Crypto Moats

Liquidity doesn’t create defensibility in crypto. Assets are identical and can move between exchanges through blockchains.

Startups use equity grants to hire people they couldn’t otherwise afford. Crypto startups have realized that they can do it with other stakeholders. Uniswap, a decentralized crypto exchange, is giving away 60% of its ownership tokens to early users and liquidity providers. As Uniswap grows, these tokens will rise in value and incentivize users to s... See more

Platforms1, on the other hand, create network effects when they aren’t interoperable. Ethereum has a community of developers building tools, which attracts more developers and users. Competing blockchains must convince developers to switch and rewrite years’ worth of software. Because the value isn’t transferrable, Ethereum has a strong moat. These... See more

Regulations protect crypto businesses too. Coinbase worked proactively with regulators when rules were unclear. They signed up millions of users before regulations arrived. This let them spread the costs of compliance over many users bringing down marginal costs. If you want to take away their customers now, you’ll have to cough up a few million do... See more

Stakeholder ownership can work for any company, but it’s particularly strong for aggregators who need suppliers. Ownership makes them financially and emotionally invested in your business. It has unbounded upside, so the better you do the harder it is to poach them.

Imagine that you rented apartments on Airbnb in 2008. For every $100 you make, Airbnb throws in $5 of stock. It’s now 2010, your stock has tripled and you think Airbnb is onto something. How much would a competitor have to pay you to list? Much more than $5 for starters. If it’s not equity, you may not even do it. What if they become successful and... See more