Notes on Consumer Crypto | Nov 8, 2024

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

Here's what I found worth talking about this week...

Degen, the farcaster token and community, has had a wild week. It started with the founder sharing a bunch of challenges they’ve been facing with their L3 service provider that has caused $160k in lost user funds. The Solana community then used this opportunity to try to court Degen and spread the gospel of their monolithic approach. And then finally Bunny deployed a $DEGEN token on pump fun in an attempt to migrate the community over. 

The obvious conclusion in hindsight is that $DEGEN should have never launched an L3. But that’s easy to say with what we know now, and at the time it was a very worthy experiment to go run. 

Everyone in crypto is on this journey of finding new structures, both technological and cultural, for aligning social capital around a belief in a future, and capitalizing it through the issuance and trading of tokens so real progress can be made towards said future. Formalizing the network through a chain is an interesting line of exploration in doing that.

But they clearly ran at it too fast, and the speculative attention created actually diluted the value of the community to the point where nobody even $degen was or what it stood for. 

They should have spent more time making sense of their opportunity, building community among their core believers, building products that the community actually wanted to use, and backing into the chain opportunity if it eventually presented itself.

Also the narratives for the Solana $degen token is kinda strong lol. It has the $100M+ market cap of Degen base as a target, taps into the Solana vs Ethereum battle, and has the no VCs / insiders narrative that is core to the memecoin movement. I doubt the trenches actually care enough for it to go anywhere, but it could be funny to watch if it gets some momentum. 

Anyways, launching and managing your own chain is hard and expensive regardless of what service providers want to tell you, and is an obviously unhelpful distraction until you have products with real PMF doing meaningful transaction volumes. Go build something people actually be a part of first.

We’re a year into the memecoin craze and it just continues to accelerate. October was a record month for Pump.fun, Murad coins continue ripping, AI agents have chaotically entered the arena, and now two of the most memetic people on earth are leading America. Also as of yesterday Base finally has a good memecoin launchpad, so we’re going to find out if the trenches can actually exist there. 

It’s easy to think back to last cycle, compare this to what was happening with NFTs, and call for its inevitable demise, but I don't think that’s going to happen. I also don’t buy the idea that people are going to rotate back to DeFi tokens now that the regulatory environment has improved. Memecoins are different, and I want to tease out why.

The power of memecoins is in their ability to serve so many different desires. If you want to degenerately gamble you can hit pump fun and hope for a 1000x. If you want to invest you can form a real thesis around why a meme is going to grow in attention and holders over time. If you want to have social experiences you can jump in a group chat with your friends, or 5,000 random internet strangers, and share alpha and trade together. If you want to exercise your creativity you can create memes for a community you’re in, or launch your own tokens.

They’re the foundation for chaotic new internet experiences for a broad range of archetypes. They combine gambling, investing, socializing, creating, and entertainment into a single and easily accessible experience with a non-zero possibility of making life changing money. That’s fucking crazy.

The global gambling market is projected to reach $1 trillion by 2030. Over $1 trillion dollars in volume a year is traded on Robinhood. It’s pretty reasonable to think that memecoins could meaningfully eat into those markets as well as unlock entire new groups of market participants that don’t care about sports or Microsoft but love internet culture.

NFTs had pieces of this, but they fell down because they often weren’t just cultural assets, they were promises for a future that was never going to manifest. Metaverses, production studios, games, user-owned IP, etc. They had too many external dependencies. And when they were just cultural assets, the limited supply, high barrier to entry, and illiquid markets made them not very good ones. 

The power of the simplicity of a liquid single ticker schelling point for an idea, meme, belief system shouldn’t be overlooked. 

I wrote back in February about the huge opportunity in building the defining contexts for people to create, trade, and socialize around memecoins. Pump fun, moonshot, and many others have since come on to the scene and dramatically improved the experiences around them, but as I see it this opportunity is still wide open.

Who’s going to be the one that turns this from a market with tens of thousands of participants to millions? Who’s going to do the hard work of telling the rest of the world the insane things that are possible here in accessible and easy to understand ways?

Someone is going to…

Matti from Zee Prime wrote a good article this week about what they look for in an investment. He outlined their core focus being on finding founders that are building from a deeper purpose and a genuine curiosity with a problem space, not ones just chasing hot narratives and fast wealth creation. It resonated, as their writing usually does, and made me want to re-outline what we look for.

Being an early stage consumer investor presents a bunch of challenges. Consumer products are notoriously difficult as you’re dealing with fickle consumer habits and preferences, have to figure out how to bootstrap network effects to create the right initial conditions, are competing in the global attention arena, and need virality to combat high acquisition costs and low user lifetime value.

Many of the most successful consumer products of the past decade took many years and pivots before they figured out the right way to package their ideas, let mainstream culture catch up to them, and see real traction. 

We hold this understanding really close to heart when making investment decisions. We look for founders that have the character and relentless resourcefulness to battle through this uncertainty, have a non-consensus and right insight into where the world is going, and are genuinely obsessed with the problem space to the point that they can’t even consider working on anything else.

That’s the starting point. From there we also make sure it’s an idea that we’re excited to lean in hard on for a long period of time, and one that we’re proud to put our brand behind. 

Ideas that are obvious and there are existing competitors for are a red flag. Ideas that are on already hot narratives are a red flag. Ideas that aren’t building on top of new technological or cultural inflections are a red flag. These can obviously still work, but they’re much less likely to be the breakout products that change the world.

I also shared a bit more here about the properties of consumer crypto products that excite me the most right now, but our favorite thing is when we talk to a founder that shares a world view we hadn’t even considered before so this isn’t gospel by any means. 

Everyone on crypto twitter knows about the Polymarket whale that bet $18M on trump winning the election, but some information has come out since about where his conviction came from. He had commissioned pollsters to run his own surveys using the “neighbor method” that revealed “mind blowing” support for Trump. The “neighbor method” suggests that people are more likely to reveal their true preferences when asked who they think their neighbors are voting for versus being asked about who they themselves are voting for. 

This is such a cool example of why permissionless betting markets are able to effectively reveal truth and high quality signals that the politically-oriented and lazy mainstream media isn’t incentivized to uncover.

You know the talk track but we’re increasingly in a world where the mainstream media is untrustworthy as a source of truth and having markets as aggregated expressions of the public’s expectations is incredibly valuable. Even if it is from people with inside knowledge wanting to capitalize on their information edge.

Also France didn’t like this and is preparing to ban Polymarket smdh.