I was in middle school when I first started getting excited about the internet. It’s hard to describe just how clunky the internet was back then. My parents had a 9600 baud dial-up modem that would hog our only phone line and would connect to the internet. It took minutes to log on, and it would drop every 3 minutes or so. Not to mention, I drove up their phone bill so high quite frequently, they got super mad.
And there were all these scams you could easily fall into — especially if you were using the internet for transactions. In fact, the word “phishing” developed during this era. And it was common for people to actually physically mail dollar bills to purchase things on eBay. Adults were buying tech stocks. My neighbors in Silicon Valley were talking about taking jobs with stock options. And finally, in late 2000, the stock market came crashing down, and everyone thought the internet was dead. What an insane era!
And yet it was amazing. The first era of the web was about connecting people. And over the next 10-20 years, people made the web better. We moved past the clunkiness. Interfaces and UX got better. It wasn’t as slow. People figured out how to get wiser about security. We now have mobility — you can get on the internet just about anywhere and even with devices that fit in your pocket. You can transact in your local country.
That said, despite the open nature of the internet, you still cannot undertake large projects. Heck, it’s often hard to undertake even “small projects”. If you’ve ever tried fundraising for a startup, you’ll know exactly what I mean. It’s hard to find people who want to work with you (for near free / cheap) and hard to raise money from investors.
For centuries, people funded their companies or projects either by raising money from rich people / institutions or from pre-selling their product to customers. Both paths can get you only so far. For many years, there were not enough rich people or rich institutions to fund businesses. In the 90s, if you struck out with the 20 or so VCs on Sand Hill Road, you were kinda out of luck. Even though the world is immensely better now with many more financing options, it still gets limited especially when you get to the series A level. There are only so many people or funds that can invest $10m+ at a time, and it’s still not legal to crowdfund this level of capital.
Moreover, even if you can address funding and even hire a couple of people, customers and partners are still not incentivized to work with fledgling startups. If you are selling software to another business, they are generally not looking to take risk with a startup that can go out of business tomorrow. There is no motivation or reason to be an early customer.
Despite all these problems, entrepreneurs have persevered. But it’s slow. You bring in one customer at a time. You bring in one investor at a time. You hit milestones – slowly but surely. And there are lots of reasons to move slowly in the beginning — you don’t know yet what your customers want and how the business model will work. So validating slowly makes sense. But even once you hit product-market fit, your financing woes, hiring woes, and customer woes don’t go away for most companies.
So how do you solve for this? You need a way to align everyone to help you earlier and faster.
In many ways, we see this mechanism now with how startups raise money on SAFEs. Part of the reason fundraising rounds move a lot quicker now than when I was raising money as an entrepreneur myself, is that startups now typically raise money using a tranched strategy with SAFEs. If investors come in now, they’ll be rewarded with a special valuation. Otherwise, the valuation goes up for the next tranche which may even be only weeks or months later. 10 years ago, when everyone was doing only priced rounds, it would take months to cobble together enough funds to do a round. And guess what — all the investors would get the same valuation, which was pretty unfair to the investors who committed 6 months ago. So why would anyone move quickly and be a first mover? This SAFE-based tranched strategy is an example of how people can move faster with the right incentives.
So what if you apply this mechanism to literally everyone — not just investors but also people who work with you? I’m talking about contractors, employees, partners and customers.
Enter crypto. If we cut through the noise of all the scams and poor UX and tooling of crypto, which is reminiscent to the Web 1.0 days in the ’90s, crypto enables the world to work on big projects. It gets everyone to be bought-in sooner.
Some people label crypto as “programmable money”. But, I think it’s more aptly at the intersection of programmable money and programmable equity. And that’s good for the world.
With the way things currently work, there isn’t enough of a “glue” to quickly bring together enough resources to help solve big problems like carbon emissions or compiling health datasets for drug discovery. E.g. you might be cobbling together people here and there to drive 5 miles less each week, which really doesn’t make a dent in the world of carbon emissions. You can’t solve big lofty problems in this manner.
In contrast, let’s take the Helium project, as an example, to illustrate the power of crypto. They have a lofty goal — to create a global decentralized wireless network. When I think about my own home wifi provider, they’re horrible. (And I imagine many of you also have horrible wifi providers!) But why are they horrible? It’s because they basically have no competition. It is extremely hard to create a new startup to compete against these incumbents – it takes a TON of capital and a lot of building resources.
So Helium created an open source design for a hardware node that is produced by many manufacturers. And, as a consumer, you can buy one of these boxes and simply turn it on at your home, and now you are providing wifi to anyone who is near where you live. This network becomes extremely valuable and can have extensive coverage if many people buy these boxes. Why would anyone buy these boxes? Helium will give you helium tokens to set up a node. In the beginning, these tokens are basically worthless, but the hope is that over time, if many customers start paying for this wifi service using their helium tokens, the value of the helium token appreciates against the USD, because there is a fixed supply of helium tokens. So if you believe in the project, you are incentivized to buy a node and set one up as quickly as possible, so that you can start earning tokens earlier than later. As of this writing, there are nearly 130m beacons for their wifi network that have been set up globally!
This mechanism can apply to so many projects. Suppose you want to build the next WeWork. One of the issues with WeWork was their insane financial losses. This honestly shouldn’t be surprising to anyone — it’s incredibly capital intensive to set up a global network of office spaces. But imagine for a moment you did this with a token. What if you gave out $WORK to anyone who wants to covert their extra apartment or office space into a workspace? $WORK wouldn’t be worth anything in the beginning, so you could afford to give hosts $WORK tokens before there were even renters. Eventually, as nomadic workers start renting space using the $WORK token to pay for rent, then the value of $WORK against USD would appreciate, and early supporters would be handsomely rewarded for participating early.
As an entrepreneur, you have no cash outlay to pay people to set up offices, but the $WORK token would incentivize your office hosts to help you earlier and get rewarded later. You would also not be able to give out a couple of shares of your equity to each of your hosts. This would be a logistical nightmare, and their liquidity options — even later — would be limited. $WORK, in this case, would effectively help with this coordination problem to build something big.
You can imagine applying this same train of thought to other projects. Like a new Uber model. Or a new healthy-food franchise. Things where the project is more valuable if it has a larger network-reach and where it’s too capital intensive to address with traditional capital. And with the world becoming more global, there are many projects where having a global network is more valuable than not. These are the best uses for crypto.
This incentive mechanism can also be applied to solving the earth’s problems. Carbon emissions is a problem that everyone needs to participate in. But, you need everyone to be bought in quickly and all at once. Traditional financing is too small to help with this. But, there are now a number of carbon emissions-related crypto projects that are aiming to solve for this.
So if we can get past the scams, the poor UX, the speculation of this first inning of crypto, I think we can solve some very big problems in the next 10-20 years. But to get there, we will need better tooling, infrastructure, and UX. And to do that, we will need more builders and operators. We need more designers, engineers, marketers, salespeople, PMs, and community managers in crypto.
This is why my company launched Hustleverse last week – an initiative to help bring more builders and operators into Web3 in an inclusive way. How does one get a job or a part-time role in a cool Web3 project or company? What tooling does one need to know to work in this space?
But even ahead of that, there are so many weird terms that people use in crypto. What is important and what is not? And what do things mean? We are holding a session tomorrow (it will be recorded) that is free and open to the public that goes through many of the terms and concepts in crypto that we think are important.
Sign up and join us here to get your questions answered or to see the recording.
And, if everything goes right with crypto, I think we’ll be able to solve some of the biggest problems plaguing the planet at a faster pace. Crypto will allow us to incentivize people globally to help on goals more lofty that we have ever imagined.