Towards the post-cycle blockchain era
AVentures thesis series: Interview with Dr Tamer Ovutmen
Boom and bust cycles are over; we are moving from speculation to utility
We came to an end of the boom-bust cycles and are now in what I would call the post-cycle era. In the past, cryptocurrencies were regarded more as speculative investment assets as they had limited application. People invested in L1s, meme coins, low-utility tokens etc., without really knowing what they were purchasing. A core pillar of our investment thesis in AVentures is focusing on token utilisation at TGE. If the token has no utility at launch, it is mainly a speculative instrument and more susceptible to market volatility. We now have DeFi, NFT and GameFi as strong use cases attracting many retail and institutional investors. Apart from the useful applications, these protocols safeguard the space from the boom-bust cycles we had in the past. However, this does not imply that we are free of the market dips as we saw in May and November this year. On the contrary, the dumps and recoveries are likely to become more frequent in the next 12–18 months.
Hype cycles are here to stay
Talking about the hype cycles, we’ll continue having them. A good example is what is happening to the NFT space. When it all started, the NFT projects attracted massive liquidity, the prices hiked up, and now that space has dried up. It seems like we are at a similar inflexion point with GameFi. Many of the play2earn games achieved a massive overvaluation due to the hype. However, the chances are that GameFi/P2E projects will relatively quickly converge to valuations seen in mobile-only games.
User experience is the king
The multichain is a way forward as the single-chain approach is unsustainable when it comes to the overall crypto market and its technological future. To enable and fuel mass adoption of crypto, we need to stop talking about the TVL of each chain as separate pools. Namely, retail investors do not and should not care which liquidity pool, protocol or blockchain their tokens end up. It is simply too much work and effort for an average investor to stay on top of everything in a rapidly moving space. This complexity of competing blockchains and protocols should be replaced by simple multichain protocols with user-friendly and intuitive interfaces. These multichain protocols of the future should do the hard work by constantly monitoring, shifting and optimising crypto investments to generate the highest possible returns. In the same fashion, multiple and competing decentralised exchanges are not sustainable in the long term. To survive, they will have to collaborate and become composable and interoperable. Ultimately, the platform that successfully delivers the best customer experience will win.
Removing frictions and educating end-users as top priorities
Until now, most of the blockchain dApps were designed by developers, and UX/UI was not given the proper attention. Since many DeFi protocols have matured, it is time to remove friction points for users and deliver customer delight. One of the key pain points is complicated and expensive on-ramps and off-ramps. TradFi banks do not like liquidity moving to crypto and are trying to limit, charge high transfer fees, prevent or completely block such transactions. The off-ramping situation is nothing better nor less complicated. Currently, you cannot directly send money from the blockchain to your debit card. It is a tedious process that would likely involve using DEX to convert tokens to those supported by a CEX of choice, sending tokens from your wallet to CEX, selling the token for fiat and then moving fiat from CEX to your current account. At the moment, this costs about 1.5% of the total value of off ramped tokens. In the future, the more adoption and on and off-ramp volume, the costs should fall in line with average DEX fees.
Besides high on and off ramping costs, DEX-es and other non-custodial protocols need to become simpler and safer. Using these for the first time can be pretty overwhelming and off-putting. There is an issue of complicated login procedures, safeguarding the keys etc. While CEX-es offer customer support if things go wrong, DEX-es and Web3.0 protocols are unlikely to do so, which opens doors to scammers creating massive damage to the space. However, multiple Discord and Telegram groups teach people how to do things safely. Yet, it is not easy for newbies to find and absorb information. Organisations such as Avalabs and Terraform need to prioritise the education of new users on how to keep tokens safely.
The emperor’s new clothes or how things should not end in crypto
Another thing to solve is privacy. It should not be an option but a base layer, which goes without saying. Someone should not see all your transactions only because they have received from you or sent you some tokens. One has to get very creative to protect their transaction history by having multiple wallets etc. However, your transaction history is exposed to everybody who has your wallet address by default. We need privacy for retail and institutional investors if we want to see more adoption. Transactions between the parties should be based on zero-knowledge proof. When you transfer your tokens to someone, all the recipient needs to know is that you are the holder of the key and a particular crypto asset that is the subject of the transfer. Everything else is irrelevant. The problem is getting more prominent when it comes to institutional investors. Exposing them to competition means that they can be front-run by a competitor in a crypto arbitrage. Until now, it was more manageable because there were no significant losses nor wins to be had in a matter of seconds. However, with options and leverage becoming available in the crypto space, a 0.1% front-run can significantly impact profits/losses. Until this is solved, we will not see a massive inflow of big institutions in DeFi space.
About Dr Tamer Ovutmer
Dr Ovutmen is a strategy advisor, entrepreneur, investor and board member. BSc, MSc in Industrial Engineering, PhD in Operations Management; he has 10+ years of consulting experience (Bain & Co, IBM, OC&C). He mainly advised Telco and Tech clients, focussing on M&A and go-to-market strategies. He has been leading the Blockchain Practice at IBM Consulting in London. He completed over 20 Blockchain strategy projects worldwide, focusing on decentralised identity, data sharing platforms and contract management. He is also a DeFi degen, developing and executing yield-farming strategies on Avalanche, Terra, ThorChain and Cosmos chains. Recently focussing his research on protocol owned liquidity, fair token launches and fractional NFTs. He is one of the founding members of AVentures. Internally he is responsible for business development and DAO structuring; while he advises the projects on tokenomics, creating long-term value and defining addressable markets.
About AVentures
Aventures is an investment DAO comprised of OG Avalanche community members on a mission to support the ecosystem. The team boasts multiple successful dApp developers and project owners, content creators, advisors and domain experts that have come together to channel our expertise to support the Avalanche ecosystem.
AVentures DAO:
* Provides advisory and marketing support to new Avalanche projects
* Supports Avalanche projects by investing in seed/private rounds
* Incubates new projects via mentoring
* Publishes technical analysis on DeFi projects
