Why I left TradFi for Crypto

"(We)b3 can do better", by Mike Featherstone.

“Why’d you do it?”

When someone wants to know why I left TradFi for crypto, they often sound like a reporter interviewing a criminal after he’s just been sentenced.

To be fair, that’s a natural response to reading one headline after another about the likes of Do Kwon, Su Zhu, and SBF (who’s just been arrested in the Bahamas). 

But my answer won’t make for much courtroom drama: I’m curious. Traditional markets are well-researched, well-trodden paths. 

It might sound odd coming from the Chief Financial Officer, but finance isn’t the most exciting thing to me about the industry I get to work in. 

There are many unknowns, and basically no playbooks — which means we get to help write them. This makes the job of a CFO feel about as close to mapping outer space as one can get without an astrophysics degree. But again, I love the unknown. There’s a relationship here between my current choice of industry and the fact that I’ve lived in eight countries and traveled to countless dozens more.

That level of unpredictability can get dangerous. There are no standards for risk assessment, regulation changes frequently (or: is in the midst of material change?), and there aren’t many established best practices we can rely on. Ironically, human error is one the mechanisms by which progress is made.

And we’re right in the middle of one of those errors.

The problem of hyper-financialization in Web3

“Number go up.” 

It’s a common memetic in crypto, an only-somewhat-sarcastic phrase we like to use self-deprecatingly in reference to a commitment to the industry and a hope for positive returns — a stance that looks ridiculous to anyone who doesn’t remember the feeling of fighting for a cause you believe in. 

In hard times, the phrase encourages: “Sure, times might be tough now, but remember what we’ve seen in cycle after cycle: number go up.” And in good times, it’s the Twitter equivalent of a celebratory fist-bump.

(See also memes such as “Have fun staying poor” and the like to get my drift about the more unhelpful stuff.)

Coming from TradFi, there’s a temptation here to scoff at the naivete (which we explore in Is Crypto Naive?, aka “Crypto for the Real World”). And of course, we could discuss at length the ways truisms like this can steer you wrong.

But we both know that talk amongst Wall Street floor traders or Miami fund managers can sound strikingly similar. Crypto is as much a product of the economy it’s trying to resist as the one it’s trying to create, after all. 

And yet, the truth remains; number can’t always go up — as with every market. To refer back to a quote attributed to Rockefeller when asked what Standard Oil stock is likely to do, “Young man, it will fluctuate”.

This means that the hyper-financial focus of Web3 narratives and the insistent profit-expectance are setting Web3 up for let-downs cycle after cycle after cycle.

Number goes up, hopes go up, people overextend, heroes fall, people get “rekt”, chains and projects are marked as “ded”, and so on. It’s like the regular stock market, but with just slightly more cult-of-personality than normal (Steve Jobs was the original reason we all cared about $AAPL, after all).

If we want to make progress, that needs to change.

We like the tech

Thankfully, another meme is starting to catch on. 

“We like the tech” is said with a similar playfulness as “number go up”, but this time, it’s also an admonishment — ”Don’t forget what we’re really here to do.”

We’re here to solve real-world problems with emerging tech. 

Finance is one area where real-world problems occur, but in a mode of hyper-financialization, many people aren’t even focused on financial problems, they’re focused on financial returns.

“We like the tech” is an effort to re-focus on the bigger picture here. To that end, I’d like to introduce you to just a few of the innovations I get to explore in my work at Flipside:

Data 

In Web2, data is gross. Most of the time, that is. 

It’s Cambridge Analytica, and Facebook’s re-brand. It’s private enterprises having far too much influence over the individual, and staying tight-lipped about how they’re sharing (read: selling) that influence. It’s web 2 platforms owning your entire online existence, with zero portability or interoperability between platforms.

Not so in Web3. 

Web3 data is an open record of transactions on each blockchain, which includes activity on the platforms built atop them. The task here isn’t owning the data, since it’s generally free and public. 

Rather, we curate, translate, and organize it so that it’s useful for anyone that would interpret it. 

The lowest hanging fruit of this tech is financial. At a bare minimum, retail and institutional investors alike can use this data to make more informed investment decisions.

But that’s still the bare minimum.

That data also covers NFTs, gaming, social networks, work/bounties, and anything else that can be protocolized on-chain.

Think of the implications: imagine if all data on how people use the internet today was open source (but wasn’t always publicly tied to your identity and advertising preferences). You become a more informed participant on the internet, in whatever you do. 

This is the grassroots layer of Flipside’s databases. Anyone can query tables for free to find answers to specific questions, chart usage trends, and more.

But we can go further. 

To their credit, Web2’s “Big Data” offers data-driven insights to companies and organizations looking to make more informed development, advertising, and business decisions. 

At Flipside, we’re aiming to perfect the art and science of the data-driven insight. Our advocacy team provides custom white-glove guidance to organizations, and we leverage the strengths of Web3’s to activate communities of analysts who can deliver on-demand analysis — by the users themselves. It’s this context that makes data both quantitative and qualitative, and it’s all possible because Web3 is a fundamentally different foundation to build insights on.

DAOs

It isn’t just information being changed by Web3. Organizations are, too. 

The open-source attitude is changing how we get things done. That community of analysts delivering insights? 

That’s self-governed. We’re in the process of energizing a Decentralized Autonomous Organization (DAO) called MetricsDAO to self-source and self-train analysts who perform on-demand analytics.

Forget decentralized finance, we’re talking about decentralized labor markets — The economic incentive model (which has been quite an exciting problem to wrestle with) and structural elements of MetricsDAO can be applied to any number of work contexts. 

Move aside, gig economy. Or rather, move forward.

Tooling

For all of this to be possible, we need primitives. Tooling, infrastructure, procedural frameworks, etc. Essentially, this is where Web3 tech meets its problem-solving application.

Take Badger, for example. It makes spinning up something like MetricsDAO so much easier. 

If you want to build a DAO, and have laid out the relevant social and economic models that will serve as its foundation (which anyone can learn from our work at Flipside), Badger helps you leverage NFTs to make it happen.

Badger is a tool that lets anyone mint NFTs with a few clicks. In early stages, it’s specifically geared toward DAO roles — if you need to gate features or access by a person’s role in the organization, just create a set of badges and issue them to the relevant people.

That single feature can be applied at scale to business, communities, and even software subscription models. I’m certainly biased, but I think it’s one of the best concrete examples of how Web3 tech can directly impact our existing workflows outside the industry.

And Badger is just one of multiple tools we’ve already launched, with hopefully many more to come.

Solving problems in Web3

At Flipside, our goal is to experiment in search of solutions to real world problems with Web3 tech, and my job is to make sure we’re financially able to continue doing so as long as it’s beneficial. 

The products I described above are examples of how, by focusing on advancing the technologies that comprise Web3, we can genuinely impact global economies, not just individual wallets.

I find it to be just the right mixture of idealism and pragmatism, and it’s already “paying dividends” (and that’s not financial advice). 

If you’ve found this interesting, be sure to subscribe to this newsletter — it’s a journal of what we (the Flipside executives) are learning as we use data to chart a course forward in Web3.

And if you’re on LinkedIn, be sure to let me know what you liked (or didn’t) about this piece. 

See ya for the next one!