Do the Unscalable Things The Secret to Success for Cryptocurrency Startups

Mastering the Unscalable The Key to Success for Cryptocurrency Startups

Author: Qiao Wang, AllianceDAO Translator: Shanooba, LianGuai

Exactly ten years ago, LianGuaiul Graham wrote an article titled “Doing the Unscalable.” In my opinion, this is the most important content ever released by Y Combinator (YC) for the startup community.

The core idea is that in the early stages, startups have to manually recruit users and manually provide them with exceptional experiences. These are things that almost no big companies would do, hence they are seen as unscalable.

Since starting AllianceDAO three years ago, I have been contemplating the applicability of these suggestions in the context of crypto startups. Over the past three years, I have accumulated enough data points to answer this question.

But before I answer that question, let me introduce you to some “unscalable things” that AllianceDAO alumni have done to attract and satisfy their users.

Synthetix (ALL1)

Synthetix is the earliest derivatives trading platform and has always been one of the top protocols in terms of FDV.

Kain recently came back to give a speech to the founders of ALL11. He said something that would surprise most people: “You have to play the short-term narrative game.”

When Synthetix started, which was during the first round of DeFi summer in 2020, the prevalent narrative in the DeFi community was “liquidity mining,” “token staking,” and “TVL.” In 2023, these concepts have largely fallen out of favor. In fact, it is now a consensus that strategies like liquidity mining are negative for startups.

But in 2020, Kain embraced these things. They engaged in liquidity mining, carried out token staking, and they talked about TVL on Discord and Twitter. And these strategies worked. They attracted some of the most influential people, such as DegenSLianGuairtan, to become their most passionate supporters.

Now, I’m not saying strategies like liquidity mining are still effective today. But the advice of embracing short-term narratives remains valid, especially when you’re building a crypto-native product. This is because the crypto-native community is still relatively small, and everyone is just 1 or 2 degrees away from each other.

Furthermore, Kain is the most active member in their own Discord, regularly engaging with the Synthetix community. Even today, he continues to post blog articles about Synthetix, clearly with the aim of acquiring more users.

0x/Matcha (ALL1)

0x is one of the earliest DEX protocols. They also built Matcha, a leading DEX aggregator.

0x has always been ahead of its time. When 0x first launched years ago, professional market makers were skeptical of DeFi and DEX. It was almost impossible to get market makers to provide liquidity for 0x.

Therefore, the 0x team built their own internal market-making infrastructure (later spun off as Periscope Trading). The idea was twofold. First, to solve the cold-start problem where professional market makers are only interested in exchanges that already have sufficient liquidity, they used their own liquidity. Secondly, from the perspective of market makers, they experienced firsthand the pain points of providing liquidity. This helped improve the onboarding experience for users. As more organic liquidity entered, they discontinued the market-making infrastructure.

Ribbon/Aevo (ALL2)

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

Julian also returned to the ALL10 and gave a speech. Like almost all other successful DeFi protocols, he manually contacted the first batch of users. Interestingly, he noticed that there were the same 20 people on the Discord of each options protocol. So, he messaged each of them, bringing them into the Aevo community because they were already naturally interested. The DeFi derivatives community is still quite niche, so it’s possible to talk to all of them.

But he did more. Because on-chain options liquidity is generally quite limited,

some of Aevo’s users couldn’t find enough entry or exit liquidity. Julian manually searched for liquidity for them and posted buy and sell offers on their order books.

Mux (ALL3)

Mux is the top three perpetual swaps trading protocol on Arbitrum.

Mux (then called Mcdex) was launched on Twitter in 2020. Then, DeFi Pulse and Bankless stumbled upon Mcdex and liked the product, so they contacted Jean and Jie. The latter had separate conversations with DeFi Pulse and Bankless and negotiated a deal where they would write articles about Mcdex in exchange for referral fees. The product took off from there.

But more importantly, Jie didn’t rest. He did the standard 996 thing that every Chinese startup does. 996 refers to working 6 days a week, from 9 am to 9 pm each day. I heard it has evolved to 997 now. I often lurk in their Telegram group and see him responding to users at 11 pm local time. Mind you, he is the technical founder. I rarely see technical founders do that.

Dodo (ALL3)

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

Dai Dai worked at DDEX in 2018, another early DeFi protocol. This was two years before she founded Dodo. In her spare time, she created a blog called “DeFi Labs” where she would produce educational content about DeFi.

Then, she realized she wanted to personally connect with her readers. So, she pulled them into a WeChat group called “DeFi the World” and regularly organized offline meetups with the members. This became the first and largest DeFi community in China. Don’t get me wrong, this was during the previous bear market cycle when DeFi wasn’t a real thing yet, so “largest” meant around 100 people or so.

When she founded Dodo in 2020, those 100 people became Dodo’s first 100 users.

Pendle (ALL4)

Pendle is the largest yield trading protocol today.

I distinctly remember TN inviting me to speak at their internal all-hands meeting to boost team morale. It wasn’t a scalable thing for Pendle or me, but once I received the invitation, I thought to myself, “TN is special.”

But he did much more than that. In the early days, he reached out to potential LPs (liquidity providers) and scheduled one-on-one meetings to pitch Pendle’s yield opportunities to them. Prior to Pendle, he had no sales experience, but after enough tries, he became more proficient in sales and started seeing conversions. In fact, most founders don’t realize they can be great salespeople – sales is a numbers game. He also occasionally shared his ideas for yield trading with potential LPs. As they became more familiar with the team and the protocol, they started converting into actual users.

Similar to Synthetix, he also identified opinion leaders he wanted to collaborate with and reached out to them through calm Twitter DMs or cold emails. Today, most decent founders do this, but TN went the extra mile by doing his homework. For example, if he wanted to collaborate with a certain opinion leader, he would research their interests and habits and write materials that he thought the opinion leader could publicly use. He did this for a while until he started seeing more organic mentions on social media.

Charmverse (ALL7)

Charmverse is a leading web3 community operations platform. (2 years ago, the competition was fierce, but most competitors fell during the bear market.)

The first version of Charmverse was a token-based Notion. But obviously building a Notion was very difficult. So Alex and Matt hacked into the internal Notion API and provided token gating as a feature for Notion’s admin users. (At the time, Notion had not yet released their public API, but they have now.) That’s how they got their first DAO clients.

Of course, Alex went to many crypto conferences and built relationships with key decision-makers in the DAO space, many of whom were writing DAO proposals to adopt Charmverse, which eventually passed with DAO votes.

One very labor-intensive task Alex did to convert existing Notion users to Charmverse users was manually transferring their Notion content to Charmverse and then conducting onboarding meetings with DAO members to teach them how to use Charmverse.

Hubble (ALL7)

The Hubble team created Kamino, the #1 marketplace for yield vaults on Solana (the Yearn of Solana).

When FTX crashed in November 2022, everyone (except me) told Marius and Thomas to abandon Solana and move to Ethereum layer 2. That idea crossed the minds of every Solana builder.

I remember having discussions with Marius and Thomas about this issue every week for several months. In the end, they concluded that Solana would stay because:

Solana has soul: There are still developers passionate about it.

The tech is actually legit. It’s fast and cheap. The downtime issues at the time were engineering problems that could be solved, and they eventually were.

Anatoly is the most inspiring L1/L2 leader after Vitalik.

Meanwhile, if they migrate to Ethereum, it is unclear how they will compete with existing Ethereum projects.

Marius and Thomas made a very difficult but ultimately wise decision to stick to a smaller but growing market (Solana) that they deeply understood, rather than a larger, more scalable market (Ethereum) where they had no unfair competitive advantage.

Synquote (ALL7)

Synquote is the #1 decentralized options trading protocol based on trading volume.

When Synquote launched, Ahmed ensured that he and his team responded to user requests 24/7. One morning, a large holder on the chain wanted to make a large trade. The team built a temporary over-the-counter trading product within a few hours, providing liquidity and completing a record-breaking nominal trade of over $3 million that afternoon.

Providing support 24/7 brought an unexpected benefit. Users who witnessed the rapid improvement of the product, knowing that the team listened to users, became advocates for the product.

Tensor (ALL8)

Tensor is the #1 NFT marketplace on Solana.

Ilja and Richard used an on-chain tracking website to identify all Solana NFT whales, found their Twitter usernames, and directly messaged some of them.

But that wasn’t enough. At the time, they were competing with NFT markets like Magic Eden that had an order of magnitude more distribution, so they formed an alliance with other NFT markets. Notably, they reached an agreement with Hadeswap, which had 10 times more distribution than Tensor. According to the agreement, Tensor would build a completely new front-end for Hadeswap in exchange for a reverse link from the Tensor website, greatly increasing Tensor’s distribution.

Of course, in Tensor’s short history, they made many other outstanding decisions, but the collaboration with Hadeswap was a pivotal moment.

Liquifi (ALL8)

Liquifi is the #1 token locking solution for crypto protocols, think of them as the crypto version of Carta.

My office hours with Robin and Oliver were some of my happiest times. They came prepared for every meeting. They would give me a list of other AllianceDAO start-ups and go through them one by one, asking if I thought they would be a good fit as a customer and then reaching out to them. By the way, some AllianceDAO start-ups got their first few customers through our community.

Robin and Oliver would also comb through all publicly available fundraising data from Twitter, Messari, Crunchbase, etc., to find all potential customers. They would seek referrals from every investor to reach decision-makers. They even went into random Discord channels directly asking everyone for introductions.

Robin described Liquifi’s customer support as being “over-communicative.” For example, the team would check spreadsheets of lock-up schedules that customers sent, helping reduce onboarding friction. They found a lot of mistakes and even proactively pointed out a plot where someone was underpaying within 2 years. Dealing with token locking is a very sensitive matter, and this level of diligence helps customers feel comfortable and willing to work with Liquifi.

Clique (ALL8)

Clique is the #1 offline certificate issuer.

During the Alliance project, Jaden interviewed over 200 protocols to verify the use case for offline certificates. They found the first strong use case in the Lens protocol, which is combating counterfeiting.

Jaden reached out to the Lens team. At the time, Jaden had just moved to New York. The Lens team was also there. After three weeks of back and forth communication, the Lens team finally agreed to a face-to-face meeting. However, on the day of the meeting, the team mentioned that they had flown to ETHSF and wouldn’t be able to make it. With no ticket to the event, Jaden flew to San Francisco on the same day and waited outside after the event, eventually finding the head of the Lens partnership. He succeeded in making a pitch and signing a deal with Lens.

Next, Jaden and Kevin built a series of temporary features to meet Lens’ needs. Jaden half-jokingly told me “Clique is the least scalable product in the crypto space.” But in the end, Optimism and other L2s noticed that Lens was using Clique, reached out to Clique, and became clients. Things that don’t immediately scale might unintentionally scale.

Yakoa (ALL8)

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

Graham’s B2B sales strategy is “showing up in person.”

For a client, Graham and Andrew flew across the country twice and had face-to-face meetings during the negotiation process. They spent a day at the client’s office, getting to know the entire team and internal dynamics. They sat down with multiple levels of leadership, which would have been nearly impossible to coordinate over phone calls alone, to gain their support. They had dinner with the people actually going live. Throughout all of this, they were also able to identify several additional pain points for cross-selling.

Stride (ALL9)

Stride is the #1 liquid staking protocol on Cosmos.

When Stride launched, Aidan, Vishal, and Riley took turns being on call 24/7 until they were sure the protocol was secure. In the first two weeks, one of them would wake up at 3 am every night to ensure the regular IBC packets of data were correctly transmitted to Cosmos and the protocol’s accounting reconciled correctly.

While most founders are active on their own Discord and Telegram, the Stride team specifically made an effort to monitor all other Discord servers frequently visited by members of the Cosmos community (e.g., Osmosis and Mars Discord servers) and answer any questions. This is because people from other Cosmos zones could use Stride to stake their native tokens. Eventually, they even set up a cron job that crawled all these Discord servers and dumped relevant messages into their own Slack for easier addressing without actively monitoring them as much.

Primodium (ALL9)

Primodium is the most popular fully on-chain game based on Daily Active Users (DAU) count.

Emerson and Morris have some non-encrypted background. With the help of our team member, Will Robinson, they have built a solid network in the on-chain gaming community. Like the Ribbon and on-chain derivatives community, the on-chain gaming community is also a niche community, which can connect with most “important” community members.

Therefore, Emerson and Morris released the game on Twitter and introduced it to everyone in their network. Then, the game spread privately and began to organically disseminate on social media. There was even an article about it in The Wall Street Journal.

The lesson here is that when the community is small, you don’t have to take dramatic measures to get started. Spend some time building close relationships. These relationships will have an effect from the day of release.

SleeLianGuaigotchi (ALL9)

SleeLianGuaigotchi is a sleep tracker with gaming elements, and it has the highest retention rate of any single 30-day and 90-day retention among all the crypto consumer apps I’ve seen.

Anton saw the Axie Infinity community as potential early adopters of their app. At the time, “play2earn” was popular, and SleeLianGuaigotchi marketed itself as “sleep2earn.” By the way, this ties in with Kain’s point about “playing short-term narratives.” Anyway, Anton offered users on Axie Twitter a service to “freely turn their characters into 3D.” Twitter users would share their favorite 2D Axies, and then they would create a 3D version for them. This caught the attention of Axie founder JiHo, who retweeted their work. JiHo later became an angel investor in SleeLianGuaigotchi after its launch at NFT NYC in June 2022.

Anton also took a similar approach to interact with the BAYC community. He knew Eminem owned an ape and decided to create a 3D version of his NFT, standing in front of the SleeLianGuaigotchi character and performing. Luckily, Eminem and Snoop Dogg released their songs during NFT NYC in June 2022, and Anton released the 3D version the next day (as the video was already made). This tweet quickly gained traction, reaching 30,000 impressions within hours.

Importantly, Anton converted potential users to their Discord rather than their mobile app, i.e., they focused on the community first. This is because entering Discord has less friction than installing an app. Anton found that many people entered Discord to joke around or just to check out the trendy “sleep2earn” project. But for every question, whether serious or not, Anton’s team would respond with 2 to 3 paragraphs. People who were initially curious about the idea realized that the team behind it took it seriously and eventually downloaded the app.

Refract (ALL10)

Refract is the top-ranked “crypto antivirus software” for consumers.

When Refract first launched, a NFT platform called Premint was hacked, and Nish privately messaged everyone who claimed on Twitter that they were hacked. It wasn’t some annoying sales pitch like “you can use Refract,” but rather “let’s understand what happened.”

Then, whenever there is a major cryptocurrency hack, Nish would write a post-analysis on Twitter. I’ve read some of those tweets and they have almost higher engagement than any other tweets I’ve seen in the cryptocurrency space, because people get emotional when they lose money. One time, Nish and Justin showed me these metrics and found an astonishing correlation between the surge in new users and the occurrence of major hacks.

They manually DM’d over 1000 Twitter followers who were existing users, asking them superhero PMF-related questions like “How disappointed would you be if Pocket Universe disappeared?” That data point strongly proved that they indeed had PMF.

Caldera (ALL10)

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

The most important thing Matt did to attract the first few B2B clients was building small, temporary features for them. Each feature took 2 to 5 engineering days. One example was the support for secp256r1 curve (EIP7212). Yes, it was so obscure that most founders wouldn’t think it would have any significant impact.

But the result was that it brought a lot of goodwill. The customers were extremely happy that Caldera was willing to provide such high touch and customized support, and they organically told their friends, leading to more deal flow. Remember, in crypto B2B, customers all know each other.

Interestingly, Jaden from Clique is Matt’s friend. And the most frequent thing Jaden has told Matt in the past two years is “Are you sure this can scale?”

Guardrail (ALL10)

Guardrail is a leading protocol security auditing and investigation tool.

Their first client happened to be Pendle, another alumnus of AllianceDAO. Sam joined their Discord as a user, provided product feedback to them, connected with their dev-rel director, and then asked to be connected with their internal tool manager, who eventually became a core user of Guardrail. I know this sounds confusing. But the key is that for B2B clients, it often takes time and several hops to get in touch with internal champions and decision-makers.

Also, this client (Pendle) is based in Singapore, so most of the back-and-forth happened within a 12-hour time difference. So Sam did all the customer support work between midnight and 2 am local time. After the product demo, the client got some unique use cases, like auto-refresh so they can keep Guardrail on TV all day. Sam and James built it for them in the same week.

Kravata (ALL11)

Kravata is the leading fiat in/out provider in Latin America, and their clients include the biggest Latin American exchanges.

Felipe understands that behind tech companies are humans. Humans like to eat, drink, and talk to others. And I’ve found that this is especially true in countries with weaker rule of law, where relationships matter even more.

In order to acquire the first batch of clients, he arranged face-to-face meetings with them, enjoying coffee and delicious desserts. When drinking the first cup of coffee, he always took the initiative to pay, and he would pay from his own pocket instead of the company’s. Like the employees of Yakoa, sometimes he would fly to meet the clients at their locations. He would discuss common concerns, such as regulations that everyone might be involved in. Sometimes, mutual friends would appear in the conversation, which is useful when building relationships around homogeneity, as people tend to connect with those who are similar to themselves. He would offer business advice and useful introductions without seeking anything in return. If you have met Felipe, you would agree with my viewpoint that he is a typical example of humility and honesty, so this helps as well.

It is important to do all of these things to make the clients feel comfortable before direct sales.

Do some unscalable things

After reading all of these stories, I hope you can draw similar conclusions as I do. The advice to “do unscalable things” still generally applies to cryptocurrencies. Some of the most successful crypto startups have done incredibly laborious things to acquire and delight their users, whether they are consumers or businesses, whether they own tokens or not.

But there is one thing to note. Cryptocurrencies do offer a native and scalable way to acquire early users, and that is token incentives. Token incentives could be one of the biggest unlocks for cryptocurrencies. Other major unlocks include asset ownership (Bitcoin), data ownership (cryptosocial), permissionless programmability (Ethereum), fundraising (ICO), permissionless financial services (DeFi), culture (NFT), and tokenization of everything (RWA).

Since Bitcoin, token incentives have evolved significantly. From immediate rewards, to retroactive airdrops, to non-token systems of points. Based on experience, these are very powerful and scalable user acquisition strategies. Thus, they are so powerful that they are worth delving into.

However, token incentives are not a cure-all. They cannot replace the unscalable things. They are complementary, not substitutes. Many AllianceDAO alumni mentioned above launched token incentive measures while doing heavy manual work.

Even in the case of tokens playing such a significant role to the point where they are the cryptographic protocols of the product itself, such as DePin, stablecoins, StepN (ALL7), and L1s, some games also got started by leveraging their friends, investors, and random folks on Twitter.

In 2008, Satoshi Nakamoto exchanged many emails about Bitcoin with their cryptopunk friends, including Hal Finney and Wei Dai, who then spread the gospel to a group of early Bitcoin enthusiasts on bitcointalk.org and in person. Ethereum’s founding team went on a world tour in 2014 to spread the gospel to a select group of early developers, including the famous Devcon 0.

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