The importance of proper tooling: a cautionary tale for crypto startups
Building a company in a nascent ecosystem introduces lots of unique challenges. What happens when you have to create everything from scratch? Not just the platform itself, but even the tools required to build and grow it.
In Q3 of 2017, Ian Worrall and co-founders created the MyBit Foundation, a non-profit entity in Switzerland focused on building a new approach to wealth. By relying on the Ethereum blockchain, MyBit would allow anyone to tokenize physical assets while providing new means for crowdfunding, which in turn would bring revenue back to investors directly into their wallets.
The elevator pitch? Decentralized Kickstarter
MyBit was created to challenge online centralized fund-raising models and was conceived to create an alternative to existing crowdfunding solutions like Kickstarter or GoFundMe. Existing commercial crowdfunding platforms would take up 5% of the crowdfunded campaigns, and decided on the listing and delisting of projects. MyBit would instead take only 2% of raised funds and allow anyone to list assets on their platform. Governance would be made possible through a DAO, managed by token holders, who could decide on listing or delisting investments.
By early 2018, I was brought on as CTO and Advisor, and together, we put together a roadmap for our vision in order to achieve MyBit’s goals. After months of work, we came up with a series of products that would shortly become the MyBit Ecosystem: the network, which was the crowdsale smart contract and the assets published in the Ethereum blockchain; Go, the platform where anyone could list and invest in assets created in the network; and the SDK, which would allow any developer to interact with the contracts and assets in the network.
All this software and vision was powered by MYB, the company utility token issued as part of the 2017 ICO. MYB would be used to signal the approval of the asset (governance), take part in paying to list an asset (entry fee), and would be locked in the asset listing process (collateral) to back up the listing of the assets.
Before the end of the year, we were presenting the MyBit ecosystem to developers and users around the world, from Europe to Asia. In a few online demos, we showcased how any developer could create a crowdfunding asset with a few lines of code, fund them using DAI or ETH, and then add revenue to it, which in turn would allow investors to automatically calculate their respective ROI per block and withdraw it on request. At that point, we had created not only the smart contracts but the JavaScript SDK and even UI drag and drop widgets.
Although the vision was strong and the idea solid, MyBit would cease operations two years later. I would be resigning my position as a CTO of MyBit AG and engaging in the dissolution of both the company and the foundation. By the end of 2019, the team would be dissolved and the company liquidated. Investors and community members would be left disappointed with a token that would quickly drop in value and had almost no usage or adoption.
So what happened to MyBit?
The fall of MyBit
If you ask in the MyBit telegram channel what happened to MyBit, you will get different answers. The majority of individuals will point to flawed and inexperienced management, bad leadership, or poor decisions made by the founder and team members. In exchange, team members will blame crypto winter, the legal hurdles surrounding the idea, and the challenges of conducting business as a crypto startup without having a bank account.
If you ask me, I will tell you that all of the above had a role to play, but none of them was the main problem.
In my eyes, MyBit failed because the user experience of the platform was plain awful. Even worse, building MyBit was awful.
In 2017, the crypto ecosystem looked very different from what it looks like today. The most popular tool for interacting with Ethereum RPC endpoints, web3.js, didn’t even have a stable release or API. All utility tokens were only accessible via centralized exchanges that would charge exorbitant fees for listing and intimidated users with their trading UX. In most cases, we had to forward users to another platform (e.g. Bancor) to get our token, way before any swapping platform existed. The tooling around deploying, parsing, and reading data to and from the blockchain was limited to block polling. Ethereum node gateways like Infura or Quiknode were months away from mass adoption.
Despite MyBit’s good intentions, its vision required a set of tools that were simply not there at that point in time
Without a proper indexing mechanism or paying for an in-house node, we always had to ask users to first download and connect MetaMask before doing anything. Without a governance and reputation relayer, all listing was arbitrary and token holders could not signal any preference. And finally, without any token onboarding experience, users had to first acquire ETH, purchase MYB, and then come back to the application, which created a horrible user experience for everyone.
It took us years to realize that we had to build the tooling ourselves, but at that point, we had simply run out of time. The SDK for the platform, the UI, and all other developer tooling were left stranded with the hopes of completing the platform before we ran out of funds. Given the amount of money we raised and the specific focus of the project, it was too late for us to pivot on the required infrastructure without under-delivering. We had to rush our way to delivering the Go platform and were forced to start cutting corners. By early 2019, 50% of our workforce would be disbanded, the CEO would stop getting a salary, and the remaining team members would receive salary cuts.
Although additional measures were put in place, the fall would continue, slow and steady. Unable to raise additional funds in a second token-sale, by the summer of the same year all money was exhausted. Because of the steep costs at the time for swapping a high amount of ETH into any stable coin, any reserves we had were hit by ETH price drops. Crypto winter had fully set in, forcing the company to close, leaving investors frustrated, and a team once made of friends, disbanded and hurt, both emotionally and in some cases even physically.
The real treasure was the tools we built along the way
Although around 99% of alt-coin based companies like MyBit collapsed by the end of 2019, the other 1% survived. These companies either raised incredible amounts of money, managed to get by with limited funding, or did the not-so-obvious: learned to quickly set up the foundations of their project, and if there were none — built them. Companies like Dharma, Filecoin, 0x, and Aragon, understood this approach well and have continued to thrive despite the bear market that followed.
These survivor companies understood that if they wouldn’t build the tools required to bring their vision to life, no one else would.
These companies set up funds, created grant programs, sponsored labs & hackathons, and established foundations to help themselves not only create a product but an entire protocol layer around themselves. In many cases, they pivoted entirely in order to supply a demand in the market that they became aware of because they were their own customers.
Thanks to companies that identified these problems early on, the tools we have today are infinitely superior to the ones available back in 2017. Nowadays we have IPFS to store data, TheGraph to index events, Textile to communicate via p2p, Ceramic to grant identities, Handshake & ENS to name systems and wallets. Liquidity pools like Uniswap allow token listing, and anyone can do a “Dutch Auction” ICO by creating a Balancer smart pool via their UI.
If we’re talking about UX, nowadays developers can prompt users to select from a variety of embedded web3 providers instead of just asking them to download MetaMask. Projects like web3modal and onboard.js enable this behavior in DApps with only a few lines of code.
Some on-ramp providers, like Banxa, have enabled web3 providers like Portis to offer a much friendlier experience to the average consumer when they need to acquire crypto in order to engage with the ecosystem. We no longer have to ask users to go to a third-party website before they can start interacting with our application.
The importance of open source
Although MyBit no longer exists as a company, its code remains, and so do all the other open-source projects. The blockchain ecosystem relies on open-source software, so today could be a good time to ask yourself (and your company) whether you are supporting the tools that you rely on on a daily basis. If your project relies on a smooth onboarding experience, check on your provider, and see how you can help them. Start a conversation in your company about the option of sponsoring or creating a budget for the open-source tools that it uses. If you don’t know where to start, Google recently created a program to help companies and users alike identify these tools.
As a new bull run begins in the crypto ecosystem, we have a chance to continue pushing the tools and projects that might not have existed in the past, but today play a critical role in making the entire industry possible. Existing companies, as well as those that have yet to be born, rely on us to make the path easier for everyone. The faster we build, the less we will see companies failing, just so everyone else can continue innovating.
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Despite shutting down the legal entity, the MyBit community launched MyBit Go v2 and continues to push the project and vision via their Telegram channel.
