Pragmatic Product Teams (in crypto)
6 min read

Pragmatic Product Teams (in crypto)

Prices are down, but many things, like noise, are at an all-time high. Noise pertaining to the merits of web3, poor risk management, price action, exploits, and macro. It goes on and on.

The best builders tune it out and prioritize ruthlessly. One thing they’re prioritizing is their funding position. Many founders are asking the question–how do I make my cash last 24-36 months? It’s an ideal time to focus on something else as well – are you making decisions that will result in the best product possible?

This tweet by Antonio (founder of dYdX) triggered a lot of people, especially in the Ethereum ecosystem. It’s worth evaluating your own reaction to it.

dYdX developing their own chain is emblematic of the approach necessary to win big and build breakout products during this down cycle. If you've followed Antonio for a while or search Twitter for his name and "product," you'll see a long history of relentlessly focusing on creating the best product possible (like here and here). Listen to any podcast with Antonio, and you'll hear him say that he's not a product maxi, not a chain maxi. They purposefully don't steep themselves into any chains' community. They embrace the fact that blockchain tech is rapidly evolving. Therefore, it's critical to remain flexible with technical choices.

Tribalism is natural across humanity. Maximalism and dogmatism are powerful for certain things. They help set a direction and push forward in the face of adversity. They're often necessary for birthing 0-1 technical innovations. And in crypto, "community" is a critical growth technique and moat. When done well, members of that community become tribal by design. But it can often serve an ecosystem better than some of its members.

Tribalism becomes problematic when it blinds your ability to reason.

The rest of this post highlights a few recent examples of top-tier teams tuning out the noise and focusing on coming out of this downturn with leading products. The details of their actions oppose each other, but their overall approach is sound. They’re thinking independently. They're relentlessly iterating towards a great product. Neither are influenced by tribalism. And they aren't focused on just making their token go up. They’re positioning to come out the other side of this market cycle as winners.

Example 1: Antonio and dYdX

Building dYdX V4 as its own blockchain on Cosmos is a risky move. It's not the easy path. They will have a lot to build and will face significant challenges.

Exploring why such a drastic change was the right move for them highlights what independent thinking looks like.

Antonio shared one of the reasons in this Bankless episode. He said that many of the best products are vertically integrated. Think of the iPhone or Tesla. Extending this to crypto is a foreign concept.

David Phelps offers a fascinating hypothesis of his own. While immutability is a benefit of some blockchains, perhaps it’s not for every product. It’s critical for something like globally distributed, censorship-resistant money. But that doesn’t make it a blanket rule for all use cases. Antonio doesn’t care about fitting into a defined box of DeFi, CeFi, or whatever else. He cares about using the best tools for the job available today. Immutability may be a bug if the community of users doesn’t think it’s valuable for their application. Who is to say this is wrong? If dYdX believes it results in a product better than any DEX or CEX, and its users agree, then it’s the right decision for dYdX. As Phelps says, “the lack of security makes it more secure in the eyes of those it represents.” It’s an incredibly pragmatic approach and display of independent thinking.

So why bother taking this risk? They have an excellent reputation and traction. Many would opt to progress with minor incremental improvements. Antonio shared that their company values helped drive their decision process - “Think 10x bigger.” They want to capture 30% of the crypto trading volume instead of just the 1% today. He believes building the product possible is the only way to do it. And for them, it requires making big bets to make it happen. They could lose 1% or gain 30%, and he prefers to swing for the fences. Bold, gutsy! Antonio is a product maxi instead of a chain maxi. It’s an example of someone swinging for the fences during a bear market to come out on the other side in a dominant position.

Example 2: Sid and Maple Finance

This is another team relentlessly focused on coming out of this bear market with a world-class product. They’re facing some headwinds given the nature of their business and current market conditions, but they’re doing all the right things. If they make it through the next few months as loans mature, I’m confident they’ll emerge as a big winner on the other side. Sid, Maple Co-founder, recently discussed how they're approaching this downturn. ‘This period gives us time to think through appropriate changes and manage operations… you should try to validate the core pain points for people. Think carefully, and come together as a team to address those pain points. Identify the top 2-3, work through them, and develop your upgrade while continuing to run your business simultaneously. That’s what we’ve tried to focus on.'

Zero tribalism clouding his thought process. They already support both Ethereum and Solana. Like dYdX, they maturely let audacious goals guide their decisions. As the Solana expansion post highlighted, "the team is singularly focused on building a $100B company and crypto’s largest capital network."

Their approach should serve them well on their journey towards product-market-fit (PMF). They’re taking advantage of the current market conditions by identifying improvement opportunities. As a result, their product will be better positioned when the stakes are higher in the future. And perhaps most importantly, Sid is leaning on his users. Users are your most precious resource when designing products. Involve them in your processes instead of trying to guess their pain points.

Pragmatic Product Teams

Both dYdX and Maple are examples of pragmatic product teams. If you’re serious about being one of the big winners in the next cycle, check your mindset, goals, and behavior. Use the bullets below as a guide. Remember, 'up only' was a meme, and money is limited. Raising is already more challenging. Now is the time to identify changes and act decisively.

  • Understand the importance of iterating towards PMF. You need to create a solid product that meets the demands of the users of an attractive market.
  • Don’t chase or fall for fake PMF. This is a big problem across crypto where it’s common to shill your token before having a product people care about. Be honest with yourself when assessing if you're too reliant on incentives. As Tascha said, “Token-enabled ponzi-nomics hides weakness of the product, creates illusion of adoption & actually makes it harder for the product to improve b/c there’s no correct market feedback.” Most of these ‘products’ will die this winter.
  • Choose the best tool(s) for the job. Look at new technology as an enabler of new behaviors and applications. Be comfortable living in the middle of spectrums if need be.
  • Recognize that the best tech doesn’t always win. Optimizing for ease of use and trust can be more beneficial. This applies to API-first products as much as consumer products. Centralized exchanges have been the breakout crypto products to date for this reason. It also answers why CeFi was wildly popular even with the existence of DeFi.
  • Don’t try to be the best ‘crypto version of x.’ Change your mindset to be the best x, period. It’ll better align your team, expand your market, and attract long-term investors and partners with expertise in your area.

Use this time of uncertainty to evaluate your approach to product. It’s hard to build great products. You have to make thousands of decisions as you iterate towards PMF. It’s especially hard in crypto, where the landscape and foundation shift rapidly. As Antonio said, “we’ll always build on the best possible technology, and we care about the best possible technology on a 2-3 year time horizon because we’re willing to throw out everything we’ve built before and just build on the next 10x thing.” Don’t let tribalism or past decisions hold you back. Think independently. This is a wake-up call – focus your team on creating the best possible product.

Note: I’m an investor at Costanoa Ventures, an early-stage firm focused on crypto, web3 infrastructure, fintech, data infrastructure, and security software. I did not speak directly with anybody at dYdX or Maple while drafting this post and Costanoa does not currently own their tokens.