In 2018, the promise of a decentralized future fell apart.
The most widely used dapps have a few thousand daily users and a study of 43 blockchain applications found a zero percent success rate. With so much funding and talent in the space, why do we have so little success to show?
There is a broken process for building and launching blockchains applications today. Rather than working within an low-risk environment that supports iterations and learning, blockchain companies follow a playbook that stacks the odds against their success. By pre-selling a product before it is built, projects set themselves up to failure with unrealistically high user expectations on their V1.
Moving forward, this approach to building creates three problems:
- To appease an early adopter crowd of crypto-enthusiasts, projects preach to the choir and build with the assumption that decentralization is the answer (rather than a means to an end)
- With vocal supporters, projects make sub-optimal decisions by committee
- With a market emphasis on ideas and theory, projects follow the white paper as if it is the final product plan rather than the starting point.
With so little to show from 2018, we have to change how products are incubated and tested. For a better 2019, we can take lessons from how successful technology companies are built and apply them to the blockchain space.
Build a product not a protocol
Many blockchain projects that pitched a future of decentralization just a year ago are realizing you cannot find mass market success by preaching a philosophy alone. Open-source projects as an alternative to closed, centralized networks are nothing new. It has been tried before with Diaspora vs Facebook, Mastodon vs Twitter and DuckDuckGo vs Google.
The takeaway from these projects is the same: openness and decentralization only matter to developers.
Blockchain applications need to go back to basics and ask the question of who is the user and what is their problem. Bitcoin created a way for darknet users to exchange funds online. Ethereum allows developers to run a script on a decentralized computer. IPFS is a way to store censorship data.
No crypto-economic incentive is strong enough to overcome a missing use-case.
Don’t let users tell you what to do
Facebook released the newsfeed to overwhelming negative public response. Apple product launches have all been met with the same media reaction: too expensive to succeed. Netflix moved to streaming and lost over a million customers in the transition.
Some of the most important product decisions that seem obvious in hindsight were controversial at the time. For crypto projects, a vocal community can be the biggest asset or biggest liability. Listen to your users but filter the feedback. Don’t give your users what they ask for; give them what they want.
Focus on iteration over the idea
There is an mistaken perception in crypto that the idea is the most important part of success. So, we see teams focusing on white papers and delaying the launch for years. But what we have learned from how successful technology startups are built is that a good idea is only the beginning.
Two markets with runaway success in 2018 were exchanges (e.g. Binance) and mining hardware (e.g. Bitmain). Binance went from zero to over $1 billion in revenue in under a year. ASIC mining efficiency for bitcoin has increased by over 10 times. In the same year, no decentralized application has seen mainstream success.
The product development cycle for building smart contracts and decentralized networks is excessively slow because the high risks of mistakes are too high (e.g. Parity wallet hacks). Rather than launching and learning from user feedback, teams iterate in isolation and delay the valuable learnings that come from real users. Moving forward, projects should launch earlier and smaller. Test the product with a small group of users, get feedback, and iterate.
Despite a 2018 with few signs of success, I am optimistic about the year ahead.
As seen in the dot-com bubble and burst, bear markets are some of the best times to collect talent and build. That said, as Einstein said, “the definition of insanity is doing the same thing over and over again, but expecting different results.”
So let’s shift to a new way of building in 2019.
Russian Official: BRICS Countries Continue Unified Payments Systems Developing, No Plans for Bitcoin in Near Future
Last week, the news that Russia is considering investing huge amount of money into Bitcoin as a means to invade US sanctions spread like fire.
Given the fact that Russia has been working on de-dollarization plans for a long time now while looking for an alternative reserve currency further put force behind this news. This got the crypto enthusiasts excited as this would have meant huge investment into the crypto market and that too directly from the government.
However, this might not be happening at least, any time soon, as the Russian news channel, Forklog, published an article quoting Elina Sidorenko, the chairperson of an interdepartmental working group of the State Duma for managing risks of cryptocurrency turnover, as saying,
“Under this statement, there is not a bit of common sense, much less ideas that would be considered in government circles. The Russian Federation, like any other country in the world, is simply not ready today to somehow combine its traditional financial system with cryptocurrencies. And to say that in Russia this idea can be implemented in the next at least 30 years is unlikely to be possible.”
She further pointed out that given the fact that there is lack of any legislative regulation of cryptocurrencies in the territory of the Russian Federation makes what Vladislav Ginko, a teacher at the Russian Academy of National Economy and Public Administration under the President of the Russian Federation, said sound absurd.
“Even if Russia wants to place its cryptocurrency assets now, it simply cannot do this, due to the fact that we do not have any mechanisms that would allow us to introduce a system, where these assets would be stored, which authorities would be responsible for it, which would be responsible for abuses and stuff. Such a model under the current criminal, financial and civil legislation, in general, does not fit. All over the world, a cryptocurrency is considered as a high-risk asset and a similar model, naturally, would not suit anyone.”
However, Sidorenko does note a different way to solve this issue which she states is the only way to use digital assets at the state level.
She says an interstate cryptocurrency can be created that would then become a unified system of payments between countries.
“A similar idea is already being considered within the framework of the EAEU, but the BRICS countries have moved closer to it. If a cryptocurrency unit had been invented, which allowed making payments only for energy, in fact, the Russian Federation could have made a long and long-term advance in the economy.”
Just recently, Russian Prime Minister Dmitry Medvedev talked about cryptocurrencies and their volatility being a cause for concern while acknowledging the fact that it has its own benefits that can’t be cast aside.
This Just In, Europe is Bullish on Bitcoin According to Binance Seeing Massive Registrations in EU
Binance has launched its European services only a day ago and the wave of registrations are already massive. With its new platform in Jersey and offering the British Pound (GBP) and Euro (EUR) trading pairs with Bitcoin (BTC), Binance has just seized a huge market. In less than 24 hours, the exchange’s European division is already full of new clients.
Changpeng “CZ” Zhao, the founder of Binance, has affirmed that the company is “overwhelmed” with so many people registering and that there is a backlog of Know Your Customer verifications that have to be made before whitelisting so many people.
He affirmed that they underestimated the market and did not believe that so many people would want to register so quickly, so the systems are running slightly slow for the moment.
Despite Bitcoin dropping around 80% in price in the last months, a lot of people are still interested in it and this is the ultimate proof of that. The efforts of companies like Binance which are in the process of continuous expansion, are actually paying off and are facilitating mainstream adoption little by little.
What is sure is that Binance will have a stiff competition in Europe. Many key players are already in the country, so it will be hard to carve out some space in this new market, but it looks like things are going smoothly, at least in the first 24 hours. Coinbase and Bitstampare two of the most important competitors that CZ will have to face in order to establish Binance in Europe as a winner.
According to the CFO of Binance, Wei Zhou, though, Binance’s expansion into Europe is good for the whole industry. He says that fiat to crypto “ramps” are critical for people to enter the market as new users will not buy crypto with crypto.
Because of this, Zhou believes that this will provide new important opportunities for both the company and the whole market as well and that they want to create a real channel for people in Europe to enter the crypto world just like a lot of people are doing in the U.S. and in Asia.
It is also important to notice that Binance really needs to up its game if it wants to be relevant in 2019. In 2018, Binance was the king of the market and companies like Coinbase had to watch it, but 2019 will be the year in which companies like Bakkt, the crypto exchange and liquidity provider created by the Intercontinental Exchange (ICE) will be in the field.
With large corporations from Wall Street entering the game to win, Binance has to evolve and grow or it may lose its place in the market and be left behind.
What To Expect From Europe?
While Europe already had a Bitcoin market way before Bitcoin exploded into the mainstream, its growth is somewhat slow when compared to Asian markets, for instance. According to data which was taken from CryptoCompare, the whole daily volume of Bitcoin in Europe is less than 4% of the world volume and the whole Europe ranks behind both the U. S. and Japan.
If Europe’s market will grow, 2019 is probably the year for it. During most of the year, the country had regulation problems and has seen a slow improvement in its crypto economy. Now, however, Binance is eyeing this market, so we may see some significant growth this year.
Cryptocurrency Investors in India Are Fighting Back in the Name of Having Their Bank Accounts Closed
India, the land of one of the oldest civilizations, has existed for thousands of years. To survive for so long, one needs great tenacity and a certain acceptance of fate. There is also an ability that is colloquially known as ‘jugaad,’ the closest English equivalent is a hack. So when Banks in India started to close the accounts of customers thought to be involved in crypto trading, people found simple jugaads to bypass the scrutiny.
Banks Caught In A Bind
While the Supreme court of India has yet again postponed the hearing of its case pertaining to Cryptos, Banks have gone ahead and implemented the central banks, the Reserve bank of India, directive. Compliance to the circular requires the banks to effect bans and deny services to customers or businesses that are found to be dealing in digital assets.
Thus banks are required to close accounts that might have made crypto related transactions. This means they are expected to carry massive sweeps on their customer base and check on how people are spending their own money.
To make things worse most people savvy with these things, have already found ways to circumvent the banks screening and workarounds to avoid account closures.
How Do The Users Avoid Account Closures?
According to Instashift, a local cryptocurrency exchange, banks are closing accounts based on a simple search of any cryptocurrency-related words in the transaction remarks. This means that when a customer’s bank account is being scrutinized by a banking official, they are looking for keywords such as crypto or bitcoin in the remarks. If found the account is most likely to be closed off.
As one would imagine, the solution is to just not leave such notations. As Nischal Shetty, the CEO of Wazirx explained,
“Majority of the people understand not to enter such terms in the remarks. So simply avoiding entering anything related to crypto in the payment remarks is more than enough to avoid any problems from banks.”
He went on to suggest that the banking system has no verifiable method to confirm if a P2P transaction was used for crypto or non-crypto purposes.
Echoing the exact sentiment many Indian twitteratis are posting similar suggestions. A user, Cryptomanic has suggested
“Use P2P without writing anything related to crypto in remarks. And don’t do heavy transactions.”
Another one, Vivekmacha, concurs and advised for making use of P2P, as it cant be tracked. He further repeated the importance of making sure no crypto- related terms are noted in the remarks, for any reason.
More Than Enough Options On Offer
A solution that has been gaining in popularity recently is P2P, exchange-escrowed peer-to-peer style of trading. The popularity is unsurprising, ever since the central bank initiated the ban on digital assets and more and more crypto exchanges in India are gravitating towards offering this type of trading.
Another simple solution offered is to open another account. An Instashift spokesperson suggested that if crypto users have their accounts closed, they can simply start “a fresh account in another bank.” With the new account, they merely need to be more cautious and ensure that if they are trading, they do so without using any crypto terms that might draw attention.
Since all bank accounts are created using a Permanent Account Number, Indias water-downed version of the US social security number, the same person opined
“It’s easy to open a new account for a person in India & banks also welcome people to open accounts.”
Rigorous Action By Multiple Banks
The closing of accounts is, unfortunately, not an isolated instance, with many people reporting problems with banks, big and small, closing accounts which shows any crypto activity. Kotak Mahindra Bank, the banking branch of a major Indian industrial family and Digibank, a bank backed by the powerful Asian financial group, DBS, recently made the news. They have been sending letters to their customers advising them of impending account closures. One person affected by this took to Twitter.
Indiancryptogirl posted letters she says were sent to her. The letter simply stated that it had found some transactions with brokers who dealt in virtual currencies. As India did not consider such transactions legal the bank was
“constrained to place a credit freeze in your account. Further as per the extant guidelines, we are required to exit such relationships where transactions with brokers/traders, dealing in virtual currencies are observed.”
The letter ended with the notification that
“Hence 30 days from the date of this communication your account will be closed by the bank.”
This is not an isolated incident of some bank targetting customers with an affiliation for cryptos, numerous such cases have come to light in the recent past. Telling a similar story is Pushpendra Singh, who banks with the smaller UCO bank, but claims that this same modus operandi was followed there as well. A similar complaint reverberated in the words of Bluecrypto on Twitter who said,
“the same happened to me and my HDFC account got closed.”
Not only that, but most Banks now also follow a similar policy like Standard Chartered bank which explicitly requires, those who are looking to open an account in India to specifically agree to not engage in any sort of dealings in digital assets.
The issue of banks deciding for their customers how they can spend their money is in the front and center of this story. However, as Yatharth Vashishth pointed out, that banks are not the sole bearers of this burden as they are only following RBI’s order.
“Bank is acting as per regulations by the RBI. All banks are instructed to shut accounts of all entities dealing in crypto. ”
It does appear that banks are hapless and forced to toe the line, set by the central banks and, many suspect, a government not trusting the technology. While one can hope that the nations notoriously lethargic judicial systems come to the rescue, it is already clear that the second most populated country on the planet is working on hacks to join the crypto marketand blockchain revolution.