This past week, I found myself ruminating on thoughts of durability in crypto. At its core, durability is about withstanding wear, pressure, or damage—essentially, it's about being hard-wearing. This applies to objects and concepts, from the physical (think bridges or smartphones) to the abstract (like relationships or economic conditions).
If you were in this space during the last cycle, the concept of durability might feel like a misnomer when describing consumer crypto. Writing this in 2024, the graveyard of applications, protocols, marketplaces, and projects is littered with flash-in-the-pan ideas that, at one time or another, garnered significant traction and attention.
Yet for every 100 obituaries, there seems to be one little engine that could. Solana has ridden the interest of memecoins to come roaring back to become the world’s fifth-largest token. Magic Eden capitalized on the growth of Ordinals to blossom from a bit player to the market leader. And Pudgy Penguins overcame the odds with new leadership to become one of the top projects on Ethereum.
Consumer crypto seems to be having a moment. From the growth of L2s like Base and Blast to protocols like Farcaster, consumer adoption has never felt closer. The question is—how likely are any of the recent successes to be durable?
To answer that, we need to assess what has made the various elements of the crypto stack durable over time.
When we look at the top blockchains—Bitcoin, Ethereum, Solana—they've all proven to be durable. They've weathered multiple market cycles, bouncing back from lows to attract even more development and interest. Each cycle they've gone through has only made them stronger, both physically (with improved infrastructure, tools, and utility) and psychologically (by building community trust and investor confidence).
But here's the kicker: achieving this kind of durability isn't easy. It's a bit like climbing a mountain; the higher you go, the tougher it gets. In crypto, we can think of this as a durability pyramid with blockchains at the bottom, infrastructure and applications in the middle, before creators at the top. The durability of a given layer is the summation of the durability of the layers below it.
1. Base Layer - Blockchains
Challenges to Becoming Durable:
Initial Adoption: Think about the early days of Bitcoin or Ethereum. Achieving network effects and attracting a critical mass of users and validators was a significant hurdle. It’s like starting a new social network; you need enough people to join and use it before it really takes off.
Security and Decentralization: Establishing a robust security model and ensuring sufficient decentralization is no small feat. Bitcoin’s proof-of-work mechanism and Ethereum’s proof-of-stake are prime examples of efforts to enhance these aspects.
Innovation and Development: Continuous improvement and innovation are necessary to remain competitive and address scaling issues. Ethereum’s L2 (and L3) solutions highlight this ongoing challenge.
Advantages to Staying Durable:
Established Network: Once a blockchain reaches critical mass, network effects create a self-sustaining ecosystem. Bitcoin’s vast network of miner community exemplify this.
Foundation for Ecosystem: Serving as the fundamental infrastructure for applications and protocols ensures long-term relevance. Ethereum’s role in DeFi and NFTs is a case in point.
Community and Trust: A strong, engaged community and proven security build long-term trust and reliability, much like Bitcoin’s committed community.
2. Middle Layer - Protocols and Infrastructure
Challenges to Becoming Durable:
Integration and Interoperability: Ensuring compatibility and seamless integration with various blockchains and applications is crucial. Look at protocols like Chainlink, which provides decentralized oracles—they face this challenge daily.
Utility and Adoption: Demonstrating clear utility and gaining adoption among developers and users is essential. Uniswap’s success as a decentralized exchange protocol is due to its clear utility and widespread adoption.
Scalability and Performance: Addressing performance issues and scalability challenges as the user base grows is a constant battle.
Advantages to Staying Durable:
Essential Services: Providing foundational infrastructure services ensures longevity. Chainlink’s oracles and the Graph’s indexing services are critical to many applications.
Flexibility and Adaptation: The ability to adapt and integrate with evolving blockchain technologies and standards is vital. Polkadot’s adaptable network structure supports this flexibility.
Developer Ecosystem: Building a strong developer ecosystem that continuously contributes to the protocol’s evolution and improvement is crucial. Ethereum’s vibrant developer community is a significant factor in its sustained relevance.
3. Top Layer - Applications
Challenges to Becoming Durable:
User Attention: Capturing and maintaining user attention in a highly competitive market is challenging. Many decentralized applications (dApps) struggle with this.
Innovation and Differentiation: Continuously innovating and differentiating from competitors is essential for survival. Applications like Aave in the DeFi space have managed to stay relevant through continuous innovation.
User Retention: Building features and experiences that keep users engaged and loyal is difficult. Successful applications like Phantom have maintained user engagement through constant updates and improvements (e.g. adding multiple blockchain support).
Advantages to Staying Durable:
Agility and Responsiveness: The ability to quickly adapt to user feedback, market trends, and technological advancements is an advantage. Applications like Uniswap quickly adapt to user needs and market conditions.
Direct User Engagement: Engaging directly with users and building a strong community around the application is more straightforward at this layer. Platforms like Reddit’s use of community points on Ethereum demonstrate this advantage.
Monetization and Revenue: There are more straightforward pathways to monetization and generating revenue from users. Magic Eden’s transaction fees on NFT sales exemplify this.
4. Topmost Layer - Projects and Creators
Challenges to Becoming Durable:
Sustaining Creativity: For NFT projects and artists, maintaining a high level of creativity and production quality is essential to retain attention and relevance.
Building Reputation: Establishing and maintaining a reputation in a rapidly changing market can be challenging, especially for new creators.
Economic Viability: Ensuring that the financial aspects of creation, such as royalties and sales, are sustainable over the long term.
Advantages to Staying Durable:
Direct Community Engagement: Creators can build a loyal following by engaging directly with their audience through social media and platforms.
Continuous Innovation: Successful projects and artists continually evolve their work, incorporating new styles and technologies to keep their offerings fresh and appealing.
Cross-Platform Presence: Expanding the reach of their work across multiple platforms and communities helps maintain visibility and relevance.
Blockchains and infrastructure optimize for thriving economies and ecosystems. Over time, the success or failure of any one given application becomes less impactful to its durability. Take Blast for example—they will continue to grow as long as they have a growing list of applications where users can speculate. Elsewhere marketplaces like Magic Eden have seen revenue growth despite a shrinking number of total users because of their ability to capture cross-chain market share.
On the other hand, many verticals within the stack, like brand NFTs and consumer crypto, have not yet proven to be durable. PFP NFTs, for example, have historically traded off attention, which alone has proven not to be durable for 99% of projects. In a recent conversation, a former investor from a top venture firm mentioned to me their decision not to invest in any PFP NFT projects last cycle due to the belief that there was no underlying business model—no durability. NFTs and fungible tokens are liquid culture—they reflect attention, yet we often confuse fleeting attention for durability. Attention alone is not enough to be durable.
In the same way, a rising tide lifts all boats; blockchains benefit from the infrastructure, applications, and creators who build on top of them. This makes blockchains incredibly challenging to stand up but also harder to break down. Creators, on the other hand, are the least durable, often burning bright and fast. For examples, just look at IP across industries. From the one-hit wonders to the ever-rotating carousel of Netflix’s top 10, creating for fleeting attention is a bit like trying to stop sand through an hourglass. The question is not if the show will move on, but when.
If you’re a creator or brand, this must sound pretty bleak. How does one avoid the traps of irrelevance on the path to durability? It’s a question I’ve spent the better part of 1.5 years trying to answer at Doodles.
Yes, anyone building in consumer needs to sustain attention. The key word here is sustained. Many have been able to capture lightning in a bottle for several months, but to withstand the wear and tear of multiple cycles requires continuous development worthy of attention. This development has historically taken many forms, from content creation to thought leadership, interactive experiences (gaming, events, access), and marketing. It’s also why creators stand to benefit from creating multiple bodies of work or separate IPs.
My assessment is to become durable, consumer products have to go beyond attention. They need to develop sustainable practices enabling them to develop in all-weather conditions. So while it starts with attention those eyeballs ultimately do you no good if you can’t stay in the game to keep getting more shots on goal:
Active Community: Building and maintaining a strong, engaged community to support the brand, drive demand, and ensure continued relevance. Irrelevance is only a couple of quiet weeks away at any given time. Regularly engaging with your community through updates, events, and social media is crucial.
Scalability & Ease of Use: Creating products and media that can meet the demand of a growing community. This means designing user-friendly interfaces and experiences that can handle increased traffic and interaction without degrading performance.
Sustained Development: Brands are iterative and require consistent improvement. The Kano model is a good frame of reference here. Brands need to continually deliver value that satisfies and delights as consumers' baseline expectations continue to improve. For example, the first time a brand introduced “phygital” (physical + digital), it was seen as novel. The 10th time a brand did so, it was met with “meh”. This happens to all value propositions over time.
Sustainable Economics: Designing tokenomics and economic models that incentivize participation and ensure fair value distribution among creators and collectors. This applies not only to on-chain efforts with the sale of digital collectibles but off-chain as brands expand their reach to capture monetization opportunities from traditional IP development (e.g., licensing, consumer products, advertising, etc.).
Royalties and Incentives: With the introduction of platforms like Blur, a significant recurring revenue stream went away for most projects overnight. While projects that had been in the market for a period likely had treasuries that could withstand this shift in market economics, many new or would-be projects were left for dead. It’s imperative we implement mechanisms for creators to receive royalties from secondary sales, ensuring ongoing incentives for content creation if we want to ensure sustainable, durable enterprises can exist.
The further up the pyramid, the more you are on your own to build durability. For consumer crypto, which lives at the uppermost portions of the stack, the focus must remain on creating products and platforms that are not only innovative but also capable of enduring the test of time and market fluctuations.
The "durability" can be said to be "Anti-fragile" instead. https://www.amazon.co.jp/Antifragile-Things-That-Disorder-Incerto/dp/0812979680
great article