Of late, the crypto scene in Singapore has been rather quiet — quite the difference from what Monetary Authority of Singapore (MAS)’ Managing Director Ravi Menon called a “bloodbath” several months ago. Yet, the industry is still alive, albeit keeping itself low profile for the time being.
Certainly, many are still keeping a close eye on the industry, and waiting to see what new developments may arise in the cryptocurrency space.
At the Tech in Asia Conference 2022 held yesterday (September 21), executives of successful crypto firms were invited to share insights on the future of the cryptocurrency space, and in particular, how to build enduring companies in the Web3 space.
Navigating the bear and the bull markets
One thing that all the panellists agreed on was that navigating the boom and bust cycles that cryptocurrencies are prone to is key to ensuring that the company is able to stay afloat in the long run.
As a matter of fact, Alex Svanevik, CEO and founder of Nansen, revealed that part of how Nansen manages to stay afloat is that they manage their treasury to ensure that they do not have a crisis when the bear market comes around.
The thinking is that we want to hedge our own position. We hired a trader with a different mindset, so that he could create strategies and manage our treasury in a way that hedges the rest of the business. We ensure that we are able to think counter-cyclically in the way we get our revenue, and thats how we ensure that our treasury can last for a long time.
– Alex Svanevik, CEO and founder of Nansen
Svanevik credits this thinking to traditional economics, where counter-cyclical fiscal policy is applied by governments to save up during the good times, and spent to stimulate the economy during a downturn.
To illustrate his point, Svanevik cited the Norwegian oil fund, where profits from oil extraction and exports are invested in explicitly non-Norwegian assets and non-oil assets to ensure that the company has a diversified portfolio.
As such, the bear market that has hit crypto companies such as Three Arrows Capital and Terraform Labs is not as big a concern as it could be.
Leon Foong, head of the Asia Pacific market at Binance, agrees. He suggests that businesses at the end of the day are run by people, and that people are susceptible to market psychology. It is therefore important to be careful before going on a hiring spree during bull markets.
Instead, Foong advises companies that bear markets are a good time to hire the right talents for the company, with funds that have been built up during the bull markets.
In contrast, it may be better to focus on raising funds and taking care of the company’s cash runway during a bull market.
The future is practical, not ideological
The panellists also pointed out that the investment landscape for cryptocurrency companies is changing, and that investors are looking for better companies following the cryptocurrency market crash.
In particular, Akshay BD, Head of International Expansion at Solana, noted that “teams in cryptocurrency startups are now being held to a higher standard. Investors have gotten much more sober over the past few months, and now there is a greater focus on deliverables.”
As such, Akshay advises entrepreneurs that while building their teams, they should focus more on being practical, rather than being ideological in their products, especially given the ethos of the cryptocurrency community about decentralisation.
When teams look at what they are building through a product lens rather than an ideological lens, they will come to the conclusion that they want to have the minimum necessary data on chain that helps to achieve interoperability and composability.
– Akshay BD, Head of International Expansion, Solana
Therefore, Akshay suggests that for crypto companies to be enduring, they need to provide consumers with a product that they can actually use — applications for cryptocurrency and the likes, since “meaningful adoption only happens when we get users to use these applications.”
The Web2 world is still relevant
But how exactly can companies achieve such scale? For the panellists, the answer is simple — to position applications and products as a bridge between the Web2 and Web3 world.
While companies can rely on ideology to get consumers, this is not likely to be a long-term solution, according to the panellists. Instead, they suggest that entrepreneurs should work with Web2 companies to create something new.
In fact, Foong, suggests that such a partnership could be beneficial for all parties involved. Web2 companies can provide the user base for new Web3 applications, while Web3 companies can build these applications for consumers, to be used through Web2 products.
There have been a lot of projects that try to launch a token for the sake of launching a token, but during the bear market, these projects tend to fizzle out quickly. How many users would actually use their products if the tokens were taken away?
But for community-fi projects, if they can layer the right tokenomics, they present a lot of interesting opportunities. Community-fi projects really tap into Web2 companies with a real user base, and that gives us a real use case for these projects.
– Leon Foong, Head of APAC market, Binance
In addition, Foong also singled out NFTs as one of the new technologies within the Web3 world that could solve real-world problems. Referring to soulbound tokens, Foong argued that tokens can solve real world issues for businesses who need to fulfil know-your-customer obligations, or for resolving intellectual property disputes.
This encouragement for the Web3 world to cooperate with the Web2 world was also shared by Svanevik, who pointed out that “on-chain NFTs can be placeholders for real world NFTs”, and that on-chain NFTs could eventually be used to represent off-chain assets, such as property or infrastructure, and that other use cases such as providing loans could be made much easier through the use of smart contracts.
The Web3 world has seen quite the rise and fall over the past few years, and the industry has also earned itself quite the reputation. Yet, this industry remains at the forefront of technological progress.
While only time will tell if the industry can reinvent itself and make itself useful to the world, these panellists have offered us a glimpse into what goes into making their companies success stories rather than embarrassing failures.
And a surprising amount of their success is explained not by the abilities of the Web3 world, but rather, what they adapt from the Web2 world and other non-crypto institutions. Best practices, it seems, exist for a reason.
Featured Image Credit: Screenshot of TIA Conference 2022