In my last newsletter, I asked "Where Are All The Users?" and analyzed the top 10 blockchain projects measured by "daily active users" or DAU. Unsurprisingly, Ethereum was #2 with most of its activity coming from Uniswap transactions. Surprisingly, we also learned that becoming a top 10 chain by DAU only required 5,000 users. Experience has taught me that Venture Capitalists drool over as little as 1,000 users! This is why accessibility is vital to the growth of an early blockchain startup.
In today's newsletter, I'm going to deeply explore a blockchain project from 2017 that overcame the user adoption problem and analyze the why and how of it's explosive growth so we can apply these same concepts towards the next crypto "mass adoption".
The Truth About Mass Adoption
Mass adoption occurs when a problem lacks a solution long enough for pain to build up. A solution is created that causes a mass influx of users seeking relief. The reality is that the solution isn't always the right solution. Sometimes it's a plain lie. Just look at Terra-Luna and Theranos.
Mass adoption is ultimately a confluence of many different types of problems and requires a cumulative effort to solve. Entrepreneurs create startups to understand their users' pain and provide a solution that deeply addresses why the pain exists and how it can be cured.
Ethereum has gone through several of its own mass adoption events by this definition. Since ETH users were already a tightly knit community, it was often easy for blockchain entrepreneurs to understand the problems and solve them. The key thing to understand is that nearly all of ETH's innovations were designed to solve the pains of existing users and not new users.
This is why blockchain is still largely inaccessible to everyday regular normal people, especially when network volume increases and transaction costs skyrocket leaving most token holders stuck watching instead of doing.
Let's now examine how one project solved new user pain and leveraged the solution for the next mass adoption event.
A Lesson From 2017: The STEEM blockchain
STEEM was an application specific blockchain with a specific use case. It cannot deviate from that use case without losing its original unique value proposition. Application specific blockchains have showed us that if you provide a solution, users will come, but ONLY if you demonstrate to them why and how you are solving their problem.
With DeFi, both were clear. The users' why was acquiring crypto so they can become rich. The how was through exchanges. This is why blockchain is filled with token generating schemes that were designed to prey on this "problem". Many "solutions" were just complex ways to extract value from token holders. The mass adoption was simply early users who were acting as speculators seeking to strike gold.
STEEM attracted users who had the same why--they simply wanted to acquire crypto. The difference was STEEM's how. To earn crypto tokens, all a user had to do was post & share something that others found valuable, two actions that many were already familiar with thanks to web2.0 social apps.
Just like that, a user who had no significant knowledge of blockchain and without any tokens could begin earning crypto. They just signed up for a steemit account and began posting or commenting. The ease of access made it easy to understand how their why was being solved and provided an easy way to execute the how. This lead to STEEM's explosive growth. Let's look at the stats to back that up.
The Statistics behind STEEM's explosive growth
From dApp Radar, we saw the peak number of users at 35,000 DAU. Practically all of the transaction activity came from posting, commenting and sharing because STEEM predated DeFi. These figures are an amazing feat even by today's standards. Activity quickly grew from October 2017 to Feb 2018 reaching a nose bleeding 250,000 real transactions per day.
A user by the name of @pneguinpablo kept great records of steem's activity which is where I found the next chart. Although posts were declining after the peak, we can see that in May 2018, there were 160,000 posts per day, but by November 2018, there were only ~50,000, still a large figure even by today's standards.
The spike in transactions were a direct result of how easy it was for users to start from zero. If a blockchain-curious user found out about STEEM, they just had to sign up for an account and could begin earning crypto right away.
LESSONS LEARNED (1 of 2)
Ultimately STEEM fell from grace because it wasn't able to capture lightning in a bottle and keep it. STEEM's why and how was misplaced but its explosive growth gave us the primer on why accessibility is vital. We understand this problem deeply and it is why the technology behind STEEM was used as the blueprint for the creation of the Koinos Blockchain. It is also why Luke and I studied STEEM's success and failure during our development of Koinos Account Protocol.
LESSONS LEARNED (2 of 2)
Another equally important lesson is that it isn't enough to simply give users a method to earn crypto. Solving the wrong pain gives us the impression that we found the lightning solution, but it wont allow us to keep it.
Tokenization is not the solution because it is just a digitally-tangible way to represent value. We still need to create value and that comes from solving the root cause of user pain.
You and I have all felt that pain through our experiences when a centralized figure has too much power. We've seen information censored before our very eyes because a centralized figure decided they were the gatekeepers of truth.
We've felt the weight of those with the authority to shut us out from knowledge. Decentralization gives the decision making process back to users who are able to think for themselves and we must do everything to create systems that aren't just replicas of Web2. Rather they are new systems that have a Web2 experience but are uniquely powered by Web3. This will not only gives us back that authority, but allow us to keep it for generations to come.
This is why KAP shares the mission of Koinos Group: to accelerate decentralization through accessibility.