Winter is coming. We’ve survived not only the Terra Luna fiasco and Three Arrows Capital meltdown but are now battered by headwinds from regulation by enforcement accompanied by FED’s ever-tightening interest rates. With Russia threatening to nuke Ukraine and Europe showing signs of struggle to keep its population warm as it tries to wean off Russian energy- who gives a dime about crypto?
With speculators back in hiding, general consensus is that crypto is just but scams and Ponzi. Fortunately, crypto had a predecessor- the internet/ Web 2.0. During a period where skeptics feel vindicated when the likes of pets.com went bust, the builders like Amazon and Google were hard at work experimenting and figuring out the web2.0 business model. Their stoic resolve yielded success beyond imagination with their bottom-up empirical approach in the nascent web2.0 days.
Imagine you bought into Amazon after its 95% dip in the early 2000s after the dot-com bubble burst. I can’t say for a fact that we are going through a similar phase as the victors of web2.0 in the early 2000s. However, if it is a true positive, are you going to miss out on this once-in-a-few-decade opportunity?
There are roughly 2 games to be played in crypto.
There are finite games, games with known rules, players, and ways to win. Here you have crowds of speculators hyping up projects just to dump their tokens on late participants, and projects that raise money from unsuspecting speculators only to rug the funds afterward. While that’s not representative of the entirety of this “innovative” industry, we could say that human nature tends to get the better of some of us.
There’s also another type of game being played by a select group of humans driven by meaning, vision, and purpose. They are the Steve Jobs of our industry, here to make a dent in our universe (or a bite at the apple in the garden of Eden). We have the likes of Satoshi Nakamoto, and Vitalik Buterin- building not just an alternative way for homo sapiens to commerce but the “Noah’s Arc” as insurance against the supposed eventual collapse of the fiat system.
They play the infinite game, where the sole purpose of the game is to perpetuate the game of freedom and human dignity.
Within the infinite games of the cypherpunks, there are multiple finite games to be played. At the current price of $19256, early believers of Bitcoin are still upwards of 1,000,000x their investment at this point of writing (bitcoin price started close to $0). Quoting Justin Drake, Ethereum aspires to be the settlement layer of value on the internet- that means projects (virtuous or vice) could thrive on the permissionless Ethereum Virtual Machine.
Indeed, as Tom Evslin likes to say, “nothing important has ever been built without irrational exuberance”. Infinite game players might not be able to further their agendas without providing avenues for finite games within their ventures.
There are murmurings that Bitcoin could drop below $8000 and Eth beneath $400 in the coming months. Obviously, that’s bad news, especially for El Salvador- the nation that denominated its entire nation in Bitcoin at an average price of $30,000. What’s worse is the reflexive nature of these assets. When they go down, they go down a lot.
But when they go up…
I’d like to add a disclaimer that you do not just buy the dip for any token. In crypto, after a project falls 90% in value, it can fall another 99%. Look at the once-promising Terra Usd project(LunaC/Ust). At the height of almost $120 dollars, Luna Classic fell to US$0.0001 within 1 month (very painful, I lost money too).
If the fact that you might lose 99.99% of your bets into crypto does not deter you, I’d like to introduce 2 reasons to help you gain sanity through this trying time and end in success, however you define success.
Have you heard of Hydra, the serpentine mystical beast? Legend has it that it has 7 heads, and each head regrows into two heads when one is cut off. The crypto industry is like Hydra, they are both anti-fragile beings.
While Nassim Taleb is not a strong proponent of the crypto industry, his works about Anti-Fragile and Black Swan help us understand why crypto can survive as an industry and eventually thrive. As compared to fragile items that break under volatility, disorder, and stressors, anti-fragile beings benefit and grow from them. Black swans are unpredictable events that have extreme consequences. Compared to traditional banking infrastructure that always gets bailed out when it fails- like fire, crypto raises above its obstacles and embraces the struggle to survive. But the same struggles lend this industry its strength and independence from centralized regimes, virtuous or vice.
Nassim argues that centralized regimes build stable and efficient systems over periods, at the expense of systemic errors build up over time leading to an eventual implosion.
An obvious example was the “Great Leap Forward” in China, where unchecked power meets preposterous delusion- upwards of 55 million people died from starvation. The Chinese Communist Party imposed policies that forced their citizens to work as farmers, with flawed reporting (trust-based) methods that eventually led to officials collecting excessive non-existent food surpluses, inducing famine. That’s why my grandparents came to Singapore.
When technologies are built bottom-up, many will fail. But the ones which survive end up revolutionizing the world and the way it works. An obvious example is Amazon, the everything store. In the era that the Internet was viewed as a sham, they had to turn the “No’s” and rejections into data points until something worked. The rest is history.
Antifragile beings within the crypto space present us with the gift of several positive black swans and of course, negative ones too given the wild variance of this industry.
To put these black swans in perspective, we need the mental model of Geoffrey Moore’s Crossing the Chasm.
The diagram above illustrates the Technology Adoption Life Cycle, where innovation disperses through spectrums with unique Psychographic profiles (people who think and act on technology differently). If you look closely, you could see spaces between each sector in the diagram. They represent periods of challenging times with varying intensity when ideas and innovations cross between groups with different psychographic profiles.
The Innovators pursue technology aggressively (I’d like to think they are your Satoshi’s and Vitalik’s). The Early Adopters are eager for breakthroughs, matching emerging technology to strategic opportunities (they are your Uniswap, Defi, and crypto games). The Early Majority is the pragmatic bunch, they wait till breakthrough technology can fit into their existing structure (We don’t have someone like that yet). The Late Majority only buy tested-and-proven technologies, high in quality and reliable. Let’s not talk about laggards, since they’ll probably not use crypto anyway.
In World War 2, when Nazi Germany was dominating Europe, the allied forces had an immediate objective which is to conquer Normandy. They had to cross the straits between England and France through an overwhelmingly superior force on a couple of highly focused target. In hindsight, victory was inevitable. But have you considered, other than Winston Churchill and the citizens of Great Britain, close to none of the cabinet members and ministers were willing to oppose the once almighty Hitler?
To the British elites, crossing the English straits was like throwing eggs in a stone.
But this stone actually broke.
I would not dare claim that the crypto industry now is as heroic as the allied forces defending the remnants of human dignity on June 4th, 1944. But the consequence might be equal in significance- if both attempts failed.
With the world inching towards a meltdown, the tail risk event of crypto crossing the chasm has become increasingly likely. Take a look at the cities ravaged by Russian forces in Ukraine. Are those affected able to move their assets to a safe place? How could a system built on trust (banks, governments) function in war zones? Among many of the policies in place, the most urgent policy following the invasion that president Zelenskyy implemented was to legalize cryptocurrencies. When factions inherently do not trust each other, the system built without the need for trust (blockchains) can thrive.
Conditional on the availability of the internet, if the world goes to war, where would people deposit their assets? I certainly do not wish for a third world war, but we have to heed advice from the stoics. Especially the idea of Premeditatio Malorum, where unexpected blows of misfortune land heavier than the expected ones.
While none of us know about the future, I’m hopeful that crypto crosses the chasm NOT because of a world war, but because lady fortune elected a couple of use cases that the pragmatic bunch finds useful.
Is it a blockchain? Is it an application on the blockchain? Is it stablecoins?
Qui Sait?
A rational framework to adopt is to think in bets, how poker players manage uncertainty and profit from them.
Nassim Taleb mentions the silliness of measuring an event based on its probability of occurring. Instead, look at the expected payoff, the probability of an event occurring multiplied by the size of the payoff.
For the innovators (Satoshi and Vitalik), the probability of the bitcoin network and EVM reaching the early adopters was so tiny that it was negligible. However, both are billionaires by the value of the tokens they hold currently. The size of the payoff is likely in the tens or hundreds of trillions.
Given that blockchains and their respective applications have already broken into the early adopter markets, many crypto entrepreneurs that planned their exit strategies are multi-millionaires. However, many could evolve to become billionaires if we manage to onboard the early majority market.
What this means is that if the early adopters actually convince the early majority to adopt crypto, the size of the market will expand, on average, 5x and beyond.
Unlike traditional markets where you have to be an accredited investor to get involved in a highly lucrative businesses, the crypto market boasts of the qualities of immutable ownership and libertarian features of permissionlessness.
If you were to boil a crypto project/protocol into its barebones, you’ll see there are 2 principal components present for the project to take off- having competent builders of the project, and the community that supports the project.
I believe in the law of the harvest, where you sow seeds in one season and reap the harvest in another.
The way I see how I can benefit from the upside of projects is twofold:
Build (participate in the building) a project and receive the upside in the form of tokens
Place varying bets on different projects, the Venture Capitalist method.
As a recent cash-poor graduate, the former method is more suitable.
There are many ways to help build a project, but ultimately it boils down to
building projects if you have technical competencies (programming, designing),
helping to grow a community of diamond hands (developing content & attracting crowds toward projects)
ensure that the project has a viable business model and sound ways to generate revenue
I am practicing what I preach, involving myself in a bet to help crypto cross the chasm. The vertical I chose to participate in was NFT games. I believe that NFT games will be part of the narrative of the next bull cycle when projects deliver their promises.
I am doing business development for an NFT game called RedShield (redshield.game). RedShield is an upcoming open-world turn-based multiplayer Role-Playing Game (RPG) where players engage in competitive team battles in a dystopian universe set in the 1940s.
What I like about this team is that they are a seasoned game studio with over a decade of experience building games, and pivoting into crypto. Our founder Wayne had been upset about the manipulative nature of mobile games and disappointed with the state of crypto games- most are thinly disguised Defi products. The permissionless nature of blockchain presented a fantastic avenue for Wayne to make a difference in this industry with a fun first, crypto second approach towards crypto game development.
RedShield is currently raising funds through the sale of tokens and NFTs in preparation for the next stage of the project. Do contact me through linkedin or twitter if you are keen on having the upside of this project.
To conclude, the likes of Satoshi and Vitalik created an avenue for finite games to be played, for us to help perpetuate their infinite game of cryptography and liberalism. As long as this infinite game does not grind to a stop, multiple finite games (bull & bear cycles) can still be played moving forward. We happen to be at the start of another cycle with this bear market. Crypto is anti-fragile. The industry stands a chance to cross the chasm as it grows stronger overcoming obstacles and finding a use case that the pragmatic bunch agrees to adopt. For that to happen, we need individuals who would build innovative business models with web3.0 technologies, grow communities to support those business models, and inject these projects with funds so they can survive through winter.
If I did not bore you with this article (and if you feel generous), I’d appreciate tips in ether to my ENS orayo.eth so I’m one step closer to secure the Ethereum Virtual Machine (if you know what I mean)😋
There’s a quote from Emperor Marcus Aurelius that I really like, and I think you might find it useful to tide through the trying times.
Trust that all is for the best. For we carry our fate with us- and it carries us.
Onwards,
orayo.eth