The recent crypto crash presents an opportunity for companies in the decentralized finance space to rethink how the whole system works. And it gives us a chance to rebuild it, says Kieran Mesquita, Chief Scientist at RAILGUN.
Crypto businesses and projects can take steps now to create a more secure and stable future for decentralized finance (DeFi). Because crypto projects cannot exist without their investors, they must diversify their target audience, take responsibility for educating them, and look beyond moonshots. If cryptocurrencies want to be considered real currencies, they have to start acting like them.
A broad variety of investors is paramount
Cryptocurrency, like any currency, is most successful when it is owned by a variety of holders in varied situations. Think about it. Everyone, everywhere, has some kind of fiat bill or coin in their possession. No matter what socio-economic background they come from. This is what crypto needs to strive toward.
The best way to inject reliability into crypto is to spread it as much as possible. Companies with DeFi investments are incentivized to play it safe, to protect shareholder interests. Hedge funds are able to take big risks because they have the financial leeway to make bold bets on different coins and tokens. Day traders add a layer of depth to the distribution that can prevent currencies from swinging too quickly. When will we reach the stage where casual investors can be found anywhere?
To get there, industry leaders need to build technology that is clear, easy to use, and – most importantly – easy to access. The current heavily centralized distribution of cryptocurrency betrays both its premise and its promise.
How can business leaders solve this problem? By identifying target investors – and users – as well-run companies do. Instead of courting whales, blockchain projects should prioritize attracting and retaining a wide range of investors. Companies like E*TRADE and Charles Schwab know how popular crypto is and offer guidelines for their investors. There is a growing potential for crypto projects to woo the same investors who entrust their long-term investments to these companies.
No one in fiat invests their entire pension in one stock, so why do many crypto projects assume investors will do the same? Recent weeks have revealed that presenting crypto as a get-rich-quick scheme is a fool’s errand.
Industry leaders need to present their ideas as stable, long-term projects. Now is the time to move on from crypto resembling a modern form of gambling and instead demonstrate its uses as a decentralized currency designed for long play.
To do so, blockchain projects need to be explicit about who they are, their long-term goals, and what they hope to accomplish with their project. At RAILGUN, we prioritized transparency on our website by listing our core team members, their individual credentials, and links to professional pages. When potential investors are looking at our project, they know exactly who we are and what qualifications we have.
Let potential investors discover your business model
The biggest difference between cryptocurrency and fiat is the rapid change in value that cryptocurrency can experience. This may be extraordinary for early investors, but the singular desire to find a coin or token that will go “over the moon” ultimately ruins the ability of these currencies to have functional value outside of being a security.
If DeFi leaders truly want to see the widespread adoption and successful use of cryptocurrency, they need to do what any large movement does: invest in educating people at every level of the game.
Crypto projects need to take their best asset – grassroots communication – and use it to be as transparent as possible. Listed companies are required to hold a shareholders’ meeting once a year; crypto projects should do this monthly, or even weekly, and actively invite community members to ask questions of our dev team in real time.
Crypto is built on the mantra of do your own research (DYOR), but successful and trustworthy projects should be upfront and forthcoming about the risks associated with using the protocol, and about the future of our developments. Industry leaders in crypto must aid people’s individual research by giving them as much information and access as possible, as frequently as possible. The era of a blockchain project gaining traction with sweeping plans and vague roadmaps must end.
At RAILGUN, we spend a lot of time and energy explaining our technology to our community and answering any questions from the community. By prioritizing access, we are able to foster a culture of constant knowledge sharing. It doesn’t have to be radical; it just has to be consistent. We’ve created this consistency in the form of weekly DAO-wide Discord calls and bi-weekly Medium blog posts.
Take advantage of opportunities in higher ed
Another way blockchain projects can educate an array of potential investors is by fostering the formalized study of blockchain technology, cryptography, and decentralized finance at the university level. It is a given that students can study the economics of fiat at college. Now that cryptocurrency is a force to be reckoned with, our industry leaders need to pivot attention to cultivating foundations for and professors of blockchain technology.
CoinDesk has already started ranking the best universities for blockchain studies every year. There is currently a push to foster the future of deep technology at European universities, such as University College London or Oxford, and the community is contributing to this trend. For example, IOTA recently donated to Imperial College to study distributed ledger technology, and other large projects are participating in similar initiatives. These students could just as well be future cryptologists, data scientists and blockchain developers. Why shouldn’t the cryptocurrency space attract these new talents?
Don’t be afraid to look like a traditional finance company
The main issue crypto faces is that many potential investors remain suspicious – specifically those outside the tech scene – and after this crash, who can blame them? The crypto industry currently operates like a dysfunctional religious sect, with privileged information shared in gated channels where supporters are kept entertained through flashy distractions.
YouTube personalities function like pastors, developing an audience that is monetized through celebrity worship. The real work of educating the public about crypto has been left in the hands of journalists and periodicals who create an endless stream of “Intro to Crypto” lists and deep dives into blockchain.
The future of crypto has currently been set squarely on the shoulders of journalists, who are tasked with multitudes of “what is X” articles when everyone is better served by journalists who have the time and space to explore the “why” around the technologies.
Ultimately, it is against the best interests of crypto companies and blockchain projects to narrowly educate tech-savvy crypto bros who are already in the know through Discord channels and esoteric-heavy platforms. technological. If decentralized finance is to become traditional finance and replace fiat, there must be a large-scale pivot to education with the same ubiquity and veracity that traditional fiat demands. Industry should look to more traditional funding for the multitude of ways in which education and access is provided to the general population.
For example, crypto and blockchain projects can conduct public and easy-to-access workshops similar to how banks and fund managers do them. Newsletters and magazines from major fiat institutions exist that cater to young investors, older investors, or investors with families. The Financial Industry Regulatory Authority (FINRA), a US-based non-profit, offers a program to learn to invest. In the UK, Hargreaves Lansdown offers plenty of free resources to help beginners understand building a portfolio. These targeted educational outreach methods are tailored to specific demographics with the goal of offering financial literacy. In our case, we’ve found that the best way to educate our community is to host weekly calls outlining everything about our tech, smart contracts, and cryptography.
The crypto industry can make changes now
The crypto industry has suffered crashes before and will again. However, future crashes can be minimized if companies take this opportunity to reevaluate their modus operandi. This can mean letting go of the “go big or go home” mentality to make more space for projects that pursue slow and steady growth.
As soon as the market begins to rise again, this window for change will close, and everyone in DeFi will return to crossing their fingers and praying that the blockchain looks favorably upon their investments. Crypto doesn’t need to operate like this, and now is the time to enact positive changes based on what has successfully served traditional currencies.