Decentralized network? Protocol? Foundation? Blockchain organizations are businesses.
Despite labeling themselves as decentralized networks, protocols, foundations, and frameworks, blockchain organizations are, in fact, businesses — that will fail to succeed if they don’t start thinking of themselves that way awfully fast. In short, they need to become sophisticated about their customers and revenue.
Building technology isn’t enough of an excuse. That runway is short.
2017 was the year of crypto hype, 2018 a year of focused technical development, and 2019 is the year when sophisticated cryptocurrency companies saw the writing on the wall.
Entrepreneurs are facing the cold harsh truth that building a company on operational efficiency and cool technology alone is not enough, and that survival hinges on making money.
Build a business, or bust.
Smart cryptocurrency organizations have already begun operating like traditional businesses. As the crypto market matures, so does the requirement to understand customers, drivers of revenue, and measures of success.
Stocks are evaluated on fundamentals. Crypto isn’t a different standard.
Regardless of whether your business is Apple, Uber, a cryptocurrency, or a local pizzeria, fundamentals are a requirement.
There’s a reason the stock market reacts to fundamental data.
In January, Apple released its quarterly earnings report for Q1 2019. They noted that iPhone revenues were down 15% from the prior year, while revenue from all other products grew 19%. International sales accounted for 62% of the quarter’s revenue. They generated strong operating cash flow of $26.7 billion during the December quarter, set an all-time EPS record of $4.18, and returned over $13 billion to investors through dividends and share repurchases.
Business fundamental impact the stock price. Which is why sophisticated businesses use them to clarify the health of their company.
To date, cryptocurrencies have been judged by two dominant factors: price and market cap. But that is a ‘cart before the horse’ scenario — — price and market cap should be an outcome, not an input.
In the days of the ICO bubble, the valuation of crypto companies was akin to the valuation of tulip bulbs, beanie babies, and rare baseball cards of the past. They were things that people bought in large volumes, driving them to absurd prices, not because they did anything useful or had any real value, but solely because people thought they could sell them for more money in the future.
While “North Star” metrics are different for every business, for the cryptocurrency industry to blossom, it will be critical for leading organizations to measure metrics that reflect actual business health rather than valuation by speculation.
Since the collapse of the ICO bubble, the blockchain industry has matured and institutionalized, yet the metrics used to assess the fundamental health of crypto projects, have not. In today’s market, price and market cap represent little more than token economics and market awareness. They don’t yet reflect a measure of the relative utility or use of a crypto business.
So, what should crypto organizations be tracking? We explore two key concepts.
Two Measurements Every Cryptocurrency Org Should Track
In a traditional business, it’s clear where your money comes from and where it goes. In crypto, tracking money flow is a challenge that creates an inability to manage capital. Some crypto firms believe that miners and investors are hoarding their token, thus creating liquidity problems and further deflating price expectations. Yet the analytics and evidence for these assumptions, has been significantly lacking in the crypto world. Crypto projects must be able to answer questions like — Where do block rewards go once they released? How does each stakeholder (speculator, holder, user) manage my token? Does the speculation on my token increase volatility?
Actual Customer Behaviors:
In a traditional business, days and weeks are spent analyzing customer behavior, acquisition, growth, and retention rates. In crypto, “customers” beyond pure speculators, miners, voters — real users of the token — need to be identified and understood in order for the entity to transition into a healthy business. After all, a healthy customer ecosystem will only empower a healthy speculation ecosystem.
For sophisticated cryptocurrency organizations, understanding these specific metrics can help guide both business and product decisions. They must go beyond price, market cap, and simple block explorers and querying services to understand how to grow their business.
To learn more about how Flipside enables crypto projects to grow their businesses by monitoring project health, tracking customer behaviors, and providing insights into how activities impact stakeholders and price, visit https://flipsidecrypto.com/crypto-projects and access your free analytics dashboard today.