Kevin Ji

When number go down

Crypto has had three major bull cycles in the last ten years—the first from around the end of 2017 to early 2018; the second from around the end of 2021 to mid 2022; and the most recent is still happening, starting from around the end of 2023. Each time crypto makes a resurgence, a new wave of money flows in from crypto VCs at eye-watering valuations to companies with no semblance of “product-market fit.”

As an former cofounder and founding engineer in crypto, I believe that working in crypto is a Faustian bargain for software engineers. Crypto startups offer higher-than-average salaries for early engineers at the expense of your resume for non-crypto companies, creating a reinforcing cycle to stay inside the crypto ecosystem forevermore.

Nerd-sniping

Many technical challenges that people in crypto spend their time on are really just different forms of nerd-sniping. These issues stem from fundamental design choices that nearly all crypto chains share:

  • A “wallet” secured by a random series of bytes known as a private key
  • Irreversible “transactions” on an immutable “blockchain” that are a series of bytes typically interpreted as a function call
  • An agreed-upon mechanism to come to “consensus” about the state of a chain across many actors, where some are assumed to be malicious

Some of these problems remain key issues preventing the adoption of crypto by the mass public. For one, the UX of using and maintaining a wallet is still largely unsolved despite the increased prevalence of custodian and multi-signature wallets. The Ethereum proposal for improving this (EIP-5806) has been languishing for years, although there are hopes that it’ll come Soon™.

Consensus is also a problem that is largely unimportant to end users yet still something crypto developers have to spend hours worrying about, as a single dedicated hacker can and will drain protocols, apps, and chains if improperly secured. Examples are not far in the past; some include The DAO, Wormhole, Poly Network, and Ronin.

Compared to engineers who work outside of crypto, crypto engineers spend a considerable amount of time thinking about technical problems that only other crypto companies care about. Said differently, your resume may look more attractive to other crypto companies, but it looks worse to companies outside of crypto, who may believe that you lack industry-relevant experience for their roles.

Lack of product-market fit and hype cycles

The cardinal advice that YC gives to its startups is to do things that don’t scale and talk to users. While this advice is not universally applicable—for one, Sam Altman ignored all the advice he gave as YC president when starting OpenAI—it is nevertheless a good starting point for many companies.

In crypto, the story is different, largely because crypto lacks product-market fit outside of degens and (to a much smaller extent) people in countries with hyperinflating currencies. Companies in the last bull cycle (2021–2022) building consumer products, such as those making music and fashion NFT marketplaces, as well as “web3” games, have been largely unsuccessful outside of short-lived hype cycles.

Despite these trends, crypto infra companies—where I include a wide range of companies including L1 chains, L2 chains, DA providers, shared sequencers, alternate VMs, bridges, and wallets—have raised staggering amounts of money from VCs.

What explains this discrepancy? I largely believe that crypto VCs

  • throw money at founders that are smart enough to woo them and fit a specific archetype;
  • bet that a future hype cycle will always arrive, and that it will lift all boats;
  • believe that a bet on the “correct” infra company will result in outsized (>100x) gains during a hype cycle;
  • and in some cases, have the ability to cash out tokens in secondaries while companies are hot.

Perhaps it’s rational for VCs to throw money at crypto infra companies, as they can deploy enough capital to make multiple bets. But as an engineer, is it worth it to bet your one career on these assumptions?

Advice

In my opinion, there are three main ways to navigate crypto in terms of your career:

  • Accept the degen full-heartedly, and go deep into the crypto hole
  • Look for cutting-edge research in areas like zero-knowledge proofs and multi-party computation, with the understanding that the research is likely funded by a grant and may have no chance of making a profit
  • Avoid the space entirely

There are tradeoffs for each of these choices, and choosing between them is in part about understanding what risks you’re willing to take in your career and what you value in a job, whether that be money, intellectual interest, fun, or something entirely different.

(Also, Bitcoin is largely pointless and proof-of-work is a waste of global energy.)