Growing Crypto Communities
A Blueprint for Community Management and Growth
In a competitive market like crypto, retaining a moat is difficult. A strong community can represent a vital competitive advantage required for establishing your project as a long-term leader. While not a contrarian view like my last article about ve tokens, I will try to add more nuance on what value a community can provide and how to build and manage it.
Competition in crypto
Projects in the crypto space face fierce competition. Teams have a hard time acquiring and retaining a user base in the highly-competitive, financially-motivated, short-span attention economy that is crypto
Some of the challenges are:
- Open source code → easy forking → low entry barriers → increased number of competitors
The quality of competition varies and over time the number of low-effort forks tends to increase. Forks mostly compete with themselves, but 2–3 quality competitors can already present a strong threat to the OG protocol. A good example of this are AMM and money market forks on alt L1s, which ate into the revenue of Ethereum-first dApps. Good teams can use the original codebase to leapfrog the incumbent.
Digital products also have low exit barriers. Projects can just stop offering services without high costs to shut down their business.
When it’s easy to enter and exit a market, more competitors will try their luck. Anon founders can even try it multiple times without facing reputation risk. The more competitors, the more it becomes a game of luck which project is winning, rather than fundamentals. Of course, analysts will come up with arguments in hindsight, but what if that’s just survivorship bias? - No regulation that protects incumbents (e.g. banking) and national companies by establishing barriers to entry → more & worldwide competition
- Blockchains as a shared data layer → user-owned data (vs walled gardens in web2) → low switching costs
On-chain data is available to everyone. Products can not lock in users by utilizing exclusive user data to offer better experiences (e.g. a user’s social graph on Twitter). Token incentives are often used as an additional motivator to make users switch to a new product.
Low switching costs further allow users to hold more bargaining power as described by Porter’s five forces model. That makes it even more important to work together with them as your community. - Early industry → high-growth, highly innovative → risk of becoming obsolete by losing innovation leadership
- “Crypto frontends” such as wallets own the customer relationship and can act as kingmakers for dApps, giving them a lot of bargaining power
How communities add value
A community can add value directly and indirectly.
Direct value-add
- Are loyal users
- Share content, create original content/memes/word-of-mouth
- Help with Biz Dev (e.g. introduce the team to other protocols)
- Community experts (in their respective fields) can act as an extended part of the team, e.g. taking care of community management and education. Can even become more formal DAO contributors later
- Community experts may build complementary products
Indirect value-add
- Provide feedback that helps improve the product (e.g. bugs, UI). Either informal on Discord or formally via user interviews
- Act as a collective researcher that keeps up-to-date with the newest developments in the market. Valuable input for business strategy and product direction
- Source for potential new team members
- Build the culture of a project. Community members build personal relationships, which keeps users engaged. Helps to build around a shared belief instead of “numba go up”
- Image of a thriving project and community captures the interest of other users and projects
3 Phases of Community Management
Phase 1 | Initiation
Find your first allies
Ask yourself:
- Who do I want to bring together as a community?
Who do I want to help? Who do I share interests with?
Focus on motivated people you can build with for the long-term. The goal of your community management is to identify these individuals, keep them motivated and support them with resources, knowledge (and capital) along their journey. - Why do I want to bring these people together?
Only when humans have a shared purpose will they stay. A good purpose is grounded in people’s desires, goals and provides solutions to problems. Also communicate the bigger picture — how the purpose is relevant for a larger group, not just one person.
Financial gain is not a good purpose. Once a better opportunity pops up, community members will leave. The best purposes are rooted in people’s identities.
Similarly, focusing on an ‘enemy’ is counterproductive. First of all, being against everything another group is doing is not a (healthy) purpose and may attract people you don’t really want to be together with for a long period of time. Secondly, once the other side is gone, the community will dissolve. Don’t make your purpose reliant on another group and their purpose.
Community is about finding the product-purpose-people fit: What’s the purpose behind my work and what audience shares that purpose with me?
Start your first activity
A shared sense of belonging is the foundation for every community. Personal relationships built on a shared purpose act as the glue for a community. A community can be seen as a social network which is the sum of individual interpersonal relationships. The stronger each relationship and the more relationships each member has, the stronger the community.
To bootstrap that process, determine an activity which is
- purposeful: the activity should communicate the shared purpose
- participatory: others should be able to contribute
- repeatable/recurring: personal relationships need to be build slowly over time. Especially when members are anon and have no common friends which could act as a social seal of trust.
Community calls where participants share their knowledge and ideas can be a great starting point. But try to make the discussions deeper than just about the product.
Support relationship building
Now that members started getting to know each other in a highly controlled environment of your first shared activity, you can open up the process.
You will give people more freedom but still act as a supporter and role model.
- Give people a space to connect
- Provide conversation starters. Help newcomers by introducing them to the rest of the crew, actively asking them for their opinions, and celebrating their first contributions. Make the process of engaging as easy and motivating as possible
- Share your and others’ stories
- Define rules and related processes. For example, how can violations be reported? What are the consequences of different types of violations? How does the ban process work?
- Be a moderator. More importantly, be a role model. For example, no price talk!
Phase 2 | Expansion
Communicate your story
There are three stories to tell
- The story of you: Who are you? Why do you care? Make it personal!
- The story of us: Why should the others care? Why can the purpose only be achieved as a group?
- The story of now: Why should people get involved now? What are small ways in which they can get started?
Keep in mind: It’s not about you. Amplify the voice of the community by sharing their content. Make it clear that their support matters. Turn their activities into narratives and highlight and reward engaged members.
Build an identity
All communities have specific rituals, languages, and activities, big or small, that emerge naturally over time. It’s something all members share, separates the in-group from the out-group and helps with relationship-building. That was true for tribes and is still applicable to online communities.
An identity develops naturally, so don’t try to plan and force it. If you have the right people in your community, you have nothing to worry about. If you see things developing in the wrong direction, go back some steps in your community building process rather than seizing the lead here as the single definitive decidooor: Are these the right people I want in my community? Did I communicate our purpose clearly?
This logic applies in every stage: If something feels wrong, go back some steps.
Gain insights about your community
Now that new members are coming in and your community is expanding, you can work on identifying valuable community members. A large community needs to be managed and organized, which requires capable members at the right places and a good underlying structure.
First step is to track quantitative and qualitative metrics
- Quantitative: e.g. member count, growth rate, retention rate, messages sent, value added (depends on your goals and will also vary based on the community role e.g. # of acquired leads + value of leads for biz dev)
- Qualitative: Where have members heard from you? Why do people join? Why do they stay? What do they think is missing? Why do members leave?
Based on this, you can identify valuable members and monitor the overall health of the community (e.g. steady community growth, high retention rate, people join for the right reasons).
Another interesting way to do this is via social network analysis (SNA), going back to my definition of a community as a social network of individual interpersonal relationships. SNA analyzes entities and the relationships between them to come to conclusions about the overall network structure and to determine the most important actors. These can for example be people that represent the only bridge between two otherwise separate clusters or central entities with a lot of connections who act as thought leaders.
Phase 3 | Development
Create leaders
After you identified valuable community members, you need to make it your number one priority to develop them.
- Give people responsibility and authority: Start with small tasks. Divide tasks in manageable sub-tasks and give one person the ownership.
- Support them with resources: For example, provide templates, trainings, coachings, tutorials, wiki, checklists, best practices, FAQ, buddy people up, help networking, offer funds
Leaders need both motivation and ability. Your task is to support both.
A small number of people will do most of the work, that’s normal.
The community flywheel
Looking at community management from the perspective of a member’s journey can help us devise the right actions to support them.
Attract
Attracting members requires active outreach. Content creation is a great way to
a) bring in the right people (motivation) by communicating the shared purpose
b) qualify them by providing the required base knowledge (ability)
Events combine two advantages. They help build relationships between members and gain attention of non-members.
Token airdrops can also generate attention, but it might not be the type of attention you desire, from the wrong people. They come with the risk of attracting people who focus on financial incentives. Or the inflow of new potential members might get too big for you to handle. Communities are supposed to be scaled slowly, as you want seasoned community members to support new members. Therefore, think about who to target with the airdrop, and if you really need a trade-able token at the start.
Engage
A new member will likely feel overwhelmed and somewhat lonely. Therefore, it’s good to have an onboarding process in place which helps them acquire knowledge, get familiar with internal processes an get to know other members.
Discord channels such as “Introduce yourself” are a great starting point. They act as a database for newcomers to identify people with shared interests and backgrounds, while giving community managers the opportunity to get a first indication of what knowledge the new members bring in.
Give conversation starters that fit a member’s interests and abilities to make their first interactions with others easier for them. It’s also ok to push them a bit, for example by asking for opinions in discussions you think they are comfortable in due to their skills. Celebrate the small wins with them. Positive feedback is a great reward.
Every individual brings their own skill set with them. Map out different tracks for potential contributors and communicate the path to them. Don’t forget to articulate how their role fits into the big picture, the shared purpose.
Now that your members have the required motivation and ability, you need to give them the opportunity to contribute. There needs to be a trigger for them to become active. Forum discussions, community calls, working groups, hackathons and grant programs all offer opportunities to get involved. Again, try to ease new members into contributing by giving them assistant roles or allowing them to shadow experienced members.
1-on-1 meetings help to make it personal and facilitate trust building. For this to be scalable, old members should mentor new members and be their main contact person at the beginning.
Scale
Existing members help bring in and develop new members indirectly, for example they attract people with their content, and directly, for instance via mentoring. The more members you already have, the more new members you can develop at the same time.
Knowledge is cumulative and sharing knowledge with others helps humans learn faster. It’s important to gain marginal individuals (people from different fields) to drive your community forward. At a certain size for a working group, there are diminishing marginal returns to adding new contributors. But maybe you can acquire people with new skills. Equally important are individuals at the intersection of two or more skills who can bridge between two clusters of knowledge.
The bigger your community, the more you will have to think about structure and organization. Flat hierarchies will likely not work after a certain point. Responsibilities and authority need to be defined as endless discussions with 100+ contributors will lead nowhere. But, you can keep the hierarchy flexible depending on the task at hand. This way, no one will feel underappreciated. A related idea is to have members pitch ideas what the group should work on next and having the rest vote on it and self-select into working groups. This can help with member retention as well.
Communities = Crowdsourcing
We can further learn something about community management from the crowdsourcing literature.
- Discussions can get messy.
Examples
a) People derail discussions towards unrelated topics
b) Discussions often happen in different channels.
Therefore, there need to be value addooors which moderate discussions and synthesize/filter/sort information. - Risk of minority opinion influence.
The loudest voices get heard, but it’s essential to put them into context. Ask yourself: What does the majority want? Token-weighted voting is an okayish signal here, depending on the token distribution. You won’t make it perfect for all people, so some will leave your community. But it’s better a minority leaves than the majority. - Lack of transparency and credibility about how contributions get evaluated and what the progression path for members looks like may lead to feelings of being exploited and/or cheated. Transparent feedback is key.
Another question posed by crowdsourcing is how open should the participation be? The benefits of open participation are greatest for well-structured tasks that require only common knowledge. Especially assignments that are based on a recombination of knowledge profit from diverse knowledge and experiences. The more ill-structured and complex a task, the more interactions are needed. This limits the number of contributors that can realistically work on the project.
Conclusion
I hope this article gives you an actionable template to use for managing your community. If you are a crypto project looking for marketing advisory reach out to Deus Ex DAO. We also offer advisory services in tokenomic modeling, biz dev, fundraising and product strategy.
Great resources on the topic of communities
