Cryptocurrency Investment — “Spectrum” and “Dimension”
In the realm of cryptocurrency investment, discussions often oversimplify projects into either speculative ventures or trans-formative innovations. At Orthogonal Labs, we believe this binary view doesn’t capture the full complexity of the landscape. Instead, we see a spectrum where projects range from entertainment-type of endeavors to those aiming for societal transformation through blockchain technology.
On one end of the spectrum, there are projects tailored to existing crypto users, offering an immensely entertaining experience through speculative trading, gambling, or engaging in meme sniping. People often question the value of these projects due to their lack of fundamentals. However, they significantly enhance community engagement. Recent examples would be the meme wave/culture in Solana ecosystem including $WIF, $SLERF, $BOME, also the telegram bots’ heat back to last year (in most of the case for meme sniping), as well as similar features in $RLB and $SHFL. Community involvement is paramount in the crypto sphere, therefore the value of these projects, to some extent, is not solely determined by investors’ theses but rather by community acceptance. In this sense, these projects indeed hold value — their “existence justifies reason.” However, the limitation of such projects lies in their struggle to attract a broader user base or catalyze fundamental change in crypto adoption.
On the opposite end of the spectrum lie projects that harness blockchain technology for profound societal impact, such as Bitcoin, Ethereum, stablecoin, or trust-minimized computational frameworks. These initiatives represent an “orthogonal” vector to the established paradigm, diverging from the entertainment-driven nature of some crypto projects. Unlike their counterparts, these projects are primarily driven by technological innovation and a commitment to addressing the challenge of achieving widespread adoption at a fundamental level.
These foundational projects serve as the bedrock upon which the broader adoption of cryptocurrencies can be built. They tackle critical issues such as scalability, security, and usability, aiming to overcome barriers that have hindered mass adoption thus far. By focusing on solving these deep underlying challenges, these projects have the potential to drive significant and sustainable growth in the crypto ecosystem.
However, it’s important to acknowledge that while these projects are crucial for laying the groundwork for widespread adoption, they often operate at a distance from users and practical applications. This detachment from the immediate needs and concerns of users can sometimes lead to challenges in translating technological advancements into tangible benefits for the broader community. In many cases, these projects may seem abstract or disconnected from real demands, and become narrative-driven.
Acknowledging such issue, from an investment perspective, these projects still possess significant value. Despite their endeavors which may sometimes seem distant from practical applications, we should recognize their efforts to solve the fundmental issues (which is also recognized by the market if we look at their FDV). It therefore remain attractive to investors seeking long-term viability and stability in the cryptocurrency market. Unlike projects focused solely on speculative trading or entertainment, these initiatives provide a more substantial value proposition. They have the potential to stimulate widespread adoption and catalyze transformative changes across various sectors of society.
Situated amid this spectrum are projects perceived as emerging capital markets or financial infrastructure, serving as a vital link between entertainment-centric endeavors and those aiming for transformative societal change. These projects encompass various initiatives such as tokenizing real-world assets, developing blockchain-based investment platforms, and establishing decentralized financial protocols, etc. Through these efforts, they introduce innovative assets and novel transactional experiences within the crypto space (in short, “new type of assets” and “new type of transacting”). While they may not wield the same transformative influence as projects directly addressing societal change, they mark a significant evolution in financial practices. By offering fresh investment opportunities and contributing to the maturation of the crypto ecosystem, they are pivotal in shaping the future of finance in the digital era. Acting as a bridge where financial innovation intersects with blockchain technology, these projects unlock new possibilities and pave the way for broader adoption and integration of crypto assets into traditional financial systems.
An intriguing experiment within this landscape is Friendtech, which leverages blockchain technology to monetize the time of KOLs/Influencers, albeit with sustainability concerns. Additionally, there are teams exploring the convergence of AI agents and crypto, envisioning a scenario where fragmented AI agents could be financialized, potentially spawning a new category of micro-assets with practical applications. These endeavors exemplify the innovative possibilities at the intersection of blockchain, AI, and finance, adding depth to the evolving landscape of digital finance.
This spectrum analogy can be likened to a coordinate system, with the X-axis representing the range of projects from entertainment-focused to transformative, and the Y-axis indicating the diversity of user profiles, from non-crypto users to seasoned crypto enthusiasts. At the top of the Y-axis are individuals who have yet to delve into the world of cryptocurrency, while at the bottom are those deeply entrenched in the crypto community, often referred to as “crypto degens.”
In the crypto space, there’s often a tendency to analyze new developments solely from a technological standpoint, focusing on the innovations themselves rather than the users they aim to serve. However, understanding the preferences, needs, and behaviors of the target audience is paramount for project success. This highlights the critical importance of the Y-axis, which represents the user base and community dynamics.
One classic example demonstrating the importance of understanding user needs is observed in pre-markets, OTC markets, and points markets. While these platforms primarily cater to crypto degens, teams (e.g. Aevo and Whales Markets) adeptly dissect and address user demands, showcasing a deep understanding of their target audience.
Conversely, an example of failing to comprehend user profiles is evident in the mere viewing blockchain games as one single vertical, attempting to amalgamate both web2.5 games and fully on-chain games. In reality, web2.5 games and fully on-chain games serve distinct user bases, serving different purpose for “massive adoption”. Attempting to merge them overlooks the nuanced preferences and behaviors of each group. We might elaborate further in a separate article.
The combined X and Y axes create a two-dimensional framework where the value of a project increases as it moves from the bottom left to the top right (especially when considering the attainment of widespread adoption as the ultimate objective of the entire crypto community). This trajectory signifies a project’s ability to not only innovate technologically but also resonate with and attract diverse user profiles, ultimately fostering broader adoption and sustained growth in the crypto ecosystem.
Orthogonal Labs does not only focuses on projects that can drive mass adoption of cryptocurrencies, particularly those at the intersection of blockchain technology and societal transformation, but we also fully recognize and value the projects across the entire spectrum, the latter of which is often serving as catalysts for the mass adoption of crypto. Whether these projects enhance user experiences within the crypto community or attract new users, each one plays a pivotal role in shaping the future landscape of cryptocurrency adoption.
If you have any cool idea, please contact contact@orthogonal.fund. Cheers!