What’s happening now isn't the future
The fact that we are discussing this indicates how early we are in crypto. There is simply no Web3 social protocols or apps that have achieved product market fit, no one, has achieved let’s say 5 million monthly active users.
But speculation is one of the few innovations we see in the space normally leading to some “hype”. If we expand our horizon and see 5-10 years ahead of us, it's a bias to think speculation, or “Fi”, is all Web3 is about.
There is no denial speculation is a magic card that every crypto project can potentially play once. It is a hyper efficient way to attract thousands of people to come to your platform and at least give it a try. If a Web2 growth team sees how a Web3 project attracts 10k users from thin air, they would be mind-blown. These are the crypto Go-to-market specialties. A magical world indeed.
But this speculation card has a fire-back side. Like Cinderella has to run back home before midnight, the power of speculation fades away so quickly that once the financial upsides are gone, it comes a moment of reality: how many actual users have you won for tomorrow?
If speculation is your main dish and people have already eaten it, prepare to be daunted. It is inevitable for real builders to cook something long-term with real product-market-fit.
The full course
There are 3 major innovative areas in Web3: value (capture and transit, driven by assets), ideology (better sovereignty, ownership, privacy, and interoperability), and product (what Web3 can address uniquely and solves real user problems). Speculation belongs to the first group: Value capture and transit through assets and their distribution models.
For many Web3 users, speculation is the most exciting one, since everyone can make a bit more money and make good use of it, thus, the demand is universal. For the ideologies, people who truly care cannot live without it. People who don't care almost don’t care at all. As for product innovation, sadly, there are no milestones claimed by the industry yet.
So, by all means, speculation is merely a feature of the whole thing, and we are at the infant stage of Web3 apps. A winning Web3 product eventually has to have all 3 catalogues of innovation covered to win a long-term market share, specially on the content and social realm.
It’s like choosing someone as a partner. The reasoning for love is the combinational of all. Psychological match, appearance, good morals and temper, humor, rich… It’s okay to be with someone only for the money, but once the money is gone, there have to be other things to keep the partner stay.
So, build something people want, and speculation can be a feature of it. And finding what people want and delivering it is the hardest yet inevitable game to play.
Speculation brings a hot start to a project
Now we know speculation is one of the many features that make an overall impact on a crypto product. Let’s talk about the sequence of launching these features: the go-to-market strategy.
Assume besides financial incentives, the product (a social media app for example) does not have its killer features yet, and the team decides to launch the speculation feature first to drive some early traction (i.e. friend.tech). Thousands of new users come in one day, transaction volume is pumped to its all-time peak, and the project suddenly enters a Hot-start stage.
This differs from a start-up's typical Cold-start journey, where the early product will iterate with its early users to hit organic, meaningful traction through continuous building. The hot start challenge is on the reverse: users are already here, and speculation is temporary. So, the project needs to quickly pull off new features to successfully retain their new users, with all the same challenges of finding out what people want. One more tricky situation tho: the users attracted by financial incentives might not be your targeted long-term persona at all.
So, the speculation first go-to-market strategy is much more riskier since there will be less time for the team to figure out valuable features before users start to leave. Since the majority of the early networks are a zero-sum game, for the ones who have lost money on you, you lose their trust, too.
Speculation dilutes people’s genuine relationships
Based on what type of product you’re building, early speculation can harm genuine relationships between users and potentially dilute current users’ motivation to do something meaningful.
Imagine a Web3 content platform. If users only care about the token price of an author without reading his/her work, it is quite a disappointment for the author. For people who put their heart and soul into meaningful engagement and works, having alpha seekers flooding into their social graph is also not the most motivating to keep the daily grind going. Quora used to have an earlier competitor of a similar question-answering platform, where they thought putting a monetary reward could make people more attracted to answering questions. In reverse, people’s sincere motivation to help each other out gets pushed out of the spotlight, and it caused them straight up failure.
So, all play-to-earn builders, make it play-and-earn instead. Make the earning part a reward of a sincere good deed—a celebration of hard work, true friendship, and a contribution return of helping build the network. People are more emotional than financial. If financial incentives become the ultimate goal, you will be amazed how quickly people will no longer care about you.
Let’s go slightly technical
Going one level above, let’s dive deeper into different types of speculation and see what exactly people are speculating. From my methodology, there are two types of investment to a crypto network: Work-in and Buy-in.
Work-in is like a typical company employee, receiving monthly salaries based on the labor provided. Buy-in is like the investor of the company. They provide early capital so the business can run and eventually share their profit. Without the employees, there will be no revenue for tomorrow. Without the investors, the business might not exist in the first place.
That’s the perfect metaphor explaining certain assets in crypto, too. A perfect example of crypt work-in can be a miner providing computing power to Ethereum and earning a gas fee as a monetary reward, and the gas fee’s price moves dynamically based on the network’s demand. This has a certain level of speculation involved, but all of us would agree that it’s more of a return of value provided, and it is totally reasonable.
Crypto buy-in models are much trickier. They are more investment-driven. See NFT memberships, personal keys, and social tokens. And for a community or creator, early capital can be extremely valuable. Supporting the creator early on allows them to have the starting capital to do what they love, and share their pie with their early supporters. But the tricky part comes in when the economy is designed in a way where pump and dump is possible. Then, the game becomes too wild to be well managed by anyone.
The good news is, that these approaches are not black-and-white schemes that are exclusive to each other. There can be a sustainable relationship between crypto work-in and buy-in within the economy design, having both the “employees” and the “investors” of the network, so everyone can have their way of contributing, based on what they have, to a strong and sustainable network.
A builder’s reality check
A crypto project's most prominent combination is putting product, speculation, and ideology together. It’s just tremendously difficult, that a crypto project’s most valuable resource is time.
On the one hand, playing rushy into the overnight success might end up at 15 minutes of fame before fading into oblivion, and being too conventional ever to consider adding speculation might lead to losing solid, innovative opportunities and community fun.
As a builder myself, I do respect friend.tech’s guts for pulling out the speculation in such an early stage. This is bravery. Their economic design shows the world new ways of shaping our social dynamics with money in the game. That’s innovation. Also, making a couple of millions in the bear market is not bad for the team to keep building without worrying about the runway.
Lastly, I would like to quote my friend Bradley’s latest Lens tweet to end the post:
“Don’t confuse financial investment with emotional connection.
But keep an eye out where you can spot both.”