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April 25, 2022

The crypto cold start problem: How new projects gain traction

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Today, we’ll talk about the cold start problem all crypto projects face: How to grow even the most promising project when nobody knows about it yet.

Imagine the situation: You just created the first version of an incredible blockchain. It solves all the problems, and it should take the world by storm. But then you realize that there are over 8000 traded cryptocurrencies, and you are not one of them. 

So, how do blockchains like yours do to get attention then? First, they set aside a large amount of their coins to give away. They create airdrops, for example, to distribute them to early fans, and they give them to partners to help spread the word in return. If enough people like the coin, they might buy more, and the price increases from zero to something.

But establishing value beyond market dynamics is the second, and most important step. And this is where it gets interesting – many coins also act as rewards on their blockchain, such as validating transactions. Ethereum is a good example - after people saw the value in the technology and built dapps on it, they were willing to pay for Ether so that they can pay for transactions.

And that’s why it is easy to create a token, but very difficult to make it worth something unless it has real application value and a user base.

And next time, we’ll talk about how Learning about blockchains can make you free money. Stay tuned!

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