Notes on Consumer Crypto | July 26, 2024

Welcome to my weekly consumer crypto-focused braindump of things I'm thinking about and have bumped into during my internet travels.

Here's what I found interesting this week...

We kicked off the show with Meltem and she was really good and you really just need to go listen to it so I’m saying no more and dropping the link.

The concept of a wedge is behind many of the debates that emerge in consumer crypto, like the completely un-useful umbrella conversation of whether to target mainstream vs crypto native users, but I find it’s still pretty misunderstood and definitely underused by founders.

There was a good thread this week sharing the results of some research NFX did on “killer wedges” that is very worth reading. 

First they define a wedge as a tightly defined world that your startup aims to completely dominate.  A good wedge targets a subset of your eventual larger market that ensures your learnings remain relevant as you grow and can act as a springboard towards it. 

Crypto twitter is not a good wedge. Running the same playbook targeting the same zero attention span shiny object addicted audience will continue to drive the same ephemeral usage that we continue to see. In my opinion most consumer crypto startups should be initially targeting the intersection of crypto comfortable people and the specific user persona that most urgently has the problem or desire they’re building for.

They then run through a bunch of categories of wedges with examples of companies that have used them well. For socially-ambitious consumer crypto projects the viral network wedge, targeting tight high-context spaces like college campuses, is probably the most broadly relevant, but it really depends on what you’re specifically building.

Being able to speak to your short term wedge and how it’ll ladder up into a huge market in a pitch is so important. We want to have confidence that there’s a quick path to having meaningful usage from the right people that are really primed to care that you’ll be able to incubate your product alongside.

This was a good related tweet this week that hammers the point home, and I’ve been hearing from a bunch of founders recently how ineffective Farcaster has been as a user acquisition channel for them. Obviously the tools there are great, but unless you’re building for crypto founders and operators the right people aren’t. 

One last thing I want to mention here is that I don’t really like the forced need to feel like you have to solve a problem when you’re building a startup in today’s world, I think that’s too narrowing. I think asking yourself and being able to speak to why people will care is the right framing, of which solving a problem they have is one path to. 

This week it was announced that Founders Fund led an $11 million round in Pudgy Penguins’ parent company. 

Have to just give Luca huge respect for how he’s been executing since acquiring Pudgy Penguins a few years ago. As Jon laid out he paid $2.5M to acquire the IP and today the NFTs have a $330M market cap, they’ve done $400M+ in sales, have partnerships with Walmert and Target, they have millions of IG and tiktok followers with hundreds of millions of views of their content, and a couple of months ago they acquired Frame to kickstart building out their own chain.

In a period where NFTs are dead and their prices are down across the board, Pudgies have been on a steady march upwards. I admittedly don’t know much about the community or narrative around the NFTs, but clearly the growing cultural presence that Luca has been able to drive is making these a desirable thing to collect and speculate on. If this becomes the next Sanrio and these are the original items at the core of everything they do it’s pretty easy to see why they’d be valuable.

And Abstract is their next big bet. They’re rightly recognizing that a dominant consumer crypto chain that is able to aggregate attention, liquidity, and community will be immensely important and valuable. I’m already hearing from founders that they’re considering launching there so the execution ability that Luca has shown is giving people some early trust that it may be a chain worth building on.

It’s really hard to see them competing with Base or Solana as the mass adoption consumer chain, but could definitely see them competing with Polygon as the place trad brands go to step into this world.

I’m seeing so many pitches and launches for products that are pump.fun but with some slight adaptation to the mechanics. Whether it’s some mechanics that try to focus attention on a few standout tickers, or putting fees in a pool that pumps a random ticker, or even just launching the exact same product on another chain.

People are significantly underestimating how strong the network effects of pump.fun are, and there’s just no chance that these things are enough to disrupt it. Even the large existing attention base and proprietary distribution Dexscreener has wasn’t enough to even put a dent into it with their moonshot product.

All the best meme creators, most valuable community members, and most degenerate liquidity are aggregated on pump.fun and create an experience that is really to compete with.

I admire the attempts. Pump is in an insanely valuable seat and we’re so early that they certainly haven’t won the category, but it’s going to take way more than some new mechanics to unseat them. 

I tweeted this week that I think the only two paths to doing this is vampire attacking them with a token, or defining an entirely new memecoin launch meta. I’m not actually sure the vampire attack would be enough, but I’d love someone to try so we can see what happens and maybe forces Pump’s hand to launch their own which I’d also love to see.

So I think the right path is running at defining a new meta. There’s some bonding curve fatigue and I think we’re close to the pico top of their usage so I’d explore other options there. I’d study what’s happening in $enjoy and $pacmoon and see if there’s a way to bake in social distribution games to improve community formation. I’d look at ways to give early speculators more confidence in the teams and community members behind launches. I’d look at verticalizing onto a specific interest category and building something unique for it. I’d look at something like this.

There’s a ton to play with here to try to make something that feels and sounds entirely new, so don’t just be “pump but with x”. Be something weird.

Two options to short memecoins emerged this week; Dumpy.fun and The Arena (pw: enterthearena) by MarginFi. 

I don’t have a ton to say about this other than good luck shorts. Imagine giving cult memecoin communities the motivation of onchain visible shorts to rally their liquidity around squeezing. Imagine alongside the buy bot in memecoin telegram channels there’s also a short bot. Sounds like a dream come true for them.

Dumpy dot fun is a great name though.

Also here’s my new favorite memecoin megabull account.

So in classic Zora fashion they invented a new unit of measurement for ETH this week. They called it Sparks (✧) and 1 ETH = ✧ 1,000,000.

Jacob has been on the idea that eth should do a stock split for a while to overcome the increasingly small numbers we have to deal with as the price appreciates, but this is better.

It accomplishes the small numbers issue while also introducing a new symbol that’s fun, more human, and more readable than ETH. ETH is actually a wildly lame currency symbol when you think about it.

Could definitely see this catching on in the ethereum creative ecosystems with the influence Zora has. Let’s see.

I know I keep talking about them but they’re hot and interesting. 

This was a good thread from Kyle circling around a similar question I’ve been asking about the long term regularity and repeated usage of Polymarket. The business is predicated on transaction volumes and ideally there’s a pretty predictable path to acquiring a customer and converting them into a high repeat user. 

Sports betting is the killer example of a market that never stops. Football flows into basketball and hockey which flows into baseball and golf, etc. Politics is a decent example right now with all the drama around US elections but that’s going to stop and largely be only a periodically interesting market to your average person for the next 4 years. 

I do think Polymarket as the “professional” prediction market platform that covers everything and businesses are increasingly using to hedge and manage risk will continue to do meaningful volumes. But the question of regularity is an important one to ask for new prediction market platforms potentially looking to build better and more experiences for specific verticals.

Kizzy is one I’ve been particularly interested in as a social media betting platform. There’s effectively infinite repeatability (even blows sports away) as there are endless influencers posting many times a day. The bigger question of course is whether they can make the game of betting on the performance of influencer posts as compelling as sports betting is for sports fans, but that’s a pretty good position to be in. New market with infinite repeatability built on top of real fandom.

I was also daydreaming this week about what an entirely prediction market run organization could look like. Many people pointed out that this is Futarchy and linked me to MetaDAO which provides the tooling to do this, but neither of those sound that fun. 

I want weird prediction market based consumer experiences where the fund doesn’t end when you buy or sell a position, but this is extended to the downstream impact that has on something I care about.

Have some poorly formed ideas but I’m out of time so will share them later. 

Alright I’m going to try to not talk about prediction markets next week.

Thanks for reading :)