The recent crypto crash offers companies in the decentralized finance space an opportunity to rethink how the entire system works. And it gives us a chance to rebuild it, says Kieran Mesquita, Chief Scientist at RAILGUN.
There are steps crypto companies and projects can take now to create a safer and more stable future for decentralized finance (DeFi). Because crypto projects cannot exist without their investors, they need to diversify their audience, take responsibility for their education, and look beyond moonshots. If cryptocurrencies want to be considered real currencies, they have to start behaving like them.
A wide range of investors is of paramount importance
Cryptocurrency, like any currency, is most successful when owned by a variety of holders in different situations. Think about it. Everyone has some kind of fiat bill or coin in their possession everywhere. No matter what socioeconomic background they come from. This is what crypto must strive for.
The best way to bring reliability to crypto is to distribute it as widely as possible. Companies with DeFi investments are given an incentive to play it safe to protect shareholder interests. Hedge funds can take big risks because they have the financial latitude to make bold bets on different coins and tokens. Day traders add depth to the spread that can prevent currencies from flipping too quickly. When will we get to the stage where casual investors are everywhere?
To get there, industry leaders must develop technology that is clear, easy to use and—most importantly—accessible. The current highly centralized distribution of cryptocurrency betrays both its premise and its promise.
How can leaders address this problem? By identifying target investors – and users – as well-run companies do. Instead of wooing whales, blockchain projects should prioritize attracting and retaining a wide range of investors. Companies like E*TRADE and Charles Schwab understand how popular crypto is and offer guidelines for their investors. There is a growing potential for crypto projects to court the same investors who entrust these companies with their long-term investments.
No one in fiat invests their entire pension in one stock, so why do many crypto projects assume investors will do the same? The past few weeks have shown that presenting crypto as a get-rich-quick scheme is a mistake.
Industry leaders need to present their ideas as consistent, long-term projects. Now is the time to move away from crypto, which looks like a modern form of gambling, and instead demonstrate its use as a long game decentralized currency.
To do this, blockchain projects must make clear who they are, what their long-term goals are, and what they hope to achieve with their project. At RAILGUN we have prioritized transparency on our website by listing our core team members, their individual testimonials and links to professional sites. When potential investors look at our project, they know exactly who we are and what qualifications we have.
Let potential investors get to know your business model
The most significant discrepancy between cryptocurrency and fiat is the rapid change in value that cryptocurrency can experience. This can be extraordinary for early investors, but the unique urge to find a coin or token that goes “to the moon” ultimately ruins the possibility of these currencies having any functional value other than just a security.
If DeFi leaders truly want to see widespread adoption and successful use of cryptocurrency, they need to do what every great movement does: invest in educating people at all levels of the game.
Crypto projects should use their best asset – grassroots communication – and make it as transparent as possible. Listed companies are required to hold a shareholders’ meeting once a year; Crypto projects should do this monthly, if not weekly, and actively invite community members to submit real-time questions to our development team.
Crypto is based on the Do Your Own Research (DYOR) mantra, but successful and trustworthy projects should be open and open about the risks associated with using the protocol and the future of our developments. Industry leaders in crypto must Help people’s individual research, giving them as much information and access as possible, as often as possible. The era of a blockchain project gaining momentum with far-reaching plans and vague roadmaps must end.
At RAILGUN we invest a lot of time and energy in explaining our technology to our community and answering any questions the community may have. By prioritizing access, we can foster a culture of constant knowledge sharing. It doesn’t have to be radical; it just has to be consistent. We’ve created this consistency in the form of weekly DAO-wide Discord calls and bi-weekly Medium blog posts.
Take advantage of the opportunities in higher education
Another way blockchain projects can educate a range of potential investors is by promoting the formalized study of blockchain technology, cryptography, and decentralized finance at the university level. It goes without saying that students can study Fiat economics in college. Now that cryptocurrency is a force to be reckoned with, our industry leaders must bring attention to the cultivation of blockchain technology fundamentals and professors.
CoinDesk has already started ranking the best universities for blockchain studies annually. There are currently efforts to promote the future of deep tech at European universities such as the University College of London or Oxford, and the community is contributing to this trend. For example, IOTA recently made a donation to Imperial College to study distributed ledger technology, and other top projects are involved in similar initiatives. These students could just as easily be future cryptologists, data scientists, and blockchain developers. Why wouldn’t the cryptocurrency space snap up these new talents?
Don’t be afraid to look like a traditional financial company
The main problem with crypto is that many potential investors remain suspicious – especially those outside of the tech scene – and who can blame them after this crash? The crypto industry currently functions as a dysfunctional religious cult, with privileged information shared in closed channels where supporters are entertained by conspicuous distractions.
YouTube personalities act like pastors, building a following that is monetized by the cult of celebrity. The real work of educating the public about crypto has been placed in the hands of reporters and magazines who create an endless stream of “Intro to Crypto” listicles and blockchain deep dives.
The future of crypto currently rests squarely on the shoulders of journalists tasked with a multitude of “What’s X” articles when everyone is better served by journalists who have the time and space, the “why” around explore the technologies.
Ultimately, it goes against the best interests of crypto companies and blockchain projects to closely educate tech-savvy crypto bros who already know about Discord channels and tech-heavy, esoteric platforms. If decentralized finance is to become mainstream finance and replace fiat, there must be a comprehensive pivot for education with the same ubiquity and veracity that traditional fiat demands. The industry should rely on more traditional sources of funding for the multitude of opportunities to provide education and access to the general population.
For example, crypto and blockchain projects can hold public and easily accessible workshops similar to banks and fund managers. There are newsletters and magazines from major fiat institutions that cater to young investors, older investors, or investors with families. The Financial Industry Regulatory Authority (FINRA), a US-based non-profit organization, offers an investment learning program. In the UK, Hargreaves Lansdown offers many free resources to teach beginners how to build a portfolio. These targeted educational methods are tailored to specific demographic groups and aim to teach financial literacy. In our case, we have found that the best way to educate our community is to host weekly calls explaining everything about our technology, smart contracts and cryptography.
The crypto industry can make changes now
The crypto industry has suffered crashes before and will again. However, future crashes can be minimized if companies take this opportunity to re-evaluate their course of action. This can mean abandoning the “go big or go home” mentality to make more room for projects that aim for slow and steady growth.
Once the market starts moving higher again, this window for change will close and everyone at DeFi will be crossing their fingers again and praying that the blockchain views their investments positively. Crypto doesn’t have to work that way, and now is the time to make positive changes based on what has served traditional currencies successfully.
About the author
Kieran Mesquita is Chief Scientist at RAILGUN, the first decentralized smart contract project bringing privacy to cryptocurrencies that work seamlessly with DeFi. He has an extensive background in developing technologies for blockchain and DeFi projects. He was an early adopter of BTC and one of the first to develop its GPU mining software.
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