier investment type, or a solution to a cross-border or other type of payments problem and BTC crosses their path in that research.

I’d like to see more effort put into understanding the dynamics of and what forms #1 can take, and experimentation in crafting on-ramps adjacent to non-crypto/legacy solutions for the needs of #2.

Above all at Level 1 — we just need to increase the volume of experiments, bring in more consumer app talent, buidl buidl buidl, and see what sticks. There are roughly 15 million Coinbase users today — that gives us a lot of beginners to start with, and implies billions more pre-coiners to engage.

Who are they? — These are people within the bubble. They’ve been investing & following cryptocurrency for some time, and they’re already motivated to engage in the ecosystem. They need to be — crypto products aren’t sticky yet, there’s still technical knowledge barriers to entry, and there’s no reason for most to exist outside of the “I want to use my crypto” use case. This person can be technical, but a defining characteristic of this persona is that they don’t need to be technical/know any code to use these products.

What crypto products & experiences are available to them? ( NOT a comprehensive list)

• Investing — At this level we see everything at level one (centralized exchange wallets) and more secure and advanced ways to buy and hold like hardware wallets (Trezor, Ledger), advanced custody & multisig (Casa, Xapo), or running nodes (Casa, Nodl).
• Payments — Again, this includes everything that might be of interest at level one, plus more experimental payments systems like BTC’s lightning network, xdai burner wallets, etc.
• Trading — Starts on centralized exchanges like Coinbase, Binance, Bitfinex, and now we’re seeing movement to decentralized exchanges like 0x, Airswap, Kyber, and Uniswap.
• Getting a loan/earning interest (DeFi) — BlockFi, MakerCDPs, Compound, Dharma, Celsius
• Gambling/prediction markets — Augur, Gnosis, Veil, or small price betting games like Moon Rekt & Yolo Rekt.
• Art & digital collectibles — CryptoKitties, CryptoPunks, RareBits, Editional, Mintbase
• Games — Gods Unchained, Etheremon, CryptoKitties/Cheesewizards, a robust ecosystem of EOS games
• Social media & forums — Steemit, Satoshi’s place, Tippin.me
• Marketplaces — Open Bazaar, NFT marketplaces
• Education — At this level education blends with discourse, we get into industry media, crypto twitter, reddit, and medium.

What’s Going on at Level 2 —

This is where the interesting stuff is happening, we’ve got the widest variety of use cases and experimentation here. Is Level 2 the segment that should or will continue to grow most? It’s a crucial domain because it’s where the everyday person peers into briefly before snapping back into their everyday lives. We need to focus on building easy, sparkly & sticky products here — the right ideas will bring in and retain more users. More users = momentum towards better products.

So let’s ask ourselves — What motivates someone to convert to a Level 2 user?

1. Profit — As game theory dictates, crypto fanatics are rational actors optimizing for ROI. This is the biggest one, and to some extent motivators #2,3,4 are layers of nuance on top of this motivator.
2. Knowledge & Novelty — Curious people land here for the continued intellectual challenges, the space is always new & exciting!
3. Community & Network Effects — Don’t discount the importance of fun, memes, belonging, and that sense of “my friends are here too!”.
4. Ideology— Social dynamics dictate that people naturally form philosophical/ideological groups around shared identities (i.e. social justice, libertarian, techno-utopian). Crypto can be a strong reinforcing tool for any of these world-views.

What other sorts of motivations are missing here? The most obvious to me is an answer to an organic market need, a need that doesn’t have crypto HODLing as a prerequisite. How do we hit this? The answer isn’t clear today, but I believe doubling down on #2, 3, 4 (rather than all hands on deck for #1 aka the DeFi direction) will result in more novel data and new product hypotheses with sturdier foundations — as they’ll wrap in more nuanced social and intrinsic motivations alongside the bare economic.

Who are they? This is your advanced crypto fan — someone who’s further down the rabbit hole who has learned technical skills to further their contributions, or someone who’s entered crypto already with advanced technical or specialized knowledge. They are participating in and contributing to the ecosystem.

What products & experiences are available to them? (NOT comprehensive):

• Advanced Trading & DeFi — Beyond Level 2 we see things that might look familiar to a legacy trader or finance professional like synthetic assets, pegged currencies, derivatives, leveraged CDP rates, and much more.
• Network participation — These take a bit more technical knowledge and time than Level 2 equivalents. I’m including broad categories like running your own node, staking, DAO formation & participation, etc.
• Bounties — Using crypto to bounty code (or non-technical) tasks, mechanical turks, etc.
• App building — Here the products can be blockchain networks themselves (EOS, Tezos, etc.), layer 2 scaling solutions (lightning, state channels, PoA), or lower down the stack as infrastructure resources, developer tools, or UX improvements & other components like API frameworks, privacy protocols, oracles, identity & key management, etc.
• Education — Similar to Level 2 with medium and forums, with additional technical resources from tooling documentation, github, stack overflow, and specialized courses.

What’s Going on at Level 3 —

Once we get to this level we’re beyond what’s visible to the outside world & Level 1s peering in. This is where we’re likely to see the most progress & exploration, at least for now. Why? Because this is where people who have the strongest motivation to improve the crypto user’s experience end up. Level 3s are building products for themselves, usually focusing on one of two directions. Either they’re technical enough to build products & developments deeper down the tech stack, or they’re driven to improve the usability of simpler products; both are motivated by the pain of their own recent shitty experience of traveling down the rabbit hole all the way to Level 3.

Therefore, there is no need to further examine the motivations of Level 3 users. Their motivations are the same as Level 2, with some additional weight placed on usability and technical scaling as a means of easing their own experiences.

Crypto’s current incentives mean that the center of gravity will usually pull down to Level 3, which is largely a good thing. We need deep tech and domain talent here if we’re going to move past scaling, security, and usability barriers.

A Note on Enterprise & B2B

I won’t go too much into this user type because it’s outside the scope of this article. Users are motivated by B2B’s more complex marketplace demands, there isn’t the same 1,2,3 gradation we see with the individual crypto consumer. I see two divergent types: 1.) corporations who want to use blockchain because it’s the new “big data” or “machine learning” to have an edge, and 2.) the independent industry crusader — someone who’s made a career out of solutions for a niche industry pain-point — now “blockchain” is their holy grail.

To briefly glance at what’s out there: Institutional investing users need trading platforms, custody, insurance, asset tracking & settlement. Corporate users need infrastructure for private blockchains & development environments, HR platforms, corporate governance tools, supply chain tracking for retail, fair trade, food safety, and data privacy & sharing in healthcare, financial, or industrial settings.

In the B2B world we see mostly pilots and some production projects solving for corporate efficiency & savings. This domain is typically very “blockchain not crypto”, usually uses private blockchain sandboxes, and at this point is pushed more for innovation clout/preliminary R&D than actual utility (until proven otherwise).