Crypto Needs To Show, Not Tell

All my friends are asking me what’s going on with crypto. In response, I usually talk about how crypto can succeed. But today I’m changing it up. I’m going to tell you how it can fail.

I see three challenging scenarios for crypto.

  1. A tech failure. The technology doesn’t solve scaling, security and speed issues.
  2. A funding failure. Crypto firms run out of money. The fiat monetary value of their raises from last year shrinks to next to nothing. And their runway to commercialization is longer than expected. This a common miscalculation in the startup world, by the way.
  3. An adoption failure. Despite overcoming the above challenges, blockchain solutions see limited adoption rates.

There are other threats. Government crackdowns. Massive hacks. Overly restrictive regulatory regimes. But they are too unlikely or don’t pose existential threats.

When the Money Goes

These days, most people are worrying about a funding failure. I worry least about that.

The threat is very real and very serious. Just last week, a company called Sirin Labs – which raised $158 million last December at the time of its ICO and has raised a total of $255 million – said it may pivot from building a blockchain smartphone to selling software to phone manufacturers because it was in danger of running out of funds.

Money problems are forcing dozens of other companies to either abandon or drastically scale back their original plans.

The problem? Many ICOs raised their money using ethereum tokens. Ethereum has lost around 90% of its 2017 peak value. In Sirin Labs’ case, what used to amount to $255 million is now worth around $20 million.

That’s not ideal. But companies needing funds or almost running out is pretty typical in the startup world.

Founding teams that know they’re making progress and creating something of significant value find a way to continue. Or they convince investors that they’re worthy of fresh capital.

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