Developing Crypto

The biggest opportunity over the next decade is onboarding the next 1BN people into crypto. There are currently around 4m users who interact with DeFi and 80m unique blockchain wallets (0.1% of the global population). We are still in the very early stages of mass adoption of crypto, and chain tribalism distracts from the larger opportunity ahead.

I believe that the following things will happen:

  • We will live in a multichain world where chains are akin to nations (different philosophies, currencies, people and cultures)
  • Developer tooling, communities and libraries will become 10x better enabling a wider range of builders to develop natively on crypto.
  • Crypto will be abstracted away for the next 1BN people who are onboarding and most will have no idea that the experience is powered by crypto.

Multiple Chains Will Succeed

Multiple chains will endure and be “dominant”. Application developers will choose to route transactions through different chains depending on what they are trying to achieve. Developers have to think about the following things and it’s not immediately obvious where to build:

I believe we will live in a multi-chain future (e.g. Solana, Ethereum, Terra). Passionate, crypto native folks are often chain maximalists, but we all share one thing in common – we are crypto maximalists.

Developers will need to ask themselves the following questions (not a complete list) before they pick where to develop their applications and many successful applications will work natively across multiple chains:

  • Speed: What is the max load of the system? How fast can block confirmations happen? This varies a lot – Solana can process 65k transactions a second and has a block time faster than 0.5 seconds whereas Ethereum can process 30 transactions per second with a block time of 15 seconds.
  • Cost per transaction: What are the costs for different blockchains (L1 vs L2) to confirm transactions? Proof of work chains usualy cost more than proof of stake for example.
  • Security: How secure is the network? How battle tested is it? Are there good tools available to developers to plug common loopholes?
  • Decentralization: Can a small number of decision makers control outcomes or is the validator network decentralized?
  • Developers: Can you find Rust (Solana) or Solidity (Ethereum) for your project? Are there more folks with C (close to Rust) or JS (close to Solidity)background avaialble to be trained?
  • Community: Where are the users (geo) and what type of activity are they already doing (DeFi, NFT, Gaming)? Different chains have different levels of traction in different communities.
  • Onramps: Are there available Fiat onramps to the token that you require for the users you care about? Can you attract users or provide liquidity if needed?
  • Incentives: Are there special incentives on specific chains (grants or investment capital) or for users (liquidity mining) that can supercharge your growth?

My friend, Felix Feng put it nicely in a conversation we had a few months ago – different chains are like different nations with different philosophies, communities, and GDP. This Twitter thread also has some great nuggets:

I also enjoyed this data-driven take (from August) supporting a multichain future.

Developer Tooling Will Get 10x Better

Developer tooling will need to improve and deep communities will need to form to onboard the next batch of developers into crypto. If you talk to most people building and scaling projects engineers are the bottleneck to the pace of growth.

If we are going to live in a multichain future we will need better cross-chain infrastructure (check out projects like Polkadot, THORchain) which will help route different transactions to the right chains. Building on the “chains as countries” analogy, we need better transport and global passports to allow for cross-chain compatibility. I’m excited about Neon EVM which allows developers to write smart contracts in familiar languages like Solidity and deploy them on Solana (a second chain). I also think that aggregation services like Matcha which checks for the best prices and liquidity across DEXs will expand across chains (and potentially allow low gas or gas-less transactions) will help improve transaction efficiency.

We also need better documentation (e.g. Intro to programming on Solana, or minting NFTs using Metaplex Candy Machine), bootcamps and courses (e.g. CryptoZombies, ChainLink Bootcamp), developer communities (e.g. QuestBook), and frameworks (e.g. Anchor Framework for Rust) and developer platforms (e.g. Alchemy, Infura) to help newer developers build faster and better in crypto.

In addition, I imagine we will need some standard tools to support regulation like on-chain KYC (this wallet is a real, verified person – e.g. Civic), Fiat<>Crypto onramps as a service (MoonPay, Ponto), and wallet analytics to early detect “bad actors” across applications.

Crypto Will be Abstracted Away

To really drive adoption, the complexity of interacting with crypto will need to get abstracted away for users (definitely) and for application developers (likely). Less than 0.1% (made up statistic) of the people who send money using traditional rails understand how the systems work under the hood. The same will be true for crypto; people just want their transactions to be reliable, fast, cheap, and secure.

Audius is a cool example of a decentralized “SoundCloud” built on top of Solana and IPFS where users don’t need to know that storage is decentralized and activity is recorded on-chain. Users can just have fun discovering and listening to music and not worry about keys or custody.

Even when users are onboarding into crypto they often want to just buy an NFT or a token but are confused by the prerequisite of creating a self custody wallet and setting up their own security (and often don’t have familiar mental models). Developers will need to allow new users to pay in Fiat (e.g. a credit card) and provide “temporary custody” of the user’s keys (account information and password). Users could then “claim” their keys with a second onboarding into self custody at a later date (which could just be a common service for all application developers.

This is not an exhaustive list — just a few perspectives on how product development in crypto is going to evolve and how that might help onboard 100x more developers and users into the technology.

A Global M-Pesa

We need a Global M-Pesa / Venmo powered by crypto rails. Both these products are closed ecosystems powered by outdated, expensive rails compatible with their chosen markets. Crypto will ultimately enable even better user experiences but powered by rails that give participants access to global finance, trade, and commerce.

M-Pesa was transformative in Kenya. It allowed people to send money from cities to rural areas instantly and quickly. A network of agents lets people cash in and cash out as well as exchange their mobile money for products like airtime (credits for their cell phones), pay their utility bills etc. M-Pesa, however, is controlled by Safaricom and is a closed-loop product.

Venmo in the USA makes us feel like we are making instant transactions but they are faking it using outdated ACH rails and making money through credit card fees and instant transfers. When you send money to a person or business it feels instant but recipients have to wait a few days to “cash out” typically. Venmo is handling the float and taking some risk in this process and many people have money in their wallets which enables float in the system.

Crypto has the power to disrupt these payment systems and power the next generation of how we send each other money. There are a few things that need to be solved to make all of this possible, and activate a whole new set of crypto users (who may not always know they are interacting with crypto):

  • Cost: With fast, cheap blockchains like Solana and ETH layer 2 solutions becoming more battle tested and proven, it’s now technically possible for peer-to-peer transfers to happen with very low cost per block/transaction which previously made small transfers infeasible.
  • Scaleability: In addition to lower cost, these chains are becoming more scaleable. Solana can handle 65k transactions per second on their blockchain which means transfers can happen instantly which was not possible on Ethereum (Layer 1) or Bitcoin.
  • Regulation: Governments have used money to control their economies and societies for a long time, and crypto threatens a this power lever. It’s clear to me that taxation and regulation is imminent across major jurisdictions but my hope is that leading developed economies (like the USA) and emerging economies (all over Africa) will open their minds to the potential benefit to their society outweighing the loss of control.
  • Custody: In order to interact with crypto you have to create a wallet and keep your “keys” and pass-phrases to your account secure. For less digitally native and less literate people this is a tall order and the only real alternatives are to trust centralized exchanges with custody of your accounts (they keep your keys secure). I expect we will see a lot of innovation in the custody space (e.g. group custody, biometric gating etc) in the coming years.
  • UX: One of the biggest issues with crypto is that it’s so f*cking jargony and confusing for normal people. Crypto natives are often un-empathetic to “normies” who are experiencing crypto for the first time and this is reflected in the design of their products. As we develop products in crypto we need to remove the jargon, find familiar mental models in traditional finance and take all the friction out for normal people while preserving the functionality for crypto native power users. Crypto can power the back end and does not always have to be front and center – most people who interact with financial products today have no idea how the technology works.
  • Liquidity: We need enough liquidity (and systems to scale this up and down) on both sides of transactions so that users can complete tasks without having to understand how their transfers affect the global supply. Right now if you make trades that are a significant part of a pool you can adversely affect markets, which is inefficient when multiple pools exist across exchanges.
  • On and Off ramps: In many countries the hardest thing is figuring out how to convert local cash to cryptocurrency. In emerging markets these are often “over the counter” WhatsApp groups powered by trust because these communities are small enough. In developed economies centralized exchanges like Coinbase power most of the on and off ranmps. We need better standards and process to get fiat (cash) into digital cryptocurrency and back into cash that people can use their cryptocurrency for “real world” utility.
  • On-Chain utility: As more functionality moves on chain and/or seamless integration with real world use for money (e.g. paying school fees, rent, utility bills) the need for on and off ramps becomes less important. Users will have less reason to take their money “off chain” and they will be able to power more of their lives through crypto.

One of the companies I’m most excited about in this space is Ponto (where I’m an angel investor and advisor). They are building infrastructure to enable every fintech to offer access to crypto for their customers by bundling technology, compliance, and liquidity (cash in cash out). This allows traditional fintech startups to focus on delightful and consistent customer experiences while Ponto takes care of everything else under the hood. If you’re interested in learning more or potentially joining the company check out their careers page here.

I’m an active angel investor in emerging markets, particularly in Africa, often in businesses that power the flow of money. Individuals and small businesses get money from friends and family (remittance), trade (exchange of goods and services), labor (salary), or credit (loans). All these systems that power the flow of money can all be improved with crypto rails.

Once we give 1BN more unbanked people who have cell phones but limited access to digital finance new access to global finance at their fingertips we are going to see unprecedented improvements in financial mobility and global trade.