Aditus: 2019 Q2 Update
Learnings from the front lines of crypto-adoption
It has been some time since the last update, and a lot has happened since then, both in the crypto-space and with Aditus.
We are now more than a year from the dizzying highs of December 2017 and January 2018, when crypto prices reached their all time highs. But it did not last, as the market started dropping from the 2ndhalf of 2018 into the crypto-winter that sustains today.
While many in the space would often say that we should just BUIDL and ignore price action entirely, I believe that is at best naïve and idealistic, at worst, plain wrong.
This is because crypto-adoption is directly impacted by the degree of awareness and excitement over the entire crypto-space, and this degree of awareness and excitement is directly related to coin prices
Indeed, my personal opinion is that dealing with the volatility of the crypto-prices is part of every crypto-entrepreneur’s job, as the speed of acquisition for users (whether consumers or merchants) is directly related to the afore-mentioned awareness and excitement levels. And, gauging this speed of user acquisition becomes an important consideration in timing team build-up and product roll-out in order to best deploy resources.
My co-founders at Aditus have all been entrepreneurs each for more than a decade, and we have all survived multiple cycles in other markets. In crypto, the cycles are much more frequent, but the core principle does not change.
With that in mind, I would like to list down some personal observations and opinions, garnered from the past 18 months at the front-lines of the crypto-space. In each I will also include how each relates to Aditus.
1. In a volatile market, external revenues are critical
In the first wave of ICOs, many start-ups hoped to finance their businesses solely through selling their ICO funds (Ethereum in many instances) to fiat.
But when the value of Ethereum drops more than 70% in a single year, start-ups have to be able to open up new sources of external revenues in order to plan for the future.
We have observed that only the popular exchanges and payment processers in the space can be assured of stable revenues.
Thus, we have focused on Aditus Pay as our main product since July 2018.
Aditus Pay makes revenues by helping luxury merchants convert crypto to fiat, and charging a fee. We have been focusing on revenues with our highest performing merchants for most of the last year — we believe that is the logical plan, even if it does not result in much news and announcements.
2. BTC is still the main transaction currency of choice
In high end crypto-transactions, BTC is the crypto-currency of choice. There are no close seconds. While we do offer BTC, ETH, LTC and of course ADI, almost all incoming requests from the purchasers are for BTC.
From a merchant acquisition perspective, most traditional merchants still have little awareness of any other crypto-currencies aside from BTC. This means BTC prices and its sustained recovery will be a key to Aditus’ success.
3. Crypto -transactions, as a barometer of wider crypto-adoption, is correlated with price levels
This is an obvious and intuitive point, but it is also one that is borne out by our experience at Aditus. No one feels like spending their BTC when it has just had a 20% drop the last few days. Conversely, when BTC had just had a strong weekend, Aditus Pay sees an uptick in requests and enquiries.
In order for true adoption to happen, a sustained period of slow and steady growth in crypto-values is necessary. A overly rapid rise (and the inevitable crash) only serves to bring punters to the market, and scare away traditional companies and merchants, all necessary to bring about true meaningful adoption.
To this point, there arises the natural question of the role of stable coins. The past year has seen a raft of new stable coins in the market like TUSD, GUSD, USDC, PAX etc. So far our observation has been the impact of these has been limited to trading, and not in actual commercial transactions. I can also confidently say that, the volume of crypto trading activity (not prices) is not correlated to crypto-transactions at this point of time.
4. True decentralisation seems to be still some ways away
In my opinion, full decentralisation (what I term “hard” decentralisation — where no trust is required) in widely used applications remains an unattainable ideal for now.
I see two reasons for this, firstly the relative immaturity of blockchain technology, and secondly, our habits and preferences as users and consumers.
The relative immaturity of blockchain technology makes it challenging to build and launch an platform for consumers and merchants, without the risk of doing a shutdown and complete rebuild when a previously unknown bug surfaces. (The Parity wallet bug that resulted in more than 500,000 ETH being frozen inadvertently remains fresh in our minds.)
The irreversibility of many mistakes on the blockchain also makes it difficult for start-up teams to iterate and experiment with a launched product, as is the norm in the internet space.
The technology is constantly getting better of course, but what is perhaps a bigger impediment to decentralisation is our collective preference as consumers and users of technology. A clear example of this is still the dominant position of centralised exchanges like Binance over the host of decentralised ones. We as consumers may not be ready to fully take 100% responsibility over all aspects of our commercial dealings. We still want someone to call or email when things go wrong.
At Aditus, we have seen that our merchants and users still want Aditus to be the trusted 3rd party to facilitate and give assurances over the transactions. It will be a long time before merchants and users can place their trust solely in the technology.
This observation changed our initial plans for Aditus Access, in which a fully decentralised wallet app will handle all rewards processes. The solution we will adopt is a “soft-decentralisation” option, in which the core user and merchant facing business components will remain centralised, and only a careful selection of features being decentralised.
5. Big ticket transactions remain an excellent beachhead for crypto-adoption
A common question asked of us by our friends in crypto from even 2017, is “are users more likely to use BTC for small purchases or large purchases?”
I believed then, somewhat unempirically, that crypto-whales are more likely to spend their BTC on large ticket items rather than say a cup of coffee. Now in 2019, I would wholeheartedly double down on that opinion given our real world observations in the space.
The primary reason is that there is still a large concentration of crypto-wealth in the hands of relatively few whales, and positive movements in price result in windfalls that are often diversified to other assets in a form of profit taking.
Aditus is still the best positioned to be the leading service provider in this market space.
6. DAPPs will be critical to drive adoption, but decentralisation is not the goal of most consumers
While many of us are persuaded by the noble intentions behind decentralisation and fairness, the reality is that most of us in our lives as consumers do not prioritise decentralisation over reliability.
We have completely recrafted our original plans for Aditus Access in order to prioritise reliability over decentralisation. The core idea of Aditus Access remains unchanged, in which ADI tokens will be used as rewards points and discount tokens, but the processes in which they are transferred will be changed.
Decentralisation remains a goal to strive for, but as a start-up with stakeholders, we need to be focused on the long term, while being able to serve a commercial purpose in the short and mid-term as well. It is only with this approach that we can survive any crypto-winter.
Indeed, all DAPPS will need to find a focused use-case and be able to acquire their users (whether consumers or merchants) in that niche to prosper. Whether it be wallets or games, each needs a unique strength in the marker space they are targeting.
Aditus is one of the few crypto-startups that have not changed focus from its begining, and remain focused on the high-end, and for reason 5 above, is an excellent market space to be a leader in.
For the reasons and observations above, Aditus has been focusing on revenue-generation among our highest performing merchants, while scaling back on all other activities. In a crypto-winter of indeterminable length, this is the best strategy to adopt for niche players like Aditus.
If the current upwards movement in BTC continues, we will resume and ramp up our merchant acquisition efforts, in line with the market.
With the benefit of seeing how the various major players have operated in the past year, we are also working on a key partnership which will see a ground-up revamp of our blockchain infrastructure. We believe that this ground-up revamp will make us more ready for the future.
The crypto-space is fluid and volatile, and we at Aditus have avoided communicating half-formed plans to create false or unrealistic expectations in the market.
But please be assured that Aditus remain focused on making the goal of being the true leading player in crypto-luxury a reality.
Please stay tuned, while we stay focused.