A senior PR person told me recently they had all but stopped taking on crypto clients. The person, with whom I’ve worked for years, said they were fed up with taking money from projects that had clearly failed but that wanted to pay someone to help them pretend that wasn’t the case. Fair enough. At some point, money is not everything and there’s a point where meaningful work is more important. But it’s also worth taking a hard look at why so many crypto flops are out there acting like going concerns in the first place.
This doesn’t happen in other industries, where Schumpeter’s creative destruction is very much the order of the day. This is especially the case in Silicon Valley, where startups must claw for survival and most fail for the simple reason that not enough people want to spend their time or money on the startup’s product. In the case of crypto, however, many projects can defy these basic forces of economics.
A recent Forbes feature highlighted the problem nicely. The story compiled a list of 20 “crypto zombies”—I refer to them as dead blockchains—and published key metrics to show they had all but flatlined. One of these metrics is revenue (Coinbase CEO Brian Armstrong likes to call it “truth serum”) and the other is developer activity, which shows how many people are actually working on a given blockchain. The Forbes list showed how some of the biggest and most famous blockchains, including Cardano and XRP, have long had little of either. Yet they carry on.
The reason is that many zombies of the crypto world are sitting on billions of dollars. This is because blockchain can turn the conventional model for startup funding on its head. Thanks to token sales, many projects raised massive amounts of money upfront—rather than receiving a seed round and scrambling like hell to build something viable so they could stay alive.
Even when it’s been apparent for years that a given blockchain isn’t going anywhere, the project’s boosters can still whip up hype and false hope on social media in order to give their tokens a boost. You could argue there’s no harm in all this. After all, if someone wants to blow their money on Stellar or whatever, let ’em. It’s a free country and all.
The problem is not only that all this makes the broader crypto industry look dodgy, it’s also that dead blockchains take resources and attention away from crypto ventures that are getting some traction or building something useful. The question is whether anything can be done about this. The best option might be for respected players in the crypto space—including those from the VC and analyst sector—to follow Forbes’s example and publish lists that show which blockchains are truly dead in the water.
Once-buzzy crypto project Friend.tech, which let people trade tokens tied to influencers on the Base blockchain, fell 98% in its first trading day. (Bloomberg)
The Russian national who operated the wildcat BTC-e exchange from 2011 to 2017 pleaded guilty to money laundering in the U.S. (CoinDesk)
The NYPD are looking for three men who beat and robbed a 40-year-old man who had come to a hotel for a cash-for-crypto exchange. (New York Daily News)
VCs have been pouring money into crypto startups via “open-ended rolling funds” that juice valuation and jibe with decentralization, but skeptics say this is a recipe to overpay. (Bloomberg)
Bitcoin, which went live over 15 years ago, processed its one billionth transaction this weekend. (The Block)
Think crypto is reckless? Here’s a $20,000 bank transfer at the slot machine:
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