With several different smart contract protocols being either conceptualized, built, or just launched, we’re still at a very early stage of blockchain application infrastructure. We are also at the very beginnings of a market for decentralized applications. We are at an even more speculative phase for early-stage of investing in blockchain protocols via tokens, as fundamental value of blockchain networks have not been widely validated via mainstream global use cases yet. Furthermore, the price performance of these tokens are heavily correlated to bitcoin’s performance, which have been proven to peak and bottom in price in relation to its halving cycle, which makes it even more speculative to invest in new protocols long-term.
I anticipate that in the near future the most important metrics to quantify the success of up and coming smart contract protocols is developer community size and interest. Developer community validates fundamental value for a blockchain network as it proves that the network does provide real utility for creating new types of applications that are fundamentally unique vs. centralized-hosted applications. I expect that monitoring developer community size is a hugely important metric for investors and VCs participating in early-stage investing in blockchain protocols.
Developer community size is particularly hard to quantify as a lot of it could be somewhat manipulated to a speculator community for investing optics. Some of the ways projects can create false optics for developer communities are:
• Hackathons. While hackathons can be a great strategy for marketing, they do not validate real fundamental value of the platform as the hackathon participants could be incentivized by the prizes and giveaways.
• Network transactions. With many blockchain networks having free if not nearly free transactions, often times transactions are not reflect of real network usage and value.
• Compensate developers or an agency directly with tokens or cash to build dapps. While it can be a good idea to incubate a few dapps internally, ultimately a project outsourcing a large number of apps to be built is not a genuine and open developer community building on the protocol.
• Business development teams signing MOUs. A big enterprise brand attached to a blockchain project means nothing if there is not real value created out of the partnership. Blockchain is still a very hyped new technology that can often lead to exploratory partnerships than something of real value.
• Twitter chatter. Twitter hype can be largely driven by individuals that might have a stakehold or personal interest in the project, or a follow-the-crowd type phenomenon.
On the other hand, some data points that might reveal signs of a genuine developer community may be:
• Real and proven use cases built on top of the network
• Voluntary communities of developers existing on forums, Discord, or Stack Overflow for support and networking.
• Attendance at developer conferences and meetups.
• Enterprise adoption.
The most compelling characteristic to validate adoption is when any developer can hack away an application and can immediately build something with the protocol in their free time. The most valuable smart contract protocols are going to be the equivalent of Swift today for building iPhone apps; totally open-to-all developer tool that developers will voluntarily build on to create applications.
Again, we’re in the very early stages of building new smart contract protocols and even the pros and cons to publicly-hosted blockchain applications is still very speculative. For blockchain applications, we’re seeing some potential use cases that it might inspire over using centralized tech stack options include games, finance and social. These use cases benefit uniquely from having a publicly-hosted back-end infrastructure, either through transparency, “borderlessness” or data ownership not possible with centralized-hosted applications.
Long-term, the developer network effect around smart contract protocols is absolutely one to look out for. If smart contract protocols are able to inspire the creation of genuine developer communities for its fundamental value over centralized applications, we could be at the very pioneering forefront of unlocking massive market cap and investment value — much like being able to invest in other foundational internet protocols such as TCP/IP.
Some of the resources a team can invest in to help foster developer community are:
• A dedicated team to provide ample support and resources to entrepreneurial teams building on the protocol.
• Regional community dominance and marketing to one geographic community.
• A VC fund to help incubate companies or projects building on the protocol.
• A founder that can evangelize the platform and helps inspire teams to build.
• A very thorough developer site to help developers build applications.
• Educational content.
• Incubating a few example dapps internally to showcase some of the platform’s benefits.
• Very clear messaging the explains the pro’s and cons of the protocol over competitors.
I’m excited to see what type of innovation these new dev tools will inspire. They may be very disruptive and unlock huge market opportunities, but I would still consider these protocols to be a success if they shave off 1–5% of a major global market such as remittance or social. Some of the projects I am strategically helping and believe in are Chromia, Harmony, Promise Protocol and QuarkChain. Some other promising networks are Ethereum, EOS, Cosmos and Polkadot. Although I am not invested in all of these, and there are many more great teams I did not mention above, I am very optimistic for the future of decentralized application infrastructure.