Building a successful crypto protocol requires getting a dev -> app -> user flywheel going. This is the main thing. If your protocol cannot do that, it cannot win. Of the three legs of the stool, users are likely the most important. Their assets and their data are the stickiest. Ethereum, despite being slow and expensive to use has created a very sticky user base. So sticky that applications are willing to pay a large amount of rent to Ethereum! This dev -> app -> user flyhweel gives a protocol leverage and incentivizes future devs and apps to build on it to get access to its user distribution.
But in order to get users, protocols have needed to attract devs who are building apps. Different protocols have attracted devs with differing tactics and varying levels of success.
Ethereum was first. It's advantage was literally creating a new market and it took many years to cultivate the flywheel it has today.
Solana incubated its first few protocols.
Arbitrum hit early with GMX.
Base hit early with FriendTech and put the full weight of Coinbase behind the L2 once it showed signs of working.
Today, competition for devs has never been higher. The cost to launch chains has gone down with RaaS providers. The cost to use news chains has gone down with embedded wallet infra, account abstraction and EIP-4844 and alt DA. So new protocols have resorted to paying hundreds of millions of $ in tokens to acquire both devs and users. In my opinion this leads to adverse selection. It's exceedingly hard to curate quality devs and no matter how much we try to meme it users rarely come for the token, stay for the product.
A strategy we're seeing more and more and starting to invest behind is that of product led protocols. Rather than attracting third party devs to your protocol, build a product first, on it's own open dedicated blockspace with the ability to transform into a vertical network. The best example of this in practice is Warpcast as the leading product for the Farcaster Protocol.
There is no reason for developers to build their own social apps on top of an open Farcaster Protocol that has no users. Dan and Varun knew this, so they have focused exclusively on building Warpcast into the primary social product for crypto twitter. With the launch of new crypto native features, most notably frames, they have been successful in pulling high engagement users to Warpcast and as a result the Farcaster protocol. As Warpcast approaches 100k DAU, there is now a direct incentive for devs to build on top of the Farcaster protocol: access to Warpcast distribution.
Warpcast -> Farcaster not the only example. Zora, for instance, has led the charge on this front with it's own rollup. Beginning with zora.co it used it's user base to transition to an open protocol where now devs are minting nfts for their own apps on Zora Network because its the cheapest place to mint nfts and where most collectors are.
I suspect this is a playbook that we will see used more and more often going forward.
Views are my own and not investment advice. Haun Ventures may have previously held, currently hold, or will in the future hold positions in projects mentioned in this post. See https://www.haun.co/disclosures.
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