From Hype to Reality: Closing the Gap Between Token Promises and Product Development
In the midst of all the disruption and innovation, it is often token launches that reign supreme as the hype point for new projects.
This tweet by @CryptoRook88 is a perfect example of how easy it is for coins to get aped, and then get people excited for absolutely no reason other than their name.
For speculators, new launches are the much hoped for chance to see a token “moon” after it has been listed on crypto exchanges paving the way to substantial returns. As the crypto landscape matures, however, the gap between token launches and actual product development is becoming a glaringly obvious issue to fix.
The Hype Days
In 2017/2018 Initial Coin Offerings (ICOs) reached their peak. In June 2017 ICOs raised $550M compared with $300M raised through angel and seed VC investments - in other words crypto projects had surpassed traditional Web2 startups in terms of funding (NFTTech). ICOs paved the way to Initial Exchange Offerings (IEOs) and Initial Decentralized Offerings (IDOs), and the crypto industry witnessed a surge in token launches. These events caught public attention with hype and fanfare, but glittering token launches don’t mean much if they aren’t followed by progress in product development. It’s like the glamorous wedding before the actual marriage. In both scenarios it probably isn’t wise to place excessive emphasis on the former as any kind of metric of success. Much like a successful and long-lasting marriage, there needs to be a harmonious convergence between token launches and the delivery of something functional and impactful that evolves over time.
The Uphill Battle
“It can be an uphill battle during the early years, as a project strives to build a real product where the token’s utility truly shines.”
The journey of Web3 projects towards building products with genuine utility is an arduous one.
The nascent nature of Web3 technology makes it more complex than a Web2 startup. Unlike traditional centralized platforms, Web3 projects operate on blockchain networks, which require a paradigm shift in development approaches. The technical learning curve can be steep, requiring specialized expertise and time-consuming experimentation to create strong, scalable solutions.
Web3 projects can also be tricky to coordinate because there are quite simply so many cooks. Unlike centralized entities that can dictate development decisions, Web3 projects are often community-driven, relying on decentralized governance models. This decentralized decision-making process, while empowering and democratic, can also slow down the development cycle as consensus needs to be reached on various aspects, including feature prioritization, roadmap planning, and protocol upgrades.
Regulatory uncertainties add their own layer of complexity. The evolving landscape of crypto regulations and compliance requirements across jurisdictions creates a challenging environment for Web3 projects to navigate. Simply keeping stock of compliance efforts and legal considerations can divert resources and attention away from product development, holding a project back from realizing its utility.
Web3 projects also face the delicate task of tightrope walking between decentralization and user experience. While decentralization is a core tenet of the Web3 movement, it often introduces usability challenges. Creating intuitive user interfaces and seamless experiences that match the convenience of centralized counterparts requires thoughtful design and iterative improvements. Achieving this balance is essential to attract and retain users who might be accustomed to the simplicity of Web2 platforms.
The Speculation Trap
“In the beginning, a community primarily consists of speculators, and the token becomes a speculative asset rather than a tool within a decentralized network.”
In the early stages of a Web3 project's journey, the composition of its community often leans heavily towards speculators. These individuals are attracted by the potential for big returns on emerging tokens. As a result, the token assumes the role of a speculative asset rather than immediately functioning as a tool within the decentralized network.
This makes sense. When a Web3 project is in its infancy the utility of its tokens might not be fully understood or integrated into the network yet. Development timelines, technological complexities, and the need to build robust infrastructure may delay the deployment of the token's utility. In the absence of immediate utility, speculators are drawn to tokens based on their perceived investment potential.
Thirsty speculators are attractive for Web3 projects, because they can fuel rapid growth. As speculators invest in tokens, the increased demand and trading volume can drive token prices upward, attracting further attention from investors and speculators alike. This influx of capital and attention can provide crucial resources for project development, allowing teams to expedite product development and strengthen their position in the market.
The greater the FOMO the greater the sense of urgency and excitement within the community, leading to heightened engagement, discussions, and viral spread of project awareness. This increased visibility can attract partnerships, collaborations, and further investment opportunities, all of which contribute to the growth trajectory of the project.
This might provide short-term benefits, but as the project matures and product development progresses, the token needs to transition into a valuable tool within the decentralized network. This is vital for the long-term sustainability and success of the project, as it shifts the focus from short-term gains to building a thriving ecosystem based on real-world utility.
Closing the Gap
“The challenge lies in converting these early supporters into real users who can fully experience the benefits of a project.”
One of the significant challenges faced by Web3 projects lies in converting their early supporters, who are often speculators or enthusiasts, into active and engaged users who can fully experience the benefits offered by the project.
Many early supporters may view their involvement primarily as an investment opportunity, rather than actively participating in the project's ecosystem or utilizing its products or services. This shift from passive speculation to active engagement requires effective communication, education, and compelling demonstrations of the project's value proposition.
User onboarding can be a complex process in the Web3 space. Interacting with decentralized applications (dApps), wallets, and blockchain networks often involves additional steps, such as setting up wallets, managing private keys, and navigating unfamiliar user interfaces. These barriers can deter less tech-savvy users and impede their transition into active participants.
Early-stage Web3 projects may equally face limitations in terms of the maturity and usability of their products. The development of user-friendly interfaces, seamless experiences, and robust functionalities takes time and iterative refinement. If the project's products or services are not yet polished or lack compelling features, it becomes challenging to entice early supporters to become active users.
Overcoming these challenges requires a multi-faceted approach. Web3 projects need to invest in user experience (UX) design, streamlining onboarding processes, and creating intuitive interfaces that minimize the friction of interacting with their decentralized applications. Bringing on board non-crypto natives with expertise in building consumer-friendly apps can really help to shape accessible products.
Additionally, projects need to build a strong growth marketing strategy, harness proven Web3 marketing tools, and engage the help of content creators who can help to spread targeted educational initiatives, drive community engagement, and provide clear communication about the project's value proposition to convert early supporters into dedicated users who actively contribute to the growth and development of the ecosystem.
After the Hype
As the Web3 movement continues to shape the future of decentralized networks, it is essential for projects to prioritize utility over hype. By marrying token launches with robust product development, the crypto-native community can foster an ecosystem where the benefits of Web3 technologies become a reality, creating a transformative impact on industries and empowering individuals worldwide. In the end, it is the commitment to building real products where the utility of tokens truly shines that will shape the success and longevity of Web3 projects.