Why Do Most Crypto Projects Fail in the Huge Competitive Blockchain Market?
Cryptocurrencies are a unique technology and innovative asset class imbibing varied features that depend on the use cases they solve. While crypto-assets like Bitcoin, Doge, Dash, etc., aim to replace the fiat in your wallet, other cryptocurrencies such as Aave, Compound, Anchor, etc., help you get loans.
We also have native tokens fueling the economies of cryptocurrency-based platforms and ecosystems on the one hand, and on the other hand, we have stablecoins pegging their value to actual dollars. While the use cases and utilities that cryptocurrencies tackle — lofty or humble — are immense, not all succeed in doing what they claim to.
As of November 2021, the CoinMarketCap record showed over 15,000 coins in existence in the crypto market. But not all cryptocurrencies make a mark. While many crypto assets are mere pump and dump schemes and rug pull scams, many others fail despite having a good and genuine use case. Coinopsy, a site that tracks dead coins, reports that since Bitcoin’s inception in 2009, over 2,000 coins have already died.
But why do so many crypto projects fail despite the blockchain market raking in trillions of dollars and steadily gaining traction worldwide?
Why Crypto Projects Fail?
There are several reasons why cryptocurrency projects fail. Let’s discuss some of these:
- Competition: With thousands of crypto projects vying for their share of the blockchain market, it is not unusual for some to lose sheen or not click with the community. As is the case with conventional markets where products and services are launched regularly, but only a fraction of them become successful.
- Abandonment: Often, cryptocurrency platforms are launched with much fanfare and promotions but are abandoned midway by the founders who move on to the next project or don’t have enough funds to meet further objectives and scale the platform.
- Lack of a concrete business plan: There is a coin named $STOPELON that was designed to protest against Elon Musk’s tweets’ influence on the cryptocurrency market. How the platform intended to do so was never known, though. Similar to this analogy, many such coins continue being launched in the cryptocurrency and blockchain markets with no solid plan or use case. At times, these coins are mere copies of other established coins.
Lack of a Strong Community and Capital Funding: The Biggest Reasons Crypto Projects Fail
“We work in an open-source ecosystem, so you have to listen to users and build on an ethos that people can rally around. Often projects fail not because their technology doesn’t work, but because they haven’t galvanized a community that cares about their mission.”
~Alan Chiu, Baba Network
While there are thousands of crypto projects that are lost in the shadows, they don’t ‘officially’ die as most of them are not shut down. They’re just abandoned. When followers stop talking about the project, traders stop trading the crypto asset, or developers lose interest and stop updating the project, the project fails and loses traction in the market.
To understand why communities are a significant factor in the success and failure of a crypto project, we need to understand what these assets truly are. Cryptocurrencies (and therefore, crypto tokens) are essentially networks of computers spread across the globe. As more people join these networks, the crypto projects grow and so grow their value. The success of the meme coins such as Doge, Shiba, Baby Doge, etc., is a testimonial to the fact that solid community backing can make or break a coin. Many would argue that crypto markets have seen mediocre tokens perform well in the market because a loyal community has backed them.
Failure to get funds at the right time is another major reason for projects fading away into nothingness. Getting access to VC funds requires some level of toil and effort from the founders and team in developing and presenting a pitch deck, term sheet, presentation, etc., to present their business plan. Many projects fail to cross the entry barriers to VC funding or generate funding from an IDO launch.
Strong communities bring new investors and regular funding that would keep the project in blooming health. Any project looking to increase their community game while seeking investments simultaneously can head over to Sheesha Finance — a next-generation multichain and community-centric Defi platform.
Sheesha aims to help retail investors build their diversified crypto portfolios for maximum rewards. Projects can stake, set, and forget their tokens while collecting rewards from partner projects on Ethereum, Binance, and Polygon. Sheesha invites established and new projects from diverse fields, including NFT gaming, financial services, lending, payments, IDO platforms, social enterprise, payment/wallets, etc.
By harnessing the power of investor communities, Sheesha allows investors to become high-powered VCs as they stake Sheesha on the platform. Some of the partner VC firms include A195, New Tribe Capital, Jun Capital, Sanctum Ventures, and Phoenix Global.
The partner project can avail of the unmatched community experience via perks such as advertising, IDO platform launches, tokenomics design, legal counsel, human capital, project management, sponsorships, bounties, influencer marketing, and ambassador projects. The projects can let their community earn rewards on many partner projects via staking Sheesha tokens on the platform.
As Defi and web3 continue to grow and expand, Sheesha aims at offering a level playing field to investors to access a diversified portfolio of projects while simultaneously allowing partner projects to top tier their VC access, project incubation, and ecosystem support.