Upstream vs. Downstream Users
A different way to look at user adoption for ReFi projects.
After last week's edition, we put some more thought into ReFi user adoption. We wanted to develop a more nuanced understanding of the situation.
The conclusion we reached was the idea that, broadly speaking, there are two types of users: upstream and downstream. Upstream users contribute capital, downstream users consume it. Projects, in turn, can target one or both.
To illustrate, consider the projects Cleanify and $EARTH. Cleanify is a good example of a downstream-focused project. It gets funding from VeBetter and then rewards users for collecting waste. $EARTH is a good example of an upstream-focused project. To get capital for impact investments, it relies on users buying $EARTH tokens with USD stablecoins.
As of writing, Cleanify has over 78,000 users while $EARTH has 210 holders. The discrepancy speaks to the difficulty of getting people to fork over dollars.
Digging a bit deeper, there are a few other reasons why downstream users are easier to adopt beside the obvious one that they are getting rewarded. The first is that they are typically the ones dealing with the impact of climate change and/or social inequality. There is added incentive to collect waste, register for UBI, or sell their solar energy data. The second is that regulation is barely a consideration. Projects can launch and iterate apps a lot faster than those needing licence to attract capital from upstream users.
The third is usability. Downstream users can have much of the tech abstracted away so that they feel like they're using a familiar app. Upstream users, on the contrary, are more likely to be presented with services that require knowledge of cryptocurrency, Web3 wallets, and decentralised finance (DeFi) concepts. While by no means the end of the world, it's an added barrier making it difficult for ReFi projects to adopt upstream users.
Another way to illustrate upstream-downstream concept is by looking at projects that target both types of users. Ecological credit projects are probably the best example. They rely on downstream users to do the work to generate the credits and upstream users to buy the credits. If one doesn't pull its weight, it's difficult for the project to survive. A closer look at the fairly recent closures of Solid World, Ivy Protocol, and Coorest tells us that it was the lack of upstream interest that made it difficult to survive.
The bottom line for ReFi projects targeting upstream users is that it comes down to usability and narrative. In other words, make it as easy as possible for users to part with their dollars and give them a strong reason to do so. (But, as we saw last week, perhaps fighting climate change isn't motivational enough.) For projects targeting downstream users, it comes down to incentive/reward sustainability. It's great to be able to pay people to make positive impact, but it's difficult to sustain without some kind of revenue. The same can be said for projects targeting both.
Story We're Following
UNHCR and Lido Impact Staking to allow users to stake $ETH and donate their rewards to support displaced communities globally.
๐๐๐ฐ๐ฌ: ๐๐ข๐๐จ ๐๐ฆ๐ฉ๐๐๐ญ ๐๐ญ๐๐ค๐ข๐ง๐ ๐๐ง๐ญ๐๐ซ๐ฌ ๐ฉ๐๐ซ๐ญ๐ง๐๐ซ๐ฌ๐ก๐ข๐ฉ ๐ฐ๐ข๐ญ๐ก ๐ญ๐ก๐ ๐๐ง๐ง๐จ๐ฏ๐๐ญ๐ข๐จ๐ง ๐๐ง๐ข๐ญ ๐จ๐ ๐ญ๐ก๐ ๐๐ง๐ข๐ญ๐๐ ๐๐๐ญ๐ข๐จ๐ง๐ฌ ๐๐๐๐ฎ๐ ๐๐ ๐๐ ๐๐ง๐๐ฒ
The UN Refugee Agency (@UNHCR_CH_Innov) innovation branch has partnered with
The UN Refugee Agency (@UNHCR_CH_Innov) innovation branch has partnered with
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