Hello, Crypto Friends! 🚀 Here, I want to talk about the origins of the crypto industry which was born more than a decade ago, starting with Bitcoin. Along the way, many crypto projects have failed, and I want to tell you the reasons behind their failure and how to avoid projects that are not right. So, let's discuss it together!
First of all, you have to know the history of Bitcoin. Bitcoin succeeded in decentralizing money and changing the way we interact economically and politically. However, in its development, many people are getting rich quickly from Bitcoin, and this is actually attracting the attention of the wrong people. As a result, the crypto industry is damaged and many projects fail.
So, I want to tell you some of the main reasons why crypto projects fail:
Late in the Money Competition
There are projects that believe they can make money better than Bitcoin, but unfortunately they can't beat Bitcoin's network effects and track record. So, projects that try to compete with Bitcoin will fail or only serve a small segment.
Misaligned Incentives
One of the important things in Bitcoin's design is incentives. Misaligned incentives can make a project fail, regardless of the character of the people in it. So, before investing, first make sure the crypto project has the right incentives.
Unclear Regulations
Unclear and rare regulations can make crypto projects that don't follow the rules subject to sanctions. So, projects that don't follow the law will lose.
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So, how do we avoid fraudulent crypto projects? Just focus on projects built based on Bitcoin principles, namely:
A project optimized for decentralization, openness and permissionlessness
Here, I'll explain, okay? In a project like this, no one party has complete control. This means that everyone can participate and have the same access. This is a real example, you must be familiar with Bitcoin. Everyone can be involved and no one can control it, you know.
Community-sourced and open-source projects
This is a project whose program code can be seen and changed by anyone. Usually, open-source projects are managed by communities consisting of developers and users. So, everyone can contribute and provide input and develop the project.
Successful projects reach the product-market fit stage
What this means is a project that has found the right product for market needs. So, they already understand what consumers need and have succeeded in making suitable products. This is very important, so that the project can be successful and not just be a good idea.
A project that respects the first law of thermodynamics
What does this mean? So, this project doesn't just create tokens from the wind. There must be energy or hard work that is the basis for making tokens. For example, Bitcoin uses a proof-of-work system. So, you have to spend energy to get Bitcoin.
Projects with clear economic policies
This is very important. If the project has a clear economic policy, we can know the rules of the game. So, we can be more confident in investing. If the policy is not clear, it's better not to participate.
Projects with incentives optimized for the value offered
This is a project whose incentive design matches what is being offered. For example, Bitcoin. The incentive for miners is to provide security for the network. So, all parties involved get the same benefits, and the project can develop.
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In essence, before investing, first make sure the crypto project you choose meets the criteria above. So that we can all "Growing Together in Cryptoverse"! 🌟
