Decentralization is one of the hallmarks of Web 3.0. A decentralized business represents an important progression for digital culture, but also a return to the values of the original web, where autonomy and creative expression were decoupled from commercial interest. Decentralization, in essence, is the transference of power from one centralized location out to many. But there’s a problem.
As a company grows, many in the Web 2.0 world–think Amazon, Google–have found that in order to preserve the core values of the business, and to orchestrate explosive growth, control becomes more centralized. “Google, Facebook, Amazon are increasingly just super-monopolies,” said Roger McNamee. This presents a bit of a conundrum for companies operating in Web 3: How do you retain those values, while still growing?
Building a decentralized business
Loi Luu is the CEO and co-founder of Kyber Network, a protocol for making decentralized token swaps with Ethereum tokens—where you can swap your DAI for ETH or BAT (or whatever takes your fancy) without trusting a third party. It is also a source of liquidity —having enough tokens to buy and sell at any one point—for other decentralized exchanges. Luu explains how he managed to keep Kyber Network on track and gives his three main pieces of advice on how to scale globally without compromising on your decentralized principles.
Being open-source and being a decentralized business go hand in hand in the world of in Web 3. Creating the ability for others to improve the code at the heart of a project is tantamount to one party not holding all the cards when it comes to the direction of a network. But there’s a risk: There’s little, if anything to stop someone else from taking the codebase you’ve slaved over and cloning it. Someone could easily copy your project and replace your token with their token, thereby using your technology to boost the price of their own token, like a modern-day cuckoo. This is a risk you have to accept when you go open-source.
Luu argues that the way to deal with this possibility is by focusing on building a strong ecosystem of developers, followers, and an inclusive culture. Because if there’s one thing that can’t be copied: it’s a loyal following. In fact, Luu describes the Kyber ecosystem as its most valuable asset.
“Anyone can copy Bitcoin or Ethereum and launch their own network but would you want to deploy anything there? Not really, there’s no developer community, no support. If you deploy something there, you’re going to be alone.”
Take Bitcoin for example. It has been forked and copied hundreds of times to create new coins, like Bitcoin Cash, Bitcoin Diamond, Dogecoin and an early implementation of zCash. Yet, despite this, it has maintained its position as the number one cryptocurrency by market cap as its following has remained loyal. You should look to capture a similar kind of ecosystem—build an open and inclusive place, and they will come.
Partner with other projects in the ecosystem
One of the biggest challenges the Kyber Network faced was how to provide liquidity without using a centralized third party, such as a market maker—an institution with a large amount of funds. Instead, it has to rely on its users. It’s a problem many decentralized businesses face, especially decentralized exchanges. How to solve the problem? Join forces. Kyber Network identified partners with similar values to work with in order to achieve their goal of decentralized liquidity.
Anyone can copy Bitcoin or Ethereum and launch their own network but would you want to deploy anything there? Not really, there’s no developer community, no support.
Kyber partnered with 24 other projects to provide liquidity instead of simply using its own reserves. This enables it to scale without relying on one institution to provide the liquidity–and the ability to take it away if it wanted to. While some have questioned how a brand can really grow if it’s spending all its time helping other companies, Luu is not concerned. “Currently the market and the ecosystem is still quite small. It’s much better to work together to grow the ecosystem instead of worrying about the share of the market.”
How might this help your blockchain business? What parts of your business are becoming overly reliant on one service provider or gatekeeper. Could you gain the same result by partnering with others in a mutually beneficial way? Let’s say you want to incorporate a way of people to sign in and comment on your platform. Sure you could use Facebook’s login feature. But what about a project like Civic? “In the decentralized space, even your competitors are your greatest collaborators,” said Ancho CEO Daniel Popa. Take a look through this list of decentralized Ethereum-based applications you could integrate with.
Create a better user experience
When it comes to decentralized exchanges—or any decentralized business—users are few and far between. As a result, retaining what few users you have is paramount. Acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one, according to Harvard Business Review.
For Kyber Network, they understood this problem early, and reasoned that the user experience was one of the key ways to keep users coming back.
“It’s still hard for any dapp or protocol to acquire new users because of the learning curve to set up a new account and protect your own private key,” Luu says, adding, “The solution is going to be a lot of things combined together, you have to educate the users and you have to provide a better facility for them.”
It’s much better to work together to grow the ecosystem instead of worrying about the share of the market.
One way of testing if your user experience is up to scratch is by getting people to use it and speak to them about their experience. Kyber Network has been doing this by providing free DAI—as long as users try out its token swap service KyberSwap and turn it from one cryptocurrency to another.
“It’s a good way to onboard the users and educate them on the platform, with the learning curve to generate a new ETH wallet and protect the private key . We see a lot of new users after these campaigns,” Luu says.
The key idea is to give people a reason to keep coming back, and to provide open channels for people to feel like they are a part of developing a platform.
Growing and scaling a company is difficult. Growing and scaling a decentralized business is even more so. The above ideas can help you keep hold of what matters. We’ll be exploring this idea again and again on Startup 3.0 so stay tuned.