Does Crypto have PMF?

Do not index

Canonical URL

https://tegro.substack.com/p/does-crypto-have-pmf

A quick warning before you dive in. The first portion of this newsletter might read very negative, but I promise that it ends on a better note.

There’s even a fun puzzle with a POAP to claim :)

Thanks for reading Web3 Gaming Weekly by Tegro! Subscribe for free to receive new posts and support my work.

From the Editor

GM.

If you’ve hung out enough on Twitter, you’ll have heard of the holy words professed by founders, VCs, and just about anybody who knows something about building a successful company.

PMF. Product Market Fit.

There is no certain way to identify if your product has PMF, although most folks do say that if you’ve have it, you’ll know it. Cryptic as it sounds, it’s often seen in many products that PMF is when people flock to it in droves and the builders are just about managing to keep up. Think of it like the crowds at a popular retailer on Black Friday.

Crypto, Web3, and PMF

Over the last few months, cryptocurrencies have crashed and companies in the space have become insolvent. That we’re going through a potentially bleak period is evidenced by global indices across asset classes. So while crypto isn’t the only casualty, it is by far the one that’s most hurt. The detractors whose voices were drowned by the GMs, WAGMIs, LFGs, and other professions of faith in the industry, are now being heard with fervency.

The question arises, does crypto have PMF? Let’s dig in a little.

The market cap of cryptocurrencies peaked at a mind-boggling figure of $3.08 trillion on Nov 9, 2021, but stands at $0.97 trillion as of today - a drop of 68.5%. Well, that’s how the markets work. The dot-com bubble saw the Nasdaq Index plummet 75% from it’s high in March 2000. The crypto crash doesn’t really put a dent to the lack of PMF claim.

In fact, global crypto owners have grown rapidly. As of Dec 2021, there are close to 300M users. That’s a sizeable amount comparable to the population of the USA. These are definitely strong signals indicating that crypto has attained PMF.

But…

Yep, there’s a but. There always is, isn’t there?

But what’s the use case? The way to approach this is to run a simple thought experiment. If blockchain and crypto were to not exist today, would the world fundamentally change? The assumption is that investor’s money hadn’t yet been invested.

Think about this long and hard because it’s an important question to ask, whether you’re a builder, investor, or just a passenger on this magic bus.

Another way to gauge PMF is if a product were to cease to exist, would its users be very disappointed. Rahul Vohra of Superhuman writes an extensive piece about finding PMF on First Round Review.

How many people would be very disappointed that they couldn’t use crypto for purposes other than speculating on asset price? I’ll leave that to you to figure out, but my personal opinion is that it’s less than 10%. And that’s me being generous, mind you.

It’s quite clear that Crypto doesn’t have PMF.

Or does it?

Crypto has PMF. A very different kind.

For crypto, we need a variant unfurling of the PMF abbreviation.

PMF = Ponzi Maximization Function

And with this, I’ve opened the floodgates of hell. The crypto bros are going to come at me with the full force of their loud criticisms. But the proverb ‘empty vessels make a lot of noise’ holds good.

I’m not the only one that’s saying this. There are many others with conclusive arguments. I’m merely coining a new definition.

The simplest way to explain it is this tweet from Brian Chesky, Founder of Airbnb. You’ll need to click through to read the whole context but it’s a subtle (though not so subtle) jab at how crypto has grown.

Brian Chesky @bchesky@levie That’s a great idea. Let’s financially incentive early adopters so we never know when we get to product-market fit. The current way is just too easy
1:11 AM ∙ Jan 3, 2022353Likes7Retweets

Crypto has relied on financial incentivization to give the illusion of product market fit. One could say the same of many a startup that burns VC money in discounts and subsidies, but they eventually turn profitable, get absorbed by a bigger player, or die a gruesome death.

But crypto is different. It’s MLM at its finest. Writing as a guest on Noah Smith’s newsletter, Lars Doucet likened Web3 to Amway.

NoahpinionIs Web3 culture similar to Amway culture?I’ve generally been more bullish on web3 than on Bitcoin. Bitcoin’s core narrative of replacing fiat money is obviously false, and it has big energy issues as well; web3, in contrast, is just blockchain technology as a whole, so it seems reasonably possible that people will find something useful to do with it. But I do see some blind a…Read more2 years ago · 125 likes · 54 comments · Noah Smith

I’m not yet done with the punching down.

Most of Web3 games are a reflection of the general crypto mindset - financially incentivize user growth with the core participants being speculators looking to maximize returns, not players looking for a fun game.

Why do you think all the ‘top’ crypto games are bleeding users, and their token prices crashing? Because people aren’t there to have fun. They are there for ‘earning’. The capital rich are looking to grow their money, and the time rich are there to earn some. But where’s the money coming from? It’s nothing but speculation capital. I wrote about this in one of our previous newsletter editions.

But….

Yep, there’s another but. A round juicy one. Ok, maybe not juicy.

Games First. Web3 Second.

Most of the games out there are built by folks from crypto. Unless you truly understand a game, one can’t appreciate how hard it is to build even a simple one. It’s not just about the graphics, or storytelling, or any of the things that you see. It’s mostly about the things you can’t.

Under the hood of a good game is design based on behavioural psychology and behavioural economics. It accounts for the human need to pursue activities that aren’t just about financial benefit; humans also need entertainment. Games are one part of it.

If you don’t build a game that’s fun and has enough people playing it just for the entertainment factor, you cannot layer Web3 element on top of it.

That’s it. That’s the fundamental truth.

Assuming one has a game that is fun, then one needs to assess if there are assets in the game that are of value enough for users to care about ownership of it. If your game ticks that box, then one must assess if one can create an economic layer that enhances the game experience.

As strong a critic of Web3 I may seem, I’m rather interested in Web3 gaming as a legitimate use case that is in an infancy stage. At Tegro, we’re well aware of the need to build Web3 games that are sustainable. A majority of the founders and founding team bring together deep experience in building games, having individually shipped 100+ games over the last 10 years. Complementing this is a founder who has built India’s largest crypto exchange, and an advisor to a number of crypto games.

We don’t have all the solutions, but we’re well on our way to building them through our economic framework for Web3 games - Tegronomics - and our upcoming marketplace for Web3 game assets which focuses on fungible tokens instead of NFTs.

From Tegro HQ

Walkthroughs of Web3 Games, Streamed Live

Every Wednesday we pick a game and play it live. We do a quick teardown on how it works, setting you up for a go at it. This week, we played Blankos. Here’s the recording in case you missed it.

Twitter Spaces with Pegaxy Cofounder & CMO, Corey Wilton

Pegaxy is one of the top Web3 games, allowing players to collect, breed, and race futuristic mechanical horses. We got chatting with Corey Wilton about the finer details of Pegaxy’s game loop, traction, impact of the bear market, and Web3 gaming in general.

It was pretty interesting to hear candid responses to some of the tough questions we posed. More surprising was Corey’s questioning of the use case of blockchain in gaming, something that stayed with me and prompted today’s editorial.

I’d highly recommend giving it a listen.

Tegro is hiring engineers! (🐯,🐯) @TegroFiThe recording of the #TwitterSpaces is now available. Incase you missed it, give it a listen 👇 https://t.co/yknWPMvbey
11:50 AM ∙ Jul 8, 2022

Au Revoir

That’s it for this week. There’s not been too much happening on the games front so we decided to skip the news.

However, before you go, we’ve got something new added to our newsletter to make things more fun.

Every week, we’ll throw in a puzzle. You’re going to have to solve it, and where needed, give an explanation of how you arrived at the answer.

To participate, just reply back to this email with your answer. If you’re reading this on the web, just send an email to social [at] tegro.com and make sure you’re a subscriber.

First 3 correct answers get a shoutout in next week’s newsletter

All correct answers get an exclusive POAP that’ll unlock special privileges down the line

Find the area of the square

Found this one online. The answer is available out there but let’s see if you can figure it out yourself.

Until next week…