Everyone knows it: Crypto is undergoing a severe downturn, possibly the most severe in its 14-year history. With each passing week, there are more bankruptcies, fraud revelations, and layoffs. Crypto prices are tanking, with Bitcoin down 75% from its all-time high in November 2021 (source). Developers have lost their jobs, most investors are underwater, and the industry as a whole has squandered the trust of many customers.
In other words, crypto is facing its version of the Great Financial Crisis.
Yet, the crypto bear market can also offer incredible opportunities for web3 mobile developers and founders. In this post, we do a deep-dive into how the current crypto slump may impact iOS and Android developers, and outline what mobile teams can do to survive and prosper. It is not all good news, of course, but this environment can be a powerful moment in time for web3 mobile app developers looking to get ahead.
Crypto is dead, long live crypto
For the crypto space, 2022 is a year to forget. In May, the Terra network collapsed due to a depegging of its stablecoins (source). Hedge fund Three Arrows Capital and crypto lenders Voyager and Celsius fell soon after. The crypto market trudged along nervously, until early November, when FTX, the second biggest crypto exchange, and Alameda, its sister hedge fund, filed for bankruptcy amid allegations of stolen customer funds (source). The FTX debacle was crypto’s Lehman Brothers moment, and triggered a cascade of crashes, bankruptcies, and layoffs across the industry (source).
As we write this post, the crypto contagion is far from over. Major crypto institutions are facing serious liquidity and solvency issues; users have lost their savings; and investors have closed shops or paused further crypto investments. It is not clear when crypto will truly bottom and begin recovering.
But for web3 mobile developers, this is not the end of crypto. Look closely, and you can see that the industry has made significant progress in technology and adoption, and many sectors remain healthy:
- Improving crypto adoption: Despite the downturn, there are signs that crypto continues to gain adoption. In August 2022, the number of crypto wallets reached 84M, up 10% from a year ago. Brands and institutions like Instagram, Nike, Stripe, and Reddit have also moved aggressively to web3–a move that was unthinkable just a few years ago (see link and link).
- Stronger technological infrastructure: Anyone who worked in crypto in its early years knows how lacking the technological standards were for crypto in 2015-2018. Today, there was almost an embarrassment of riches, with a growing L2 ecosystem (see Arbitrum and Polygon), new interoperability approaches (e.g. Cosmos), and innovative technological improvements (e.g. zero-knowledge proofs). In September, the Ethereum network deployed The Merge and transformed to a proof-of-stake mechanism, thus promising vast enhancement in transaction speed and gas fees. This means that web3 mobile developers now have access to better tooling, developer support, and community than ever before.
- Growing verticals and use cases: 2022 has seen a boom in web3 applications and use cases. From decentralized identity (e.g. Lens) and social networks (e.g. Farcaster) to music investing (e.g. Royal) and messaging (e.g. XMTP), web3 has brought new innovations that have the potential to disrupt multiple industries. We expect this trend to continue, bear market or not.
- More welcoming attitudes from Apple and Android: This is probably the most relevant development for iOS and Android developers looking to add web3 features to their apps. For a long time, the biggest sticking point for web3 mobile developers is Apple and Android’s hostility towards crypto. That seems to have changed this year, as Apple now explicitly allows NFT transactions on iOS. We cannot understate how significant this policy change is, because it opens a huge opportunity for iOS developers to unlock all powers of NFTs for their customers.
Crypto is still growing, despite all the negative headlines.
Upcoming regulatory scrutiny will be net-positive
As users and investors get impacted by the recent crypto debacles, regulators and lawmakers worldwide will move aggressively to set up new legal frameworks, enforce regulatory regimes, and take actions against crypto actors. We saw that in the aftermath of the 2008 financial crisis (most notably with the Dodd-Frank Act) and in the aftermath of the dot-com bubble (see a flurry of SEC’s rules in 2001 and 2002). Web3 developers should expect heightened scrutiny from now on.
In our view, that is a positive development for crypto. For too long, there was a lack of regulatory clarity, especially in the United States and Europe (source). For example, one of the biggest regulatory debates in the US is the criteria to determine whether a token is a security. If a token is found to be a security, the organization issuing it would be subject to rigorous disclosure and reporting standards. While it is well-known that the Howey Test is the primary basis for that determination, there has been no clear articulation and guideline from US regulators to help crypto participants apply the test to their tokens. Even worse, there seems to be a turf war between the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and various state regulators on which agency has the power to regulate crypto (source).
The results? Good actors feel bewildered and restricted when working with regulators; crypto companies systematically move to offshore jurisdictions to evade law enforcement; while users still receive little to no protection all the same. As Coinbase’s CEO Brian Armstrong pointed out, this muddled situation has hurt the crypto industry as a whole, while benefiting bad actors (source).
Additional clarity will be beneficial to any mobile app teams looking to participate honestly in web3. Yes, there may be more rules to consider. Yes, the new rules may feel unfair. Yes, having too much government interference may seem contradicting to the decentralization vision of crypto. But we believe that regulatory clarity should level the playing field for all web3 developers. Moreover, since iOS and Android developers will have to comply with Apple and Google’s rules anyways, having clear and consistent standards from regulators does not seem like a bad thing. On the other hand, well-defined regulatory frameworks could even assuage users’ concerns over the criminality and fraud in crypto and accelerate web3 adoption.
Build fortunes in bear markets
As the famous saying goes, “fortunes are built in bear markets and collected in bull markets”. A crypto downturn can be an extremely challenging environment for any web3 mobile developers, but it also provides great upside for teams who are resilient, determined, and resourceful.
Today’s macroeconomic environment is often compared to the stagflationary period in the 1970s, but the same period also gave birth to Microsoft and Apple. The dot-com bubble destroyed many fledgling Internet companies, but it saw Amazon and PayPal build the economic powerhouses that they are known for now. A few years later, Airbnb was founded in the midst of the 2008 financial crisis. So if history is any guide, we should expect that some great web3 founders are building the next Apple, Amazon, and Airbnb for web3 right now. Why shouldn’t it be you?
To be sure, a web3 team starting today will run into more difficulty fundraising than the same team just one year ago. Our conversations with many crypto and startup investors have confirmed this: most investors are staying away from web3 and crypto at the moment. It is a fact that you will have to adapt, by preserving your cash, extending your runway, and focusing on unit economics. Paul Graham coined a very useful phrase for this strategy, “default alive”, which means that if everything stays the same, the startup should be able to make it to profitability without any external funding. In the current crisis, we believe that every web3 team should strive to be default alive.
Curiously, the web3 mobile developers and founders we talked to seemed excited about the current market. Valuations have become reasonable again, crypto scammers are less active, and users no longer chase after the next crypto hype. There is also less competition, which means less pressure to spend on ads and marketing to acquire users.
So yes, it will not be pleasant to work at the intersection of web3 and mobile at this moment in time. But it is a great time to create a new web3 mobile app, or add NFTs to your iOS and Android apps, or found the web3 powerhouse of the future.
Back to the basics: Make something people want
If the current bear market is not all terrible for crypto, maybe the previous bull market was not all sunshine and rainbows either. The mass hysteria and frothy valuations in crypto resulted in crypto companies raising millions with real products, investors losing sight of proper corporate governance, and bad actors pushing out frauds and scams. In many ways, FTX was the poster child of the 2019-2021 bull market.
The irony was rich: a crypto industry built to correct the corruption of Wall Street was itself corrupted by greed.
So it is time for crypto to get back to the basics. This means, first of all, to deliver real value to the customers. iOS and Android developers know this better than anyone - the intense competition in the App Store and Play Store means that every app has to solve real, burning problems for their users. All mobile app developers have to do now is to apply the same understanding to web3. Can you learn more about your users’ problems, and see if those problems can be solved by NFTs and the blockchain? Asking that question often enough, and all of a sudden we will have a fighting chance to restore the original premise of crypto.
Focus on your users.
The second implication sounds obvious, but it is worth saying it out loud: Don’t be evil. Be good. If the recent crypto scandals teach us anything, it is that misdeeds and improprieties will always come to light, and the people trading those dark arts will always have to face consequences. As web3 mobile developers, it is more important than ever that we hold ourselves to a higher moral standard: to serve the needs of the customers, to follow the laws, and to not do evil things.
Everything else will work itself out.
How Dreamerly can help
Dreamerly was founded in the depth of this bear market to help web3 iOS and Android developers survive and thrive. Our SDKs help in two ways.
One, our toolkits make it easy for any mobile developers to integrate NFTs into their mobile apps, so that developers can save time, money, and energy to focus on serving their customers. As we lay out above, it is critical for teams to accelerate iterations, manage engineering resources, and cut costs in the current downturn, and Dreamerly will help you do just that.
Two, we are 100% focused on compliance. This means that our SDKs ensure that your apps follow the latest app store guidelines and comply with local laws and regulations. On top of that, our team of experts will provide personalized tips and suggestions to help you navigate through the app review process.
We are just one DM away. Let us know how we can help.
Dreamerly is a suite of easy-to-use, compliance-focused, customizable SDKs and APIs powering NFT features in iOS and Android apps. Our mission is to help mobile developers create amazing web3 experiences for their customers.