Author: Jesse Walden, co-founder of Variant Fund
Smart contract platforms have been around for about ten years. Many are angry that in late 2023, the most successful encryption products still view the functionality of encryption as a "what" rather than a "how."
Products with cryptocurrency as the "what" revolve around assets as investments: users buy, earn, trade, borrow, leverage assets, including Bitcoin, MEME coins and NFTs, in the hope that their prices will rise. Fortunes come and go, sometimes quickly. These extreme behaviors are praised within the industry by self-proclaimed "degens" and ridiculed by those in power outside.
Many people are disappointed that there isn’t more innovation in cryptoassets beyond “what” they are. But products like this have incredibly strong product-market fit and I think this trend is likely to intensify and grow. I'll try to explain why I believe this; the reasons are subtle but also underappreciated.
Our argument at Variant is that the next generation of Internet networks will turn users into owners - specifically asset owners. The Internet allows everyone to become a Publisher, similarly, Cryptocurrency allows everyone to become an asset owner and thus an investor. You don’t need capital to invest: you can invest time or work—by creating art, running machines, or doing manual labor.
From this perspective, Cryptocurrencies can be seen as the "democratization of investment". Robinhood does this with stocks. Cryptocurrencies can enable many other forms of value native to the internet: money, digital art, MEME, and early stage technology projects.
Both within and outside the cryptocurrency space, the democratization of investing is taking on the most compelling form of speculation Realization lends credence to the claim that the most interesting outcomes are the most likely. GameStop, Doge, Bonk, Dogwifihat. what is going on?
The movie "Dumb Money" attempts to capture the cultural context behind this trend. It provides a perspective on the modern world of retail investing, characterized by online accessibility, the impact of social media on information cascades, a David and Goliath mentality, and the opportunity to get a piece of the action.
For those in power, this speculative investment appears to be a joke, or perhaps a strange form of entertainment . For participants, it's a lottery, a sport, a team sport played online with friends, or some combination of these. As with all games, there are expectations for winners and losers. There are also cheaters trying to gain an unfair advantage (this should be refereed.)
I ask everyone I meet A crypto entrepreneur and how they got started in crypto. The most common story I hear is that they started with speculative investments, usually BTC, ETH, ICO, DeFi Summer, or NFTs. I’ve heard countless stories of people making their first “real” money this way. This resonated because this is my story too. For many entrepreneurs, including myself, these early investments are life-changing—they go from having almost no savings to having some savings to take on their next risk.
Suddenly, they also became low-level investors in some technically optimistic projects or communities. That initial investment sparked their interest in the underlying technology or ideology, and many found jobs in crypto or launched startups. Often, investments don't pan out. But nowhere else are such cutting-edge financial opportunities available to anyone simply paying attention.
At the extreme, MEME coin still represents the same prospects for those paying attention today. The prospect of participating in economic growth attracts so many entrepreneurs and users, which is important because a subset of these users learn from these experiences to think and act like investors. It often starts with something that looks like a toy (or dog) but leads to a serious shift in psychology, money, effort, or skills being honed in order to make a more serious contribution to the industry. Many people are also harmed by the chaotic, volatile free market process. But despite this, speculative investments continue to drive the growth of cryptocurrencies, which in turn drives technological advancements in non-speculative use cases.
Variant’s cryptocurrency vision is a fairer Internet; its mission is to empower one billion users to become masters. This is a long-term, ambitious goal. I believe this path is shaped by this cultural shift that's already underway, where more users are thinking like investors and want to own things that they believe in and know because they use them. This means embracing MEME as much as we embrace MEME as part of the internet's native culture, and inviting people to get started investing in/using/contributing to projects that have legs (or maybe 4).
In late 2023, the speculative nature of cryptocurrencies once again became the focus of the gaming world. It has the most activity, users, and attention. Meanwhile, the permissionless industry track continues to grow and innovate around non-speculative use cases. It's not a question of if, but when the latter will have an impact, validating the speculative enthusiasm surrounding the former.
Even in failure, avoiding the reality of speculation may seem "high status," while embracing speculation is considered a "lower status" path to success. The reality is more nuanced: speculation can be a powerful strategy for getting users onboard and invested in the success of projects and the industry as a whole; it can be as much a means as an end.
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