Customer Development in DeFi

The following is a discussion on customer development and distribution to early adopters and the early majority.

• Who and WHEN are the Users?
• Trust from the Code-Illiterate
• Community Creates Value
• Potential Negative Externalities
• Where I Can Help
• Some Other Thoughts and Questions on Problems DeFi Could Solve

To bring DeFi to the masses, protocols must not only produce products but must effectively distribute those products to users unfamiliar with their offerings and DeFi in general. Distribution and trust will be key components, and this is what I will discuss herein.

Who and WHEN are the Users?

This section will lay out user types and where they live in the DeFi timeline. It is estimated that 26.8 million people in the world can code (less than 0.5%). This means in order to reach the bulk of users, protocols will have to translate code into app usability and trust for the code-illiterate masses.

When thinking about users it is important to not only think of who they are but WHEN they will be the correct users to be catering to. I lay them out below.

• Innovators — Niche Techies and Hobbyists

These are the trailblazers. Highly technical, they scour the internet for the small chirps of the next best thing, dive deep into the rabbit hole, and evangelize. These people understand the future of DeFi, are fully bought in, and already use DeFi and DEXs. They can be leveraged as product evangelists.

• Early Adopters — Technical Professionals & Whales/Institutional Investors

Some early adopters are bought into DeFi already. Some are still a little skeptical but participating. They have technological aptitude (or an advisor who does). Institutional investors looking to get in early are in this segment. They will have low transaction volume but very high value per transaction. A lot of current users are in this bucket, but there are a lot more to obtain.

• Early Majority — Gamblers & FOMOers (Fear Of Missing Out)

Figuring out how to obtain these users will set you apart from the rest of the pack. It may still be a little early, but laying the groundwork now is important so you don’t fall into the chasm. These users are code-illiterate. They will follow influencers and 3rd party supporters to your platform.

The FOMOers have seen the headlines of people making a lot of money and they don’t want to miss out on the next big thing. They are driven by fear and anxiety of watching the world pass them by. They are also skeptical. They throw in their money and hope for the best. They are not active participants.

Like the FOMOers, Gamblers have seen the headlines and want big gains. But instead of being driven by anxiety and fear, they are driven by greed and laziness. Gamification and addictive mechanisms drive these users and there will be a lot of them. They will follow influencers and are likely to act IMMEDIATELY upon getting a tip. The platform should make it easy for them to engage, interact, and supply dopamine when they make actions. You can bring them back by supplying that dopamine again with notifications.

Some of these users currently exist in centralized exchanges and can be obtained without the need for much education. These users stay away from DEXs due to fear. They want the returns DEXs provide, but they need reassurance that it is safe to do so.

• Late Majority — Generic Investors & the General Public

You should not worry about these customers for a while. They will come in later once DeFi is well understood, more safety mechanisms and insurances are in place, and DeFi possibilities are part of the general lexicon. They will mostly have low value, but as a group very high transaction volume.

• Laggards — Skeptics & Non-Participants

You should not consider this group for a very long time, if at all.

Trust from the Code-Illiterate

Because trust is in the code but the next stage of customers won’t read code, gaining customer trust will be key. One way to gain trust is to be around for a long time. Because DeFi solutions are relatively new, time is not on your side. Below are some ways to obtain trust quickly.

Community Creates Value

The most important thing you can do in DeFi right now is build a trustful, strong, engaged community. There is true value and narrative value. Most people will follow you based on narrative value.

• Protocols need to be written about by trustworthy actors via social media, email newsletters, articles, etc. with backlinks to your site.
• Find existing articles for the coins you support and get the authors to add in a backlink to your site.
• Supply the piece of an article yourself to publishers detailing out how to accomplish the opportunity (staking, lending, etc.) at hand — backlink to your site.
• Your site should mimic what is being proposed by these articles, newsletters, etc.(makes a stronger case for providing these snippets to publishers).

There are crypto influencers out there who have already done the work of gaining trust. Leverage them while developing your own trust. If these influencers write about you, this makes for easy conversion. Your marketing and PR teams should be pushing your narrative and be engaged with these trustworthy actors. Backlink everything.

• Sell the story of the humans behind the code.

You have a bunch of amazing team members who want to DO GOOD for the world. Humanize them. Let people dig into their backgrounds. As a non-coder, they will look to trust the humans and will then follow the code the human creates without reading it.

Make it Fun

• Discord & Telegram interaction, contests, etc.
• What other fun, creative things can you do? Games, fun, free things, and money-making will all bring happy community members.

Engage with the community. Make people feel special, connect with them, and allow them to make their own connections. If you are the steward of these connections, you will gain great favor.

• Educate on your site. I saw a stat recently that 50% of adults in the US can’t finish a novel at an 8th-grade reading level (Harry Potter), so you really have to dumb it down or gamify it to reach these masses.
• Transparency (for the code-illiterate) — how transparent do you want to be? Will people participate in staking if you show the hurdle rate and APY? Or will it scare people away?
• A lot of people view DeFi as a get-rich-quick scheme or gambling. How can you feed into that sentiment to get users? Can you give a rating for how safe or unsafe something is? If someone clicks a tooltip can you give them an option for how technical they want to get and allow them to dive deeper and deeper?

Being a part of the rise of DeFi, you’re going to have to do a lot of teaching. Becoming the best place to learn will bring people for a different purpose. They learn, they trust, then they interact with what you want them to do. To be sure, teaching is expensive, so you may want to avoid this if at all possible. You can leverage partnerships for this as well — maybe a better alternative.

Make it Easy

• Can you allow people to buy with Apple Pay/Google Pay/Credit Card? Could you make it easy to buy, then create a wallet for the user and perform the desired transaction (lending, staking, etc.) on their behalf? Do you need your own wallet? Can you partner with a wallet to do it?

This may be a bit counterintuitive to the idea of DeFi, but it is so hard to participate right now for the average user. Make it easy and get them in. Teach them later.

Potential Negative Externalities

Possible Issues with non-educated users, especially when it comes to voting/engaging:

• Lack of participation.
• Unqualified participation could lead to bad outcomes (this could be negated with a testing mechanism for voters).
• A corruptible testing system (such as a faction sharing answers). This could be overcome with the correct testing mechanism design.
• Bribes to the point of a centralized faction taking over. Power compiled is counter-supportive of a decentralized network.

Will a majority of users being inactive cause issues in token governance? If users just delegate their tokens for bribes, will this allow for a power balance to be shifted to a centralized group? How can you design the tokenomics to account for this?

At what point do you really want common people getting in on Defi? Do people coming in and not using their votes hurt the system? These people are not going to come in and read the code. They won’t be capable of using the system unless you make a UI for them. They’re going to read something online, follow the steps, and then you’ll never hear from them again. How does the token deal with that? Will you have different tokens for different purposes?

Where I Can Help

I see myself as a Product Manager as the glue between the products built and distribution, helping get the correct message from a technical standpoint into a story users can buy into and receive from an intermediary they trust.

I am practiced at researching and understanding customers and how they flow through and interact with a Product. The customer should always be front of mind. I’m a flexible problem solver and am open to helping build the Product wherever needed. If you have a Web3 product you’re working on, please reach out to discuss.

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Some Other Thoughts and Questions on Problems DeFi Could Solve

Reasons for DeFi:

• Increase access to banking and investing
• Reduce time/friction in banking and investing processes
• Remove friction of raising capital

There is a shift occurring from segmentation and targeting to contextual money advice.

Moving forward, the best way to interact with customers will be to give them contextual advice when they need it.

When a customer is about to make a purchase can DeFi:

• Suggest to them whether or not they can afford it?
• Suggest to them where to invest to offset the cost of the purchase?
• Lend to them instantly?
• Lend to them + invest for them?

I’m guessing Fintech will solve the problem of building better data models than traditional banks to understand contextual customer interaction.

• Can DeFi integrate with Fintech to supply yield farming?
• There is an app called Acorns that, when you purchase through their portal, invests in the stock market on your behalf. Could this be done with crypto yield farming?

Can people build reputational credit through DeFi? Reputation is much more valuable than identity. Web3 is working on digital identity and attached reputation. How will you tie into this problem?