by Nik Hawks, Max Gold, Alexander Krongard
DePIN project founders and investors tend to be Wild West types; willing to risk it all, competent in their field, with a streak of independence that can be at times startling.
Still, you need more than a high risk tolerance, competence, and the ability to independently make and execute decisions. You need to effectively build, manage, motivate, and lead a community.
Unlike typical commercial enterprises which sell to customers and provide service from a centralized source, DePIN projects involve a community as part of the structure of their business. This community isn’t quite like your normal “customer base”.
- They may not have bought hardware directly from you, so you can’t necessarily provide customer service.
- While they bought equipment and seem like a customer, they operate more like a franchise than an end-user.
- They have expectations about the product they bought that you need to deliver on in an unpredictable environment in order for them to continue using it.
- Continued use is critical: They literally provide the product that your project sells.
A DePIN community is far more like a group of mercenaries than it is like an army with a single united focus and goal. One of your many jobs as a project founder is to convert these mercenaries into an army of true believers. That conversion will require a well thought out strategy backed by the ability to execute quickly when the time comes.
Now, if we were being nice & fluffy I’d shy away from this army analogy, but if you’re going to be successful I think it’s one to lean into, with one quick caveat:
What you’re doing in DePIN isn’t actually war, which is a rotten and horrible thing that is basically an admission of evolutionary failure by all sides. Still, the war analogy is useful here.
So, think about your project as if you’re going to war. You are up against both conventional and unconventional forces (think Big Army as well as special forces).
The other side is better funded, there are more of them, they consist of multiple groups all going after you with different motivations, and there’s no central point to attack. Basically, it’s a worst-case scenario that no experienced soldier would take on if they could avoid it.
However, you’ve taken it on, and there’s nothing like a truly difficult challenge to bring out the best a human can do. So, what will you need to do to win the war?
First, you have to think about your strategy. In broad strokes, your strategy should be to avoid open battle at all costs. You don’t want to fight in the open as you’ll almost always lose. Rather than fighting the enemy, your job is to persuade them to fight for you.
At our consulting firm of Gold Hawks, we move clients through a three part strategy we developed called SSC, for Structure, Story, Catalyst.
A Structure is made up of rules and incentives. Think of it as, “Here’s how you play (the rules), and here’s how you win (the incentives.)”
The need for Structure is blindingly obvious, but the building of it is devilishly difficult. Every rule has to be examined for how it will drive the incentives of deployment. Rules and incentives are the interconnected rails upon which your army will build. Importantly, no one gets it right the first time.
“No plan survives first contact with the enemy.”
-Field Marshall Helmuth Von Moltke
Your Structure needs to be responsive to events. This is critical in making it outlast a market cycle. As we’ve seen with Helium (where my partner Max built the highest-performing fleet in the ecosystem and I was voted Community Member of the Year), the incentives that work when your community is small will deform and even become perverse as the community grows explosively.
You MUST prepare to change your Structure and incentives as you grow. The world of DePIN is one of Steven Jay Gould’s punctuated equilibrium; for a long time nothing happens, then it all happens at once.
When the change comes, a properly built structure is prepared to swing easily on the fulcrum of a well told Story.
Story is the meaning behind why your community supports you. Story binds the community together, forming cohesion in chaos when the Structure must be changed. Story gives Structure the quality of emergent anti-fragility.
You need a story your community can understand and feel a part of. Your story needs to provide a reason for the mercenaries to join your army and not someone else’s.
Story is an ongoing development that is built in conjunction with the community. Remember, you’re trying to convert a bunch of mercenaries on the other side of the battle line to join your army as regulars. You’ve got to make them BELIEVE.
As an example, we helped our client GEODNET tell the story of GNSS, how by placing a small unit on your roof you can provide a reference point for GPS satellites thousands of miles away and issue a stream of corrections for any variations in time-of-flight of their signals. These corrections can improve local GPS accuracy by 1,000 times. In return for helping providing this accuracy, you earn tokens. If you’re a surveyor who needs this incredibly precise accuracy you can buy the service far cheaper than from other positioning company offerings because of the community providing it.
Thousands of people who knew nothing about GNSS were able to understand this story. Hundreds of professional surveyors were willing to listen to the promise of a new service that left more profit in their pocket. Once the community understood it, they began to believe in it.
Story helps tie together disparate elements with shared belief. The better the story the stronger the belief and the more coherent and powerful responses are to unforeseen events. Even if they’re not on the same track, the separate parties move in the same direction. Belief begets builders.
Belief comes from leaders who have a clear mission, who respond to changes quickly, fairly, and effectively, and communicate both the mission and what is changing so their community can make good decisions.
Your community will expect you to deliver more than just a product they use. They want to know all about the product and your project. They want to know the fine details of what you’re doing, and why; they want to know the Structure. Before you get belief, you’ve got to build understanding. You use Story to do that.
In a perfect world you first build Structure, then shape the Story, and right as you finish the two you bump into the Catalyst. It never actually happens that way.
Catalysts are events that accelerate expected outcomes. Examples include the financial crisis of 2008, 0% interest rates after COVID, and bitcoin halving. Catalysts come in two types: Generally predictable and the black swan surprise.
A generally predictable catalyst is the Bitcoin halving. Every time Bitcoin halves, sometime in the following 6 months the crypto market begins the transformation from bear to bull. Crypto prices go up, many times uncontrollably. Almost all projects rise on this frothy growth, and both Story and Structure are temporarily eclipsed from sensible view. Still, as the froth subsides, the projects that stand proud of the thousand bursting bubbles are those that built Structure and Story.
Black swans are unpredictable. Much has been written about them, but really, only two things will make a difference to your project when a new color of swan is discovered:
- Do you have the Structure to take advantage of it?
- Do you have the Story telling ability to make the most of the opportunity?
The best way to prepare for catalysts is to build in opportunistic functionality with a solid Structure and Story.
Preparing for these cycles with Structure and Story is the marker of an excellent project. It can be very difficult to do. In a bear market it sounds cool to build, but building costs blood & treasure, and both seem dearer in a bear than a bull. Still, in order to provide critical Structure, blood and treasure must be spent efficiently and effectively for the project to fly up during the bull run.
If you’d like help with Structure and Story (they’re no easy feat!), please reach out. My partner Max and I have been in crypto since ETH was under $2. Our DePIN client list includes the Helium Foundation, Nova Labs, GEODNET, Hivemapper, Anode Labs, and others. We’ve seen the market go from dry bricks and mortar to bursting with froth to blood in the streets and back to building.
We’d love to learn about your project, then help you prepare with Structure and Story for the inevitable Catalyst.
Gold Hawks & Associates LLC is a consultancy specializing in the DePIN space. We have been featured in Forbes, Fortune, and Messari and have worked with all sizes of projects including Nova Labs, Helium Foundation, Hivemapper, IoTeX, Anode Labs, GEODNET, Eclipse Labs.
We assist with strategy, incentive design, and messaging. Whether you are considering starting a DePIN project or you’d like help managing your success, we stand ready to assist. Please reach out if you’d like our expertise applied to your project.
Disclaimer: Financial Interests and Consulting Services Disclosure
This blog post may contain references to various cryptocurrency projects, tokens, or assets. It is important to note that the authors of this blog post and Gold Hawks & Associates may have a financial interest in some of these projects or may provide consulting services to them, or in some cases, both.
The information and opinions expressed in this blog post are intended for informational purposes only and should not be construed as financial advice or a recommendation to invest in any specific cryptocurrency project. Readers are encouraged to conduct their own research and seek the advice of qualified financial professionals before making any investment decisions related to cryptocurrencies or any other financial assets.
The authors and Gold Hawks & Associates are committed to providing accurate and unbiased information, but it is essential to understand that our financial interests or consulting relationships with certain projects may influence the content presented. We aim to maintain transparency and integrity in our content, but readers should exercise due diligence and consider potential biases when interpreting the information provided.
Investing in cryptocurrencies involves inherent risks, and market conditions can change rapidly. It is crucial to make informed decisions and only invest funds that you can afford to lose. The authors and Gold Hawks & Associates assume no responsibility for any losses or damages resulting from actions taken based on the information presented in this blog post.
By reading and engaging with this content, you acknowledge and accept the potential conflicts of interest disclosed in this disclaimer.