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This entire week, we’re running our observations on what’s ahead this year… stay tuned here, and be sure to also subscribe to our weekly newsletter for more trend updates, industry reports, builder guides, news analysis, and other resources.
1. Trading can be a way station, not the last stop, for crypto businesses
It seems like every crypto company that’s doing well today, outside of stablecoins and some core infrastructure, has pivoted to or is pivoting to trading. But if “every crypto company becomes a trading platform”, then where does that leave everyone? Having so many players all doing the same thing cannibalizes mindshare for the many, and leaves just a few big winners. This means those that pivoted too quickly to trading missed the opportunity to build a more defensible, more durable business.
While I have a lot of empathy for all the founders out there trying to make their business financials work, chasing the immediate sense of product-market fit has costs, too. This problem is particularly an issue in crypto, where unique dynamics around tokens and speculation can lead founders down the immediate-gratification path on their journey to finding product-market fit.… It’s a kind of marshmallow test, if you will.
There’s nothing wrong with trading — it’s an important market function — but it doesn’t have to be the final destination. The founders who focus on the “product” part of product-market fit may end up the bigger winners.
~Arianna Simpson, a16z crypto general partner
2. This year, regulations will help eliminate industry distortions
One of the biggest barriers to building blockchain networks in the U.S. over the last decade has been legal uncertainty. Securities laws have been stretched and selectively enforced, forcing founders into a regulatory framework built for companies rather than for networks. For years, mitigating legal risk replaced product strategy; engineers took a backseat to lawyers.
This dynamic led to lots of weird contortions: Founders were told to avoid transparency. Token distributions became legally arbitrary. Governance became theater. Organizational structures optimized for legal cover. And tokens were designed to avoid economic value/ not have a business model. Worse yet, crypto projects that played fast and loose with the rules often outpaced the good-faith builders.
But crypto market structure regulation — which the government is closer to passing this year than it’s ever been — has the potential to eliminate all of these distortions. If passed, this legislation would incentivize transparency, create clear standards, and replace “enforcement roulette” with more clear, structured paths for fundraising, token launches, and decentralization. After GENIUS, the proliferation of stablecoins has exploded; legislation around crypto market structure would be an even more significant shift, but this time for networks.
In other words, such regulation would enable blockchain networks to operate like networks — open, autonomous, composable, credibly neutral, and decentralized.
~Miles Jennings, a16z crypto policy team and general counsel
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The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the current or enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; a16z has not reviewed such advertisements and does not endorse any advertising content contained therein.
The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the current or enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; a16z has not reviewed such advertisements and does not endorse any advertising content contained therein.
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