Cryptocurrency Company Edition: Start your entrepreneurship with "dumb" things that cannot be scaled

Original Title: Do Things That Don't Scale: Crypto Edition

Original Author: Qiao Wang, AllianceDAO

Translated by: Qianwen, ChainCatcher

Ten years ago, Paul Graham wrote an article titled "Do Things That Don't Scale." In my opinion, this is one of the most important articles that Y Combinator has introduced to the startup community.

The core idea is that startups in their early stages must: 1) manually recruit users; 2) manually provide extraordinary experiences for users. These are things that almost no large company would do, and thus are considered "dumb" things that cannot scale.

Since founding AllianceDAO three years ago, I have been pondering whether this advice applies to crypto startups. After three years and the development of nearly 200 startups, I feel I have enough data points to answer this question.

Before I provide an answer, this article will introduce some "non-scalable things" that AllianceDAO members have done to recruit and serve users.

Synthetix (ALL1)

Synthetix is an OG derivatives trading platform and has consistently been one of the top 100 protocols by FDV.

Founder Kain recently returned to give a talk as an ALL11 founder. He said something that surprised most people: "You must focus on short-term narratives."

When Synthetix was just starting out, during the first phase of DeFi summer in 2020, the popular terms in the DeFi community were "liquidity mining," "token staking," and "TVL." By 2023, these concepts have essentially lost their novelty. For example, liquidity mining is a net negative for startups, which has become a consensus.

But in 2020, Kain embraced these concepts— they did liquidity mining, token staking, and talked about TVL on Discord and Twitter, ultimately achieving success. They gathered some of the most influential people, like DegenSpartan, who became their most loyal supporters.

Now, I’m not saying that practices like liquidity mining are still effective today. But the advice to embrace short-term narratives remains valid, especially when you are building a crypto-native product. This is because the crypto-native community is still relatively small , and the social distance between everyone is quite close.

In addition, Kain is also one of the most active members in their own Discord, constantly interacting with the Synthetix community. Today, he still regularly publishes articles about Synthetix on his blog, clearly to attract more users.

0x/Matcha (ALL1)

0x is one of the earliest DEX protocols, and they also created Matcha, a leading DEX aggregator.

0x has always been ahead of its time. Years ago, when 0x first launched, professional market makers were skeptical about DeFi and DEX. At that time, 0x could hardly provide liquidity for them.

As a result, the 0x team built their own internal market-making infrastructure (which has since spun off and is now called Periscope Trading). This idea had two main purposes: first, to support their own liquidity. This helped solve the cold start problem, where professional market makers were only interested in exchanges that already had sufficient liquidity. Second, to experience the pain points of providing liquidity firsthand alongside market makers. This helped improve the user experience for first-time users of the application. Ultimately, as more organic liquidity arrived, they gradually replaced the market maker infrastructure.

Ribbon/Aevo (ALL2)

Ribbon is the first and most active structured product market. They are currently building the leading options protocol, Aevo.

Julian (one of the founders of Robbion) also returned to give a talk at ALL10. Like all other successful DeFi protocols, he manually reached out to the first batch of users. Interestingly, he noticed that there were repeated 20 people in every options protocol's Discord, so he messaged each of them to bring them into the Aevo community, as they were already interested ****. The DeFi derivatives community is still quite niche, making it possible to talk to all of them.

But he did something even more remarkable. Due to the overall low liquidity of on-chain options, some users of Aevo could not find sufficient entry or exit liquidity. Julian would manually seek liquidity for them and post bids/asks on their order book.

Mux (ALL3)

Mux is one of the top perpetual swap trading protocols on Arbitrum.

Mux launched on Twitter in 2020, initially named Mcdex. Subsequently, DeFi Pulse and Bankless stumbled upon Mcdex, liked the product, and reached out to the relevant contacts, Jean and Jie. They received calls from DeFi Pulse and Bankless, negotiating an agreement for DeFi Pulse and Bankless to write articles about Mcdex in exchange for referral fees. The product then took off.

But more importantly, Jie is a workhorse, with a work pattern typical of Chinese startups known as "996," which I’ve heard has now evolved into "997." I "lurked" in their Telegram group and saw him responding to users at 11 PM local time. Keep in mind, he is a technical founder. I rarely see technical founders do this.

Dodo (ALL3)

Dodo is a leading DEX with a market share of 5%.

Dai Dai (co-founder of Dodo) worked at DDEX in 2018, another OG DeFi protocol, two years before founding Dodo. In her spare time, she started a blog called "DeFi Labs," where she created popular science content about DeFi.

Later, she realized she wanted to personally understand her readers. So, she pulled them into a WeChat group called "DeFi the World." She also regularly organized offline meetups with the members. This became the first and largest DeFi community in China. Of course, this was during the last bear market, and DeFi had not yet really taken off, so "largest" referred to about 100 people.

In 2020, when she founded Dodo, these 100 people became Dodo's first 100 users.

Pendle (ALL4)

Pendle is the leading trading protocol for yield.

I clearly remember TN (one of the founders of Pendle) inviting me to speak at their internal all-hands meeting to boost team morale. This was not particularly suitable for Pendle or me, but at the moment I received the invitation, I thought to myself, "TN is interesting."

But he did much more than that. Early on, he reached out to potential LPs (liquidity providers) and scheduled one-on-one meetings to pitch the yield opportunities available on Pendle. Before joining Pendle, he had no sales experience, but after enough attempts, his pitching skills improved, and he began to achieve conversion rates. In fact, most founders do not realize they can become excellent salespeople; sales is a numbers game. He also occasionally shared yield trading ideas with potential LPs. As they became more familiar with the team and the protocol, they turned into real users.

Similar to Synthetix, he also identified influencers he wanted to collaborate with and reached out to them via Twitter DMs or email. Today, most decent founders would do this, but TN did more and did his homework. For example, if he wanted to collaborate with a particular influencer, he would research their interests and habits and write materials he thought the influencer could publicly use. He did this for a while until he began to be mentioned more frequently on social media (like being @'d by other big names).

Charmverse (ALL7)

Charmverse is a leading web3 community operation platform (the competition was fierce two years ago, but most competitors have since died in the bear market).

The first version of Charmverse was a Notion with tokens as a threshold. However, building Notion was clearly very difficult. So, founders Alex and Matt hacked Notion's internal API to provide token-gated functionality for managing user identities with Notion. (At that time, Notion had not yet released their public API, but it has since been released.) This is how they acquired their first batch of DAO clients.

Of course, Alex also attended many cryptocurrency conferences, building relationships with key decision-makers in DAOs, many of whom wrote DAO proposals to adopt Charmverse, which were ultimately passed by DAO votes.

To convert existing Notion users to Charmverse, Alex did an extremely labor-intensive task of manually transferring their Notion content to Charmverse. Then, he trained DAO members, teaching them how to use Charmverse.

Hubble (ALL7)

The Hubble team developed Kamino, the top market for yield vaults on Solana.

In November 2022, when FTX collapsed, everyone (except me) told Marius and Thomas to abandon Solana and switch to Ethereum L2. Every Solana builder had such thoughts.

I remember discussing this issue with them for months. In the end, they concluded to continue using Solana because:

• Solana also has soul, and there are still many developers crazy about it.
• The technology is actually legitimate. It is fast and cheap. The downtime issues at that time were solvable engineering problems, which ultimately did get resolved.
• Anatoly is the most inspiring L1/L2 leader after Vitalik.

At the same time, they were unclear about how to compete with existing counterparts on Ethereum if they were to migrate.

In the end, they made a very difficult decision, but in hindsight, it was also a very correct decision to stick with a market they understood well, which was smaller but growing (Solana), rather than a larger market (Ethereum) where they had no inherent advantages.

Synquote (ALL7)

Synquote is the leading decentralized options trading protocol by trading volume.

After Synquote launched, founder Ahmed ensured he and the team were responsive to user requests around the clock. One morning, a whale on-chain wanted to execute a large block trade. The team built a temporary OTC product within hours to find liquidity for them and arranged a record trade of over $3 million that afternoon.

Providing around-the-clock service to users brought unexpected benefits. These users witnessed the product rapidly improve with their participation , while also getting to know the team, thus becoming advocates for the product.

Tensor (ALL8)

Tensor is the leading NFT marketplace on Solana.

Founders Ilja and Richard used an on-chain tracking website to identify all Solana NFT whales, found their Twitter accounts, and DM'd everyone, having calls with a few who replied.

But that wasn't enough. At that time, they were in a tough battle with the NFT marketplace Magic Eden, which had a much larger volume. So, they formed alliances with other NFT marketplaces. Notably, they struck a deal with Hadeswap, which at the time had ten times the volume of Tensor, under which Tensor would build a brand new frontend for Hadeswap in exchange for a backlink to the Tensor website. This significantly increased Tensor's volume.

Of course, Tensor made many other great decisions in its short history, but the partnership with Hadeswap was a key moment.

Liquifi (ALL8)

Liquifi is the number one token attribution solution for crypto protocols. They can be understood as the Carta of the crypto world (for Web2 tech companies).

Working with founders Robin and Oliver ****was one of my most enjoyable experiences. Every time we met, they were very well prepared. They would give me a list of other AllianceDAO startups and then ask me one by one if I thought they would be suitable clients before reaching out to them. *By the way, many AllianceDAO startups got their first batch of clients through our community.*

They would also comb through all public fundraising data from Twitter, Messari, and Crunchbase to look for potential clients. They would ask every investor to introduce key decision-makers. They even randomly used Discords to request introductions from everyone.

Robin described Liquifi's customer support style as "unhealthily high-touch." For example, the team would check the lock-up schedule spreadsheets sent by clients to help them have a better onboarding experience. His team found numerous errors, and once even pointed out that a user was underpaid by two years' worth of tokens. Handling token locks is a very sensitive topic, and their diligence helped clients feel at ease working with Liquifi.

Clique (ALL8)

Clique is the largest issuer of off-chain credentials.

During the alliance program, one of the founders, Jaden, interviewed over 200 protocols to validate the use cases for off-chain credentials. They discovered the first powerful use case for the Lens protocol, which was to combat witch attacks.

Jaden reached out to the Lens team. At that time, Jaden had just moved to New York. The Lens team was also in New York. After three weeks of back and forth, the Lens team finally agreed to a meeting. However, on the day of the meeting, the Lens team said they had flown away to attend ETHSF. Without a ticket, Jaden flew to San Francisco that day, waiting outside the venue until the event ended to finally meet the person in charge of partnerships at Lens. In the end, he successfully pitched and got Lens to sign a deal.

Then, Jaden and Kevin built a bunch of temporary features to satisfy Lens. Jaden half-jokingly told me, "Clique is the most non-scalable product in crypto." But ultimately, Optimism and other L2s noticed that Lens was using Clique, proactively reached out to Clique, and became Clique's clients. Those things that cannot scale immediately may achieve scaling through serendipity.

Yakoa (ALL8)

Yakoa protects some well-known Web2 and Web3 brands from on-chain intellectual property theft.

One of the founders, Graham's B2B sales strategy is " being on-site ."

During negotiations with a client, Graham and Andrew flew across the country twice. They worked in the client's office for a day, understanding the dynamics and situation of the entire team. They sat with multiple levels of leadership, which would have been nearly impossible to gain support from these leaders just through a conference call. They also dined with the person responsible for onboarding. Throughout this process, they were able to uncover multiple additional pain points and ultimately cross-sell.

Stride (ALL9)

Stride is the leading liquid staking protocol on Cosmos.

When Stride first launched, founders Aidan, Vishal, and Riley were on call around the clock until they confirmed the protocol was secure. In the first two weeks, one of the three would wake up at 3 AM every day to ensure the regular IBC packets were correctly landing on Cosmos and that the protocol's accounts were consistent.

While most founders are active in their own Discord and Telegram, Stride's employees diligently monitored Cosmos members frequently using other major Discord servers (like Osmosis and Mars servers) and answered all questions. This is because all users in the Cosmos ecosystem can use Stride to liquid stake their native tokens. In the end, they even set up a software cron to scrape all these Discord servers and transfer relevant information into their own Slack so they could answer these questions without having to actively monitor them.

Primodium (ALL9)

Primodium is the fully on-chain game with the highest DAU.

Founders Emerson and Morris have a gaming background (but no relation to cryptocurrency). With the help of Will Robinson, they spent a year building a solid network in the on-chain gaming community. Similar to Ribbon and the on-chain derivatives community, the on-chain gaming community is also a niche community where most of the " important " members can be contacted.

So, they simply posted the game on Twitter and informed every user in their network. Before the game began to spread organically on social media, it had already circulated privately among user groups. There was even an article in the Wall Street Journal mentioning the game.

The takeaway for us is that when the community is small, you don’t need to do any eye-catching creative work to get started. Spend some energy building close relationships. And these relationships will pay off on launch day.

Sleepagotchi (ALL9)

Sleepagotchi is a gamified sleep tracker and has the highest retention rates I've seen for cryptocurrency consumer applications within 30 and 90 days.

One of the founders, Anton discovered that the Axie Infinity community was a potential early user for their application. At that time, " play2earn " was all the rage, while Sleepagotchi claimed to be " sleep2earn ." By the way, this goes back to Kain's point about " focusing on short-term narratives ."

In summary, Anton offered users on Twitter from Axie Infinity the chance to convert their 2D characters into 3D representations for free. Twitter users could share their favorite 2D Axie characters and then get 3D renditions. This caught the attention of Axie founder JiHo, who retweeted their work. Later, JiHo also made an angel investment in Sleepagotchi.

Anton did something similar in the BAYC community. He knew that singer Eminem owned Bored Ape NFTs, so he decided to create a 3D version of his NFT, making this 3D character sing in front of the Sleepagotchi audience. Fortunately, both singers Eminem and Snoop Dogg released their songs during NFT NYC in June 2022, and Anton also released a 3D video. This tweet quickly went viral, garnering around 30,000 views within hours.

Importantly, he attracted potential users to their Discord rather than the mobile application , meaning their primary focus was on the community. This is because jumping to Discord has less friction than installing an app. Anton found that many people would jokingly enter Discord just to check out this trendy-sounding "sleep2earn" project. But for every question, serious or not, his team would respond with two or three paragraphs. Those who were initially curious about the idea realized that the team behind it was serious, and ultimately downloaded the application.

Refract (ALL10)

Refract is the number one consumer-facing "crypto antivirus."

When Refract first launched, an NFT platform called Premint was hacked, and Nish DM'd everyone on Twitter who claimed they had been hacked. This was not some annoying pitch like "you could have used Refract," but rather "let's understand what happened."

Then, whenever a major cryptocurrency hacking incident occurred, founder Nish would write a post-mortem on Twitter. I’ve seen some of these tweets, and their engagement is almost higher than anything I’ve seen in the cryptocurrency space, as people become emotional when they lose funds. Once,**** *Nish* *and* *Jastin* *showed me these metrics, revealing a striking correlation between spikes in new users and major hacking incidents.*

Through existing users, they manually DM'd over 1,000 Twitter followers, asking PMF (Product-Market Fit) related questions, such as "How disappointed would you be if Pocket Universe disappeared?" This data point strongly indicated that they indeed had PMF.

Caldera (ALL10)

Caldera is a leading Rollup as a Service (RaaS) provider.

To sign on the initial few B2B clients, the most important thing Matt did was to build small temporary features for them. Each feature took 2 to 5 engineering days. One example was supporting secp256r1 Curve Support (EIP7212). At that time, many founders thought such moves would not be impactful.

But the result was that this work brought a lot of goodwill. Clients were very pleased with Caldera's willingness to provide such high-touch and customized support, and they naturally told their friends, bringing in more deal flow. Keep in mind that in the cryptocurrency B2B space, clients often know each other.

Interestingly, Clique's Jaden is a friend of Matt's. Over the past two years, the most common thing Jaden has said to Matt is, "Are you sure this is scalable?"

Guardrail (ALL10)

Guardrail is a leading protocol security detection and investigation tool.

Their first client happened to be another AllianceDAO alumnus, Pendle. Sam joined their Discord as a user, providing product feedback, and established contact with their developer relations lead, who then connected him with their internal tools lead, who ultimately became a core user of Guardrail. For B2B clients, it often takes time and several jumps to reach internal supporters and decision-makers.

Additionally, the client (Pendle) was located in Singapore, so most of the back-and-forth work was done within a 12-hour time difference, meaning Sam completed all customer support work between midnight and 2 AM local time. After the product demo, the client raised some unique use cases, such as automatic refresh, so they could have Guardrail open on TV around the clock. Sam and James completed this work for them within the same week.

Kravata (ALL11)

Kravata is the leading fiat on/off ramp service provider in Latin America, with clients including the largest exchanges in the region.

Founder Felipe understood that behind tech companies are people—people enjoy entertainment and like to talk to others. I find this particularly true in countries with weaker rule of law, where personal relationships are more important.

To win his first batch of clients, he arranged meetings with them, having coffee and dessert. During the first coffee meeting, he always took the initiative to pay, and it was out of his own pocket, not the company's. Like the people at Yakoa, he sometimes flew to meet clients in their locations. He would discuss common regulatory issues that everyone could understand. Sometimes, common friends would come up in conversation, allowing him to build relationships around homogeneity (people tend to connect with those who are similar to them). He would offer business advice and useful introductions without expecting anything in return. If you’ve met Felipe, you would agree that he is very humble and straightforward, which also helps. Importantly, before direct sales, he would do all these things to make clients feel comfortable.

Summary: Do Non-Scalable Things

After reading these stories, I hope you can draw a conclusion similar to mine. In the cryptocurrency space, the advice to "do things that don’t scale" generally still applies. Whether users are consumers or enterprises, and whether they hold tokens or not, some of the most successful startups in the cryptocurrency space have done extremely labor-intensive work to acquire and serve their users.

But one thing to note. Cryptocurrency does provide a native scalable way to acquire early users, which is token incentives. Token incentives may be one of the greatest potentials of cryptocurrency. Other major potentials include asset ownership (Bitcoin), data ownership (crypto social), permissionless programmability (Ethereum), fundraising (ICO), permissionless financial services (DeFi), culture (NFT), and everything tokenized (RWA).

Since the advent of Bitcoin, the token incentive mechanism has changed significantly. From instant rewards to retroactive airdrops to the current point-not-token systems. Based on experience, these are all very powerful, scalable user acquisition strategies. Therefore, they are so powerful that they deserve our in-depth study.

However, symbolic incentives are not a panacea. They cannot replace those non-scalable things. They are complementary, not substitutes. Many of the AllianceDAO members mentioned above launched token incentive mechanisms while engaging in labor-intensive manual work.

Even for crypto protocols where the token's role is as significant as the product itself, such as DePin, stablecoins, some games (like StepN (ALL7)), and L1s, they initially started through friends, investors, and random crowds on Twitter.

In 2008, Satoshi exchanged numerous emails about Bitcoin with network punk friends, including Hal Finney and Wei Dai, who then promoted it to a batch of early Bitcoin users on bitcointalk.org. The Ethereum founding team campaigned around the world in 2014, pitching to a handful of early developers, including the famous Devcon 0.