The recent collapse of cryptocurrencies presents an opportunity for companies in the decentralized finance space to rethink how the entire system works. And it gives us the opportunity to reconstruct it, says Kieran Mesquita, chief scientist at RAILGUN.
There are steps crypto businesses and projects can take right 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 moonlighting. If cryptocurrencies want to be considered true currencies, they need to start acting like it.
A wide variety of investors is paramount
Cryptocurrency, like any currency, is most successful when owned by a variety of holders in various situations. Think about it. Everyone, everywhere has some form of fiat currency or bill in their possession. It doesn’t matter what socioeconomic level they come from. This is what cryptocurrencies should strive towards.
The best way to inject reliability into crypto is to distribute it as widely as possible. Corporations with DeFi investments are incentivized to play it safe, in order to protect the interests of shareholders. Hedge funds can take big risks because they have the financial leeway to make bold bets on different currencies and tokens. Day traders add a layer of depth to the spread that can prevent coins from tipping too quickly. When will we reach the stage where casual investors can be found anywhere?
To get there, industry leaders must create technology that is clear, easy to use, and most importantly, easily accessible. The current heavily centralized distribution of cryptocurrencies betrays both its premise and its promise.
How can business leaders tackle this problem? By identifying target investors, and users, in the same way that 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 growing potential for crypto projects to woo the very investors who entrust their long-term investments to these companies.
No one in fiat invests their entire pension in a stock, so why do many crypto projects assume that investors will do the same? Recent weeks have revealed that presenting cryptocurrencies as a get-rich-quick scheme is nonsense.
Industry leaders must present their ideas as stable long-term projects. Now is the time to move from crypto to seeming like a modern form of gambling and instead demonstrate its uses as a decentralized currency built for the long game.
To do so, blockchain projects must be explicit about who they are, their long-term goals, and what they hope to achieve with their project. At RAILGUN, we prioritize transparency on our website by listing our core team members, their individual credentials, and links to professional pages. When potential investors look at our project, they know exactly who we are and what qualifications we have.
Let potential investors know about your business model
The most significant discrepancy between cryptocurrency and fiat currency is the rapid change in value that cryptocurrency can experience. This may be extraordinary for early investors, but the singular drive to find a coin or token that will go “to the moon” ends up ruining the opportunity for those coins to have functional value beyond being a security.
If DeFi leaders truly want to see widespread adoption and successful use of cryptocurrency, they need to do what any big movement does: invest in educating people at all levels of the game.
Crypto projects must 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, if not weekly, and actively invite community members to ask questions of our development team in real time.
Crypto is built on the mantra of doing your own research (DYOR), but successful and trustworthy projects need to be honest and open about the risks associated with using the protocol and about the future of our developments. Industry leaders in crypto must aid researching individuals by giving them as much information and access as possible, as often as possible. The era of a blockchain project gaining traction with broad plans and vague roadmaps must end.
At RAILGUN, we spend a great deal of time and energy explaining our technology to our community and answering all questions from the community. By prioritizing access, we can foster a culture of constant knowledge sharing. This doesn’t have to be radical; it just has to be consistent. We have created this consistency in the form of weekly Discord calls across the DAO and bi-weekly posts on the Medium blog.
Take advantage of opportunities in higher education
Another way that blockchain projects can educate a variety of potential investors is by encouraging formalized study of blockchain technology, cryptography, and decentralized finance at the university level. It is a fact that students can study fiat economics at university. Now that cryptocurrency is a force to be reckoned with, our industry leaders need to turn their attention to cultivating blockchain technology foundations and professors.
CoinDesk has already started ranking the best universities for blockchain studies annually. There is currently a push to foster the future of deep technology in European universities, such as University College London or Oxford, and the community is contributing to this trend. For example, IOTA recently made a donation to Imperial College to study distributed ledger technology, and other major projects are participating in similar initiatives. These students could easily be future cryptologists, data scientists, and blockchain developers. Why shouldn’t the cryptocurrency space catch these new talents?
Don’t be afraid to look like a traditional finance company
The main problem facing crypto is that many potential investors remain suspicious, specifically those outside of the tech scene, and after this crash, who can blame them? The crypto industry currently operates as a dysfunctional religious sect, with insider information shared on closed channels where followers are kept entertained through flashy distractions.
YouTube personalities operate like herdsmen, generating a following that is monetized through the cult of celebrity. The real job of educating the public about cryptocurrency has been left to the reporters and periodicals who create an endless stream of “Intro to Cryptocurrency” lists and in-depth analyzes of the blockchain.
Currently, the future of cryptocurrencies has been placed squarely on the shoulders of journalists, who are assigned a multitude of “what is X” articles when everyone is best served by journalists who have the time and space to explore the “why” around technologies.
Ultimately, it goes against the best interests of crypto firms and blockchain projects to closely educate tech-savvy cryptobros who are already in the know through Discord channels and tech-heavy esoteric platforms. For decentralized finance to become mainstream finance and replace fiat, there must be a large-scale shift to education with the same ubiquity and truth that traditional fiat demands. The industry must look to more traditional finance for the multitude of ways that education and access is offered to the general population.
For example, crypto and blockchain projects can hold public and easily accessible workshops similar to those held by banks and fund managers. There are newsletters and magazines from the major fiduciary institutions that cater to young investors, older investors or investors with families. The Financial Industry Regulatory Authority (FINRA), a US-based non-profit organization, offers a program to learn how to invest. In the UK, Hargreaves Lansdown offers a host of free resources to help beginners understand portfolio building. These specific educational outreach methods are tailored to specific demographics with the goal of providing financial education. In our case, we found that the best way to educate our community is to hold weekly calls outlining all about our technology, smart contracts, and crypto.
The crypto industry can make changes now
The crypto industry has suffered downturns before and will suffer again. However, future accidents can be minimized if companies take this opportunity to re-evaluate their modus operandi. This may mean abandoning the “go big or go home” mentality to make more room for projects that pursue slow and steady growth.
As soon as the market starts to rise again, this exchange window will close and everyone in DeFi will once again cross their fingers and pray that the blockchain will look favorably on their investments. Crypto does not need to operate like this, and now is the time to enact positive changes based on what has successfully served traditional currencies.
About the Author
kieran mosque is the chief scientist of RAILGUN, the first decentralized smart contract project bringing privacy to cryptocurrencies that works seamlessly with DeFi. He has extensive experience in developing technologies for blockchain and DeFi projects. He was an early adopter of BTC and one of the first people to develop his GPU mining software.
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