Just going to venture outside of my core domain for a bit.
B2B vs. B2C, why not both?
Lots of chat and some forums posts about abandoning B2C for B2B lately and I wanted to register strong objections to this way of thinking. I’m not going to argue for the inverse of this, but more for the appropriate B2B strategy for a decentralized protocol, and to call out a massive blind spot everyone is missing with B2C.
B2B can be an effective profit-seeking strategy, but it carries a number of risks. I suggest we make a checklist for any potential B2B engagement. This list is meant as a starting place, and not an exhaustive list of all considerations. I’m just an engineer damnit.
Poor ROI. The time invested on any such engagement should generate staggering amounts of new DAI supply with matched demand, while preserving peg stability. For example, anything we spend 6 months on should come with an expectation that we generate somewhere upwards of a billion more DAI within the year of the end of that engagement.
Linear Scale. While DAI supply is the ultimate measure for ROI, there are knock-on effects we get from choosing engagements where the end result impacts end-users. A big advantage to tech is that we can scale with network effects, it makes no sense to choose an engagement that could generate a billion DAI in a year, if we don’t think that is 2 billion in two or 4 billion in three.
Rugged. Many… many… many times throughout my career I’ve seen an innovative or well executed idea by party A, sold to party B as a service, only so party B can learn more about that market, gain access to those users, and ultimately offer a competing product or bring the service in-house. B2B relationships are not just fragile, they are almost always the vector by which party B rugs party A. With too much reliance on a relationship like this to balance the peg by influencing DAI supply or demand, it could easily be an existential threat to the protocol. I cannot stress enough the risk of this dynamic. It’s not the exception to the rule, this is almost always the rule itself. We built a moat, don’t be too eager to fill it in.
Lack of Vision. Banking the world’s unbanked. Unbanking the banked. Enabling self-sovereign finance. Permissionless. Decentralized. Censorship resistant. Voluntarism. Transparency for the powerful, privacy for the individual. This is vision. This is the cyberpunk fever dream. The promise that the world’s system of value, its base economy, isn’t orchestrated by the elite and powerful any longer. That they can’t steal your life savings through inflation, that they can’t fund their wars, that they can no longer death march (sorry LFW) the world’s population back to serfdom. This promise is what attracted most of us to the space. We found elegance in mathematical constructions and properties of the universe that could allow for a paradigm shift. The old system is build on coercion and violence, but those tools are meaningless under this new paradigm. Violence and coercion can’t stop gravity, and so it is true with crypto. This is the narrative. It appeals to the world’s population, not some business. It’s hard to get excited about “making the world a better place through capital efficient B2B blockchain relationships …”.
This last bit is a good time to transition to the point I want to make. Abandoning B2C relationships, that is, relationships between the Maker Protocol and its users, is a perilous idea. Where do you think the DAI supply came from? It came from appealing to users directly with the vision I mentioned above, that lead to a spark, which ignited a movement. B2C isn’t just some old business model that we have to pivot away from because of ethereum gas fees, it’s the entire funnel. For every 100 or 1000 users you engage, some small percent of them go on to build on the protocol, become part of governance, build a business on top of Maker, or suggest to their employer they use Maker as part of their critical infrastructure. This is the capital battery. It’s not even about where income comes from, it’s about where innovation comes from. Can we point at where most of the DAI supply comes from, yes. Is it directly end-users, no. But ask yourself why those other projects are here, how they learned about us, what drew them to want to use the Maker Protocol and DAI in the first place, and you will see it’s end-users that lead them here.
At meetups and conferences, people built on top of the maker protocol because it is innovative and permissionless. These small projects have grown to be some of the largest in the space, and DAI itself is a cornerstone of DeFi. This is the hard-to-bootstrap network effects most modern startups strive for, and from reading the forums and chat, it seems much of the community is resigned to let it wither on the Vine. If this funnel dries up, the protocol dries up. There is nothing left for other businesses to want to integrate with and the outcome would be well deserved for selling out our core vision.
I’m not suggesting we put all our efforts into B2C and abandon B2B relationships. I’m suggesting a balance. Choose those B2B relationships very carefully, and put the rest of the effort into the B2C vision, feed the innovation battery, and reap the rewards. I’m not suggesting this will be easy. Having to up the dust limits because of L1 gas makes achieving this vision all but impossible on mainnet. But rather than pivot to some risky B2B model, we should look to scale horizontally to L2s, start thinking about how the protocol takes advantage of ETH2, and build something that people want to use and build on top of. This will pay dividends in the future.
We’ve made an unbiased currency for the world, fueled by human values. Let’s finish the mission and scale it for humans. The world can’t afford to have us fail.