Postmortem: Co-founding a Web3 startup as a crypto skeptic young dev
anicetnougaret.fr> Basically we were planning to only make money on fees, which already seemed too much for us considering we'd rather have low fees and more user satisfaction. But what investors in the crypto world wanted was not only fees, but actually even more than that. They wanted us to create our own crypto (on top of the NEAR blockchain) and basically manage it like our own mini financial asset (of course not declared as such because that would be in a grey legal area). With staking, giveaways, and other mechanisms to create more and more of it, or to pump its value over time.
I, for one, am shocked.
Scam-as-a-service. People wanna run a grift AND they want the playbook ready for them. That's just... wow. I don't know why I'm surprised but I always assumed crypto scammers were at the very least building their own scams.
Shocked! Well not that shocked.
He figured it all out correctly. Somebody hire this guy for a legit business.
This is the problem with a true blockchain-based distributed exchange. It makes money only from fees. All the exchange does is match orders locked in for a time by smart contracts and tell both sides "go". The exchange operator doesn't get their hands on customer funds, so they don't get to become a big company like FBX.
It's funny that even a "naive" college-aged kid can look at the situation and determine on his own that it doesn't look quite right, but so many others seemingly couldn't.
I suspect most people fully understand that things are questionable at the very least. But they usually think they're more intelligent and they'll be able to skirt around laws by creative usage of terms or betting on being technically correct.
As the old saying goes:
It is difficult to get a man to understand something, when his salary depends on his not understanding it.
There is some merit to that
Think about it: you have no-coiners running around like “why does that need a token!? there is no use case for anything, I looked at the top 100 things on Coinmarketcap…”
Not noticing that they only found things with tokens because it advertised to them effectively, completely missing the products that do not have a token attached
Splitting the protocol fees with a subset of token holders who choose to stake is an ok human coordination mechanism, even gets no-coiners to look and swayed too late by a grifting youtuber at the top of the next bull market
> “Splitting the protocol fees with a subset of token holders who choose to stake”
The problem is that this is the very definition of a security, and you will run afoul of powerful regulators in some important countries if you’re offering unregistered securities over the internet to all comers.
right, the only reason people do it this way is that they only care if the token is a security, not whether some application only accessible by the token is
nobody cares if some random unpausable smart contract that happens to use the token is creating securities transactions
the only people getting targeted by those powerful regulators are the centralized custodians that resell access to those smart contracts. so the Coinbases and Binances and Geminis, not the AAVE’s and ETH2 contract deployers for example
Its not even supposed to be a workaround, its just the consequences are completely fine. “hey your token is fine and can be traded everywhere, but the primary staking smart contract that happens to be linked to platform fees for the project of the same name is an unregistered securities vending machine! we’re sanctioning it and it will keep operating autonomously regardless! no, it has nothing to do with the token of the same name, why do you keep asking that”
prior token project evolutions would extend dividends to all token holders, which would introduce liability to the status of the token certainly. exchanges wouldnt even list those tokens because there would be nothing to argue to securities regulators. now its rapidly iterated to something more inconsequential and ambiguous, or just inconsequential
I think this is actually a pretty balanced and rational take on crypto. There's a lot to be jaded by in the industry, and I'm glad he got a lot out of the experience (attending the conference, meeting people, including other skeptics) despite not continuing on the startup. I think at the start of our careers, it's generally a good instinct to just try things and see if they're for you.
> By the way, we didn't plan doing that at the end, after thinking about it a lot, but it meant we would need to gain many users by having a killer product and work for free for very long, like a regular startup I'd say.
Real web3 startups are just like normal startups if you take out the token economics. There do exist use-cases and users, but I'm glad the author had a strong enough sense to do what he felt was right. It's definitely easier now that the bandwagon has mostly stopped, but I think his reaction is a good one to maintain throughout our careers.
I am a web3 startup founder, and we had to push back a lot on investors in the early days around the pressure to release a token. We raised money on a SAFE with warrants for a token should we decide to issue one. I think many others weren't experienced enough to know they could (and should) push back on investors for things they believe in. All that said, we still think issuing a token could be the right move for us, but we won't do it until we understand exactly what we are getting into, and believe that it is the right thing for the protocol we are building. Anything less is just a get-rich-quick scheme. Founders should focus way more on the value they want to create and not the way they create a return for investors. But it's doubly tough in this industry to do so with so many waving money in your face that only really care about the fact that crypto gives you an incredibly short path to liquidity.
title could be: "nerd tunnel vision" lead me to work in a Ponzi scheme.
Many many years ago Ethereum /smart contract hackathons way were more innocent, at least most participants acknowledged they were working on something useless but fun.
A Ponzi scheme still a Ponzi scheme even if it's using Rust.
Give the author a break, he/she is 21.
I am giving them an out.
Not every bad person is a Nazi and not every scam is a Ponzi scheme. Most crypto scams are the equivalent of an old school pump and dump on a penny stock.
That’s not a Ponzi scheme.
It’s not so entirely different though. Early investors in a pump and dump can make a tidy profit, just like early investors in a Ponzi.
The main difference is the lifecycle: the dump is fairly quick and sudden, as the name implies, while the Ponzi can keep digging a hole for decades if it can reach a sufficiently large or wealthy base of fresh investors.
Wow I’m surprised someone else noticed the parallel between the overuse of these two terms. I feel their meaning became very diluted because of it. They’re good examples of semantic satiation [0].
It's good that the person is young and rather clear-headed.
Here's what the actual sceptic would immediately see and say "nah":
Goal: "hackathon during which we had to develop an innovative app or web app using NEAR's blockchain"
Result: "During the hackathon we made a decentralized exchange (DeX or "swap" in web3 jargon) named "Far Far Away Swap". This app's goal was to let our users exchange coins hosted on the NEAR blockchain using an automated market maker (AMM) algorithm"
Yup. Yet another currency speculation exchange. As a more jaded person, I would stop there. However, I see it as a good learning experience for the author, and I wish them the best of luck on their path.
----
This also made me chuckle: "I met many skeptics there. Often they were on the older side of the attendees (most of them were looking like 40 years old)".
Yup :)
Maybe the outcome would have been different had he founded a Web4 or Web5 company. Lacks vision.
This is completely myopic. I'm already working on a project that's third wave post Web.
You’re the man behind WebInfinity??
A neighborhood bakery?
Weak grindset.
Poor idea to found a startup in a field you don’t believe in. Waste of time from the start.
Even as a rank-and-file senior dev, I never join companies that work on ideas I don't believe in (web3 included). I can't be productive and efficient working on stuff I despise.
I can't imagine how would it look for a founder. It's like trying to swim while being skeptical about touching water.
What do you mean by "believe in" here?
There have been very few companies I worked for where I "believed in" what they did in the sense of thinking they were doing something amazing and world-changing. But I "believed in" them enough to know they were doing things I found interesting and could afford to pay me.
> I can't be productive and efficient working on stuff I despise.
There's a huge amount of space between believing in something and despising that thing.
> It's like trying to swim while being skeptical about touching water.
I think being nervous about touching water when trying to swim for the first time is healthy and rational, and may even make your ultimate success more likely. I'd be much more comfortable working with a founder that had a healthy amount of skepticism than a founder who was a "true believer".
I suspect I'm purely getting trip up on language here, though, and I probably agree with your underlying sentiment.
> But I "believed in" them enough to know they were doing things I found interesting and could afford to pay me.
I think "I found interesting" might be not be quite right for most people either. If it's serving a need for the people that pay for it, or you think it can be serving a need if it continues in the direction it's going, I think that's the important part in "believing in it".
I've done work for companies where I was able to convince myself of this for short periods, but eventually had to accept the harm was greater than the good (payday loan companies. Used appropriately they aren't horrible, but they do everything in their power to make sure they aren't used appropriately), and that's when even though the work was interesting it became hard to stomach, for me at least.
Ultimately, if the service or product you're working to support is one people appreciate and come away appreciating afterwards, I think most people won't have a problem "believing in it". It might not be interesting though, so it's entirely possible believing in it isn't sufficient to keep people working there in itself.
Don't know about OP, but for me it doesn't have to be something "amazing and world changing", but it should be something that makes a positive impact on the society.
For example I work in healthcare and I think that the software that I write positively affects both doctors and patients, even though it is not about a world-changing novel idea. If I were to work for Meta though (just to make an example), I wouldn't be thrilled at the idea that I am optimizing for addiction, and even if I weren't working on the core business of the company, but instead on the latest and greatest web framework, I would be still working for a company that (in my opinion) totals a negative contribution to our society. The motivation is not the same for me.
Now, in the case of Web3 and crypto, people are usually either on the "the best thing since the discover of fire" camp, or in the "a wasteland of frauds and Ponzi schemes", so in fact the dichotomy between "believing in it" and "despising it" is not really wrong...
> it doesn't have to be something "amazing and world changing", but it should be something that makes a positive impact on the society.
I agree, that's why I was asking. What the commenter meant makes a pretty large difference.
If you define "believe in" as "thinking they were doing something amazing and world-changing," sure. If you mean it in the more normal sense of "Think it is a worthwhile endeavor that has a reasonable chance of success," the distinction you're drawing here doesn't seem very salient.
Right, what is meant by the phrase is important. That's why I was asking for clarification.
As a senior engineer / tech lead / whatever, I have to work with product people and think heavily in the product's terms. I have to imitate various user personas, their needs, their perspectives.
If I'm trying to think on a a user's behalf, and the question "what the user might want from the service to further their best interest?" for me has answers like "discontinue immediately and uninstall the app", I can't work on making new features and improving user retention. I'm not psychopathic enough.
> space between believing in something and despising that thing.
Correct. It's the spectrum between wasting time because the business will never work, and actively and consciously helping people do things that I would rather help them stop doing. None of this spectrum is interesting to me to work on, except maybe if that were the only way to secure my family's physical survival. I try to strategically stay far from circumstances like those.
It's not the technology, of course. I have interviewed with a company that used a blockchain to track something like carbon credits and trees planted. Most web3 companies try to peddle tokens though.
> nervous about touching water when trying to swim for the first time is healthy and rational
I agree about the first time, and maybe the N-th time, until you're comfortable in it. But your goal has to be to get comfortable in water, and to master the almost-submerged motion that is swimming. If you plan to swim in the long term while avoiding contact with water and staying on the shore, it's likely unrealistic.
Roll-friggin-eyes Scotsman. You think everyone that founds a startup for, say, B2B data integration Really Believes In It? Or just that there's money to be made?
Usually you believe you can make money if you deliver value to the customer. In crypto people don't believe they deliver value, they scam or prey on fomo.
no true Scotsman delivers value to a customer!
one of the problems with crypto as currency is that currency is not supposed to deliver value beyond medium of exchange and store of value at least long enough to do that.
There are absolutely people who go into B2B data integration startups with the belief that they are providing a useful service to their customers. Do you really doubt that?
I got some surprising news for you. There are people who passionately work in B2B data integration. All successful B2B startup founders i've met are very passionate about their field. Now for those founders who don't have much interest in the field they are working on - they are hardly those who you would call successful by any metric. Life is too short to waste it on things you don't care about.
I believe they believe they are helping people and the work is valuable at some level, if they are successful, yes. At the very least they aren't intrinsically opposed to the field.
What does it mean to Really Believe in B2B data integration?
my $green_line went up after tricking $big_corp into buying my SaaS
You should be passionate about delivering a viable competitor in that problem space, or why bother?
If you don't believe in the work, it's just a job. Most of us have a job, which really is just low hanging money. Belief can be motivation to start something, but this wasn't something he started, either.
Lesson learned
Meta: typo in title, s/sckeptic/sceptic/ I guess. Thanks.
Man, I haven't played KoL in forever, thanks for the reference and reminder about a truly hilarious and amazing game.
That's hilarious, tancks
Thanks ;)
I worry that the author isn't seeing the possible impact they can have by doing work that is driven by making money. Yes, the work itself might not lead to the changes in society they want but climbing that ladder can give them the money, power and influence to really make an impact.
Money is only a means to an end.
That said the amount of dishonest scammy behavior around the crypto world is terrible. You don't want to be part of that. You still have to make an honest living to make the world a better place.
> climbing that ladder can give them the money, power and influence to really make an impact.
Have you tried converting money into power and influence lately? The exchange rate is terrible.
The bay area has hundreds of thousands of STEM millionaires. Does the politics look like they're having a lot of impact?
Admittedly, engineers might not have any particular advantage when dealing with issues like drug addiction - but you'd expect things like water infrastructure, new homes and construction of high speed rail would be well in hand.
> The bay area has hundreds of thousands of STEM millionaires. Does the politics look like they're having a lot of impact?
No, I suspect most of these millionaires are not doing much to help their communities. This is my point, there are few people with power and influence that are working for good. It would be great if more people established themselves and then started working to better the world.
Unfortunately it's like politics. The people you want in power don't want the power. The people you want to have money and influence tend to avoid it.
The chances of making enough money to be able to make an impact are much slimmer than actually making a direct impact even if it means a less lucrative career path.
Why did your team choose to use the same name as a different DEX that seems to have gone silent back in 2021?
As an aside, wtf kind of date convention or formatting is 8/01/2023 and is it really August already? Is there some sort of an issue preventing people from wrapping their minds around ISO 8601?
YYYYMMDD makes the most sense, but DDMMYYYY is second best because it arranges the parts in a logical order, least to most significant. The only nonsensical ordering is MMDDYYYY.
> MMDDYYYY
People who use this notation (and its derivatives) are committing crimes against humanity.
It's the normal format for the majority of the world.
Yo, what can be more normal than a deliberately designed and unambiguous international standard? Since we're "hackers" here we can also look at the relevant RFC (and please read the initials as "request for compliance"):