Disclosure: The views and opinions expressed here are solely those of the author and do not represent the views and opinions of crypto.news editorial.
We should not underestimate the power of narrative in the blockchain space. So much so that it almost assumes a “chicken and the egg” dynamic, where project teams seek to capture the public’s imagination with the company’s vision to attract investment and adoption before the product is developed. It is most prevalent during bull market phases, which are characterized by an influx of investor funding, euphoria, and a significant rise in prices based on initial valuations.
When the narrative overwhelms the actual development of the product, it often leads to disillusionment and economic collapse, as evidenced by many blockchain projects during the cryptocurrency bull run of late 2021. Nobel Prize Winner Daniel KahnemanOne pioneer of behavioral economics warns that persuasive narratives create the illusion of inevitability, underscoring their psychological impact. Story skill can lead individuals to perceive events as almost predetermined.
The crucial question here is: Will the founders learn from the mistakes of their predecessors and avoid inflating their rhetoric in the next bull run? You certainly hope so, but it would be difficult for you to guess. For example, with the SEC recently approving 11 spot Bitcoin ETFs in conjunction with the next Bitcoin halving, which has historically been a precursor to market rallies, it can be difficult to avoid an excessive hype cycle. It is crucial for startups to keep their feet firmly on the ground.
Despite the current demand for narrative-driven strategies that we've seen in the popularity of memcoins and the resurgence of web3 verticals like SocialFi and LSDfi, the worrying gap between generating hype and delivering tangible products can lead to disruption. This misalignment can lead to products that fail to meet customer expectations, lack real value and, in the long run, lead to high churn rates and a poor reputation.
A good narrative is essential but it's not as important as having a great product and user experience with a nominal benefit. The attention span is short, and conversion costs are low in cryptocurrencies. Therefore, fundamentally sound products and continuous innovation by the team is what matters. Web3 and blockchain projects need to be recalibrated to meet timelines for deliverable products and reduce their grandiose narratives so that ordinary people can support them.
Blockchain and web3 startups can sometimes seem more preoccupied with hyper-focusing on potential wealth accumulation rather than product functionality and material benefit. It inadvertently appears to be a kind of “get-rich-quick” speculative venture.
Instead, startup leadership should aim to grow the right community that will support them, and demonstrate the value and usefulness of what their product will do. This approach can also foster an enthusiastic community.
In awe of the possibilities offered by the limitations of web3, many projects try to solve too many problems at once – which drains resources, introduces complexity, impacts user experience, and increases implementation challenges. To navigate this landscape effectively, a multi-pronged approach is necessary:
- Going back to basics and core principles while ensuring that the product is appropriately designed to serve the intended target audience and their specific needs. For example, in the case of liquid derivatives, Lido has built a rebasing mechanism so that stETH is always one ETH. Despite the complexity of implementation, the advantages of this solution have been well studied from a long-term user perspective.
- Focusing on a specific sector or even a champion product enables ventures to deliver maximum value, establish their brand identity and deep expertise, and ultimately differentiate themselves in a saturated market. This kind of focused approach becomes a powerful tool to stand out, thus attracting users who are hesitant about the specialized solutions offered.
- Prioritizing product development is consistent with the spirit of decentralization in cryptocurrencies and web3. The focus on user-centered solutions, transparency, community engagement, tangible value, and sustainable growth allows these technologies to achieve their true potential. This approach builds trust, positions projects for sustainable growth, ensures they make meaningful contributions to technological advancement while creating lasting societal impact, and moves beyond just hype.
- Strike while the iron is hot. When your project's “hot story” is in the spotlight, double down on your marketing and education efforts while making sure everyone knows you own a part of that story. You are more likely to receive expanded coverage through earned media and community engagement.
In their pursuit of mass adoption, companies must find a balance between crafting a compelling product narrative and value-based product prioritization. While a well-crafted narrative can generate initial interest, sustained success depends on the intrinsic value of the product. A value-based product not only meets users' immediate needs, but also builds trust, loyalty, and a strong user community, forming the foundation for sustainable growth.
What we know for sure is that blockchain technology's next bull market holds the promise of a future of sustainable growth and technology integration, paving the way for lasting societal impact.
