Lessons from 2023 and the recipe for crypto success in 2024
2023 was an eventful year in the crypto space. We witnessed bearish and bullish news weekly and observed many crypto project failures, which made the risky nature of traditional web2 startups seem like a walk in the park.
Notable crypto hacks in 2023:
- Mixin was hacked for nearly $200 million.
- Euler Finance hacked for $197 million in crypto funds.
- More recently, a security breach in Ledger Connect Kit meant over $500k was lost.
Crypto startups that said goodbye:
- Tessera, a fractional NFT project, shut down due to a “challenging crypto market”.
- Wyre, an infrastructure platform, winds down due to “difficult market conditions.
- Distrikt, an ICP project, shut down due to reasons such as “market conditions” and “legislative changes”.
Just highlighting the hacks and failures shares a biased message that crypto is a wild and risky space…which, in truth, it is. But many projects are paving the way for what it means to be an honest and successful project in this space and not all crypto projects die — this article will highlight 3 pieces of advice for crypto users and projects heading into 2024.
1. Focus on public goods
What do we mean by ‘public good’? We don’t necessarily use the term to imply that dApps shouldn’t make a profit. On the contrary, we believe dApps should be open and transparent about the fees they charge and their revenue models, which are used to fund the development of their platforms. When we say ‘public good’, we mean that dApps should benefit the public and the users more than the builders of the dApp.
Let’s take uniswap as a great example:
hayden.eth 🦄 on Twitter: “I work in crypto because of the immense positive impact I believe it can have on the world, removing gatekeepers and increasing access to value and ownership.I’m proud of the ways @Uniswap Labs has contributed to that effort and want to make sure we’re creating sustainable… / Twitter”
I work in crypto because of the immense positive impact I believe it can have on the world, removing gatekeepers and increasing access to value and ownership.I’m proud of the ways @Uniswap Labs has contributed to that effort and want to make sure we’re creating sustainable…
Uniswap have been transparent about the fees they charge and have boasted a solid customer support service for years now. It’s a good example of a project that set out with a mission, was honest to their users about it, and has succeeded as a result.
2. Clear and transparent tokenomics
Crypto tokenomics have unfortunately become a pie chart representing the allocations of tokens:
Tokenomics, when broken down, is about combining crypto tokens with economics. However, economics is not just about allocating money to different individuals or organizations in a pie chart. It’s about understanding how people interact with each other to create a functioning society. Particularly in the West, we follow a capitalistic model that, in many ways, is based around incentives.
Projects can create “good” tokenomics by creating incentives for people to use their tokens. You can’t create value for token holders by allocating more tokens to them. Value in a token is created by use cases and intrinsic value. Good tokenomics for a DAO can follow these rough guidelines:
- At least one additional use-case outside of DAO governance (give users an incentive to use the token within your dApp or protocol).
- The ability to earn the token outside of purchasing it on a DEX (earn via node providers, contract work, staking, code reviews, etc).
- An allocation of x% of tokens for team and investors.
- An allocation of y% for public purchase.
- A capped total supply.
- The rest of the tokens locked in a treasury for staking rewards and DAO proposal allocations.
By giving users an additional use case and the ability to earn the token — provides value to the DAO. DAO’s should also be able to provide users with the opportunity to perform a simple equation of x minus y, which will inform them whether they can outvote the team on significant proposals that might conflict with their interests.
3. Don’t be afraid of hacks
Too often, projects spend excessive time ‘building in silence.’ In the crypto world, the very real possibility of a hack and users losing their funds is no secret.
However, out of fear, projects often delay excessively, and some never launch due to this fear. From our experience, users in web3 and crypto are not children needing their hands held; most understand the risks and are not as fearful as some developers in the space. If you clearly indicate that your dApp is in early beta and communicate the risks to your users, you should strive to make your project as secure as possible while also launching promptly. Address bugs as they arise and engage with your early users as much as possible.
Crypto has hundreds of billions of dollars in TVL across all DeFi protocols, this gives us a great opportunity to understand how DeFi holds up against these large amounts of funds in the real world. It’s an excellent stress test for a new financial system. Vitalik discusses this in his article “Make Ethereum Cypherpunk Again”:
the crypto world is a perfect testbed environment to take its open and decentralized approach to security and actually apply it in a realistic high-stakes environment, and mature it to the point where parts of it can then be applied in the broader world.
We hope this advice was valuable to you and thanks for reading our first article of 2024, we’re excited for what the new year holds for Rakeoff.
Happy New Year 🎆