A few months ago I came to a hilarious realization: “speculation” is the most contrarian idea among crypto VCs yet the most consensus idea among crypto users.
I’m not talking about all crypto VCs of course, but many of them are disillusioned about the current state of crypto, which is undeniably very speculative. Some even frame this as a moral issue and publicly deride the idea of speculation as well as degens who engage in speculative activities.
I’m not sure why this holier-than-thou attitude stems from. I have some hypotheses. Maybe they come from upper-middle or upper class and never had financial pressure in their childhood to hustle for every possible way to make money. Maybe they see their peers invest in AI, fusion, and space and can’t justify their existence to themselves or to their LPs. Maybe they feel guilty about using degens as their exit liquidity and try to rationalize their own moral standing.
Whatever the reason may be, it’s either intellectually dishonest or flat out unfounded. And here’s why: “degens” are synonymous with “early adopters”.
Crypto degens are not fundamentally different from early internet adopters who used the first email clients and bulletin boards before the likes of SSL were developed. It just so happens that the internet is the information superhighway and crypto is the financial superhighway. So almost by definition, the early adopters of crypto ought to be those financial risk-takers who are brave enough to try unproven products.
VCs want to see DeFi disrupt Wall Street. But who will be the first 100 users that will risk their hard-earned money to ape into an unproven financial protocol? Degens. VCs want to see tokens drive global human coordination. But who will be the first 100 people that will spend $1000 on a Helium hotspot to earn a volatile and illiquid token? Also degens. VCs want to see NFTs create new IPs to compete with Hollywood and Nintendo. But who will be the first 100 buyers of “utility-less” penguin JPEGs before Pudgy World is production-ready? Again degens. Will the average VC try these new things? No. They are too risk-averse and have way too high of opportunity costs.
So the moment you start deriding degens, you are literally deriding the first 100 users of the very system you philosophize about from your ivory tower.
One of the most underappreciated outcomes of the degen activity in the early days of crypto is that it helped battletest our blockchains, rollups, wallets, oracles, bridges, RPC nodes, you name it. Without degens, we simply would not know how truly secure and scalable our infrastructure is. Degens getting hacked and paying high gas fees are what prompted our entire industry to focus on creating safer and cheaper systems.
Now one might say, “I get it, degens have done a lot for our industry, but the pendulum has swung too far and our industry is now just a speculative casino.” I’m completely sympathetic to this view. A world where speculation is the only use case of crypto is not a world I want to build. But the idea that speculation is the only use case of crypto is completely false.
The reason why this perception is so widespread is because speculation is what gets all the attention. No one cares when a Nigerian teen studying in Turkey uses USDT to send cross-border payments from home to his dorm. But stories like this take place daily across the world and grow at a mind-blowing pace. I know this because almost every one of the ~50 crypto neobank and remittance startups based in Latam, Africa, and SEA that I’ve talked to is generating revenue and growing relentlessly. In a recent Chainanalysis report, India, Nigeria, and Vietnam are the top 3 countries by crypto adoption. In a recent BH Digital report, $14 trillion worth of stablecoins settled onchain in 2022, surpassing Paypal. It’s been a while since I’ve seen product-market-fit so strong anywhere in crypto.
But guess what? Even stablecoins were bootstrapped by degens. One of the first use cases of USDT was cross-exchange arbitrage because stablecoin transfers settle orders of magnitude faster than fiat rails and fast settlement improves capital efficiency for arbitrageurs. One of the first use cases of DAI was leveraged trading, whereby ETH is deposited into Maker to create DAI which is then used to buy even more ETH. Without degens, there may not even have been a critical mass of stablecoin holders, and we would still be searching today for the first non-speculative mainstream use case of crypto.
I like degen’ing onchain. Partly because it helps satisfy my lizard-brained dopamine needs. Equally importantly because it helps me develop an intuitive understanding of the first 100 users. But I also want to build an open, borderless, permissionless, transparent, composable, user-owned financial system and web. This is what I came to crypto for. The two visions are not conflicting with each other. The decentralized utopia needs the open-minded, risk-seeking, thrill-seeking pioneers.
Credits to cat for giving me permission to use the image he used in DeFi Summer.
