How to Learn Crypto Effectively / Why Crypto Currently Fails at Onboarding
Until two years ago, Crypto was dominated by the Protocol Layer. Unlike Web2, which featured thin protocols (e.g. HTTP ), Web3 historically saw the majority of investment heading into development of the protocol (blockchain) layer, not the smart contract (application) layer built on it.
This fit well with the existing culture, dominated by a demographic that was well above average in both computer science and math. Focusing too heavily on application development early would’ve been putting the cart before the horse. The community had to decide on a sufficiently scalable, decentralized, and composable platform before too much effort could go intro nurturing it.
This general reality has changed over the past twelve months for a few reasons:
- The Death of the Protocol (Layer One) Rotation Trade: A tougher macro-environment forces consolidation at the protocol level. Even the most stoically held positions are re-examined.
- Entrenching of Ethereum as the Base Layer for Application Development: As the L1 Rotation trade consolidates, only a few platforms (ETH + L2s, Solana, Binance, Avalanche) have sufficient activity to be considered for new builders.
- Increasing Product-Market Fit for New Applications: As sophistication of smart-contracts, token standards, and builders increases on-chain, increasingly novel technology is finding its way to the blockchain.
Practically, this has resulted in more funding going to application development and far greater hesitancy around deploying capital into alternative blockchain projects- with a few notable exceptions, including recent large bear-market raises by Sui, Aptos, and Berachain.
Over the past year, Crypto has seen increasing correlation to traditional markets. As the majority of the world enters an increasingly difficult economic period, all eyes are on this relationship.
Digital Assets & Blockchain need to prove that they have created a differentiated and unique offering to meaningfully decouple. How can this be accomplished? I see two primary avenues:
- Bitcoin realizes its Store of Value thesis. As it stands, Bitcoin trades as a risk asset despite meaningful + improving inherent security and decentralization traits. As global FIAT wavers, Bitcoin will have an opportunity to step into a similar role to gold in the 1970s.
- Growth of the Application Layer. While many fundamentalists may not be as excited about it, growth of the application layer will be the primary driver for ETH decoupling from traditional equities (or even flipping BTC).
The previous wave of crypto-entrants had to understand some level of blockchain technology to make sense of the market state, as interacting with it meant either investing, building, or validating.
To invest, you had to understand relative value proposition of one ecosystem’s protocol compared to another. To build, you had to understand how blockchain infrastructure functioned (plus how to code). To validate, you had to understand how to run a node and why it even is worth money. From there, the first layer of applications was built, consisting largely of basic functions built to interact with the three types people above.
Today, we already begin to see the rise of consumer-centric applications through NFTs, Trading, and Gaming. Increasing attention from major companies across both Financial (e.g. KKR) and Non-Financial (below) sectors creates separate opportunities for onboarding new users that are indifferent to their protocol layer.
Historically the majority of time was (correctly) spent explaining the blockchain layer for onboarding. That’s what mattered to be an active participant in the blockchain universe at the time. Today, that isn’t necessarily the case, and it almost certainly won’t be within two years.
I’m living proof of this. My background is in Traditional Finance & Philosophy, and includes a resume with no Computer Science or Math background. I was onboarded via DeFi, trying to model new protocols and create frameworks for analyzing sustainability. The very same things that made traditional markets exciting- information asymmetry, arbitrage, and outworking your neighbor felt even more real in Crypto.
Day One began in DeFi. New crypto topics, like bridging, liquidity provision vs. staking, and impermanent liquidity got picked up as a result of application interaction, not as a precursor to it. With this framework, onboarding a new user into crypto becomes a game of finding the lowest common denominator; the most recognizable application to an untrained eye.
In practice, this is somewhat user dependent. I’ve had success onboarding Traditional Financial PMs & Analysts by showing them a project like GMX. Although Perps are unfamiliar, they can contextualize the majority of the project through years of experience modeling similar projects. From there, that can serve as an intro into Decentralized Markets, tokenomics, liquidity provision, and other key topics- each mapping onto a balance sheet format that they understand.
This method is, of course, not perfect. However, initial losses in nuance on underlying blockchain technology are effectively replaced by increased recognition of both the practicality of dApps and how to approach creating a framework for topics a new user has never seen.
Disclaimer: None of this is financial advice, all of this is my opinion, and you can find me on Twitter, Jack, to yell at me.
