This episode dissects crypto's existential challenge: an insular focus on cryptonatives risks irrelevance as the broader world demands real-world applications and sustainable monetization.
Crypto's Mass Adoption Imperative
- Douggee of Figment Capital asserts crypto's fundamental flaw: it builds almost exclusively for cryptonatives. This insular approach assumes the world will become cryptonative, a premise Douggee rejects. Mass adoption requires building for the existing world, not just a niche.
- Douggee argues the current cryptonative population represents a fixed segment; growth demands outreach beyond this group.
- Large companies already build on blockchain rails, demonstrating a path to mass adoption separate from cryptonative ecosystems.
- Crypto businesses must identify and target their "next proximate customer" beyond initial cryptonative users.
- Douggee states, "Unless we have the intention and recognition of that, then the next few years will probably feel more like the last few months have."
The Sales & Monetization Deficit
- Jim highlights a critical gap in crypto: the absence of dedicated sales functions. Business Development (BD) in crypto often conflates with token-driven partnerships, not genuine B2B or B2C sales. This leads to chains struggling to monetize beyond speculative token value.
- Jim differentiates BD (finding app builders, whales) from sales (selling to external businesses/users), noting crypto's lack of the latter.
- Blockchain customers are applications, not end-users; chains should sell to developers, who then bring users and use cases.
- Noah cites Morpho as an exception, employing a robust CRM to engage institutional capital.
- Moonshot, leveraging Turnkey's backend (a wallet infrastructure provider), demonstrated rapid on-chain onboarding for non-cryptonatives, proving the technical means exist for mass adoption.
- Jim argues, "Who was it whose responsibility was it at any of these organizations to go, 'Okay, we're going to pitch this to... how do we expand beyond like this?'"
Solana vs. Hyperliquid: The Asset & Revenue Battle
- The Monad token launch on Solana exposed divergent monetization strategies between Layer 1s (L1s) and application-specific chains. Solana captured significant trading volume but minimal fees, while Hyperliquid, an application-centric chain, generates substantial revenue from perpetuals.
- Solana's Monad launch generated $112 in fees from high trading volume, contrasting with Hyperliquid's $7,000 from its own spot trading.
- Jim contends Solana's success in housing spot assets (like Monad) positions it as an "on-chain NASDAQ," attracting innovation around those assets.
- Noah explains that traditional financial market structures for fees are often regulatory-driven, making direct comparisons difficult.
- Solana faces a dilemma: enshrining an application for revenue risks alienating other builders who fear competition or dependency.
- Noah warns, "If Solana kingmakes an application, I think every developer not necessarily within that segment is going to ask, 'Will my competitor be kingmade in the future?'"
Evolving Infrastructure Investment
- Infrastructure investing in crypto shifts from general-purpose networks to application-enabling components. Venture Capital (VC) funds now prioritize infrastructure that directly facilitates specific, viable applications.
- Figment Capital, historically infrastructure-focused, now adopts an "applications first" approach, investing in infrastructure (e.g., Turnkey) that enables specific applications.
- Noah notes liquid market infrastructure projects often prioritize market share over monetization, relying on token value.
- Founders of infrastructure projects now face investor pressure to monetize, driven by token price declines and runway concerns.
- Chains explore native stablecoins (e.g., MakerDAO's USDM, Hyperliquid's USDH) to internalize yield, but this risks stablecoin fragmentation.
- Douggee states, "There's still room for infra, but it has to be applications first, and you invest in the infra that enables the applications that you believe should and can exist."
The Aave Labs/DAO Governance Crisis
- The separation of Aave Labs (an equity entity) and Aave DAO (governed by the AAVE token) creates misaligned incentives and value leakage, a "cap structure debt" that undermines the token's value.
- Noah argues separating Aave Labs' equity from the AAVE token's value reduces the protocol's overall enterprise value.
- Aave Labs' historical pivot to Lens and subsequent return to Aave development, while maintaining external equity investors, complicates value flow.
- Ongoing revenue-sharing discussions (e.g., 50% for Horizons) and other service providers exploring monetization pathways siphon value from the AAVE token.
- Jim highlights Uniswap Labs' efforts to align its equity with the UNI token, contrasting with Aave Labs' current trajectory.
- Noah concludes, "The value just continuously gets siphoned away from the AAVE token to the equity entities because those people are the ones making the decisions."
Investor & Researcher Alpha
- Capital Reallocation: Investors shift capital from speculative, general-purpose infrastructure to application-enabling infrastructure with clear monetization paths. Projects lacking a revenue model beyond token issuance face increasing scrutiny.
- Sales & BD Imperative: Crypto projects must develop genuine B2B sales capabilities, moving beyond token-swap partnerships. Success hinges on identifying and serving "next proximate customers" outside the cryptonative base.
- Governance Risk: Misaligned equity and token governance structures (e.g., Aave Labs/DAO) present significant long-term value risks for token holders. Researchers should analyze IP ownership, revenue share agreements, and team incentives.
Strategic Conclusion
Crypto must shed its insular focus, embracing real-world applications and sustainable monetization models. The industry's next step involves a fundamental shift from building for cryptonatives to serving a global user base, with infrastructure supporting applications and governance aligning incentives.
