UFOstart Newsletter

Hello from Berlin! 🚀 We're thrilled to share our UFOstart newsletter with YOU. Whether you're a web3 pro or completely new – we've curated insights that resonate with everyone. You’re lucky you found this because you will get direct learnings and real value. Let's get straight into it…

• Common mistakes of web3 founders & how to avoid them

• Why web3 frontends can become valuable businesses

• Top Tweets/Bite-Sized Insights of the week

MISTAKES OF WEB3 FOUNDERS

Top 5 Mistakes Every Web3 Founder Should Avoid: Insights from Qiao Wang

Overemphasis on Marketing:

• Problem: Many Web3 founders focus excessively on marketing, neglecting the crucial aspect of achieving product-market fit.

• Solution: Prioritize product development and understanding users over marketing. When it comes to marketing, avoid external PR/marketing agencies and focus on content marketing or in-house efforts. Building a personal brand on platforms like Twitter can help in the long-run!

2. Rapid Team Scaling:

• Problem: Startups often expand their teams too quickly before establishing product-market fit, leading to inefficiency and wasted resources.

• Solution: Build a small, efficient team of top performers. Resist hiring just to fill roles; prioritize and focus on essential tasks. Utilize personal networks and communities for recruitment. Consider converting Web2 talents to Web3, as experienced Web3 engineers are scarce.

3. Community Management Pitfalls:

• Problem: There's a belief that a strong community automatically leads to a great product.

• Solution: But in reality, your product should cultivate an engaged community and have built in network effects. Community should be a byproduct, not a forced initiative. Actively engage with your community early on for feedback. If you are a founder you should basically be the “community manager”.

4. Misguided Focus on Token Economics:

• Problem: Founders often prematurely obsess over token economics without having a solid product.

• Solution: Prioritize product development over token strategy. Tailor token design to your product's unique needs. Engage with top exchanges early for listing and balance token distribution among stakeholders based on their contribution.

5. Legal and Regulatory Negligence:

• Problem: Navigating the complex legal landscape of Web3 is challenging, with varying advice from legal experts.

• Solution: Consult experienced legal teams and triangulate viewpoints to make informed decisions. Consider all relevant laws, including securities, AML, derivatives and tax laws.

Success in Web3 is about product focus, user-centric development and thoughtful growth strategies. Make sure to avoid the above mentioned mistakes to build your Web3 project sustainably! For more:

WEB3 FRONTENDS

Can web3 front-ends become the most valuable businesses in Web3? Let’s explore some insights shared by Figment Capital

Understanding Web3 Front-ends: The Dual Service Providers Web3 front-ends are revolutionizing how we interact with blockchain technology. They're not just interfaces; they offer two crucial services - allowing users to read from and write to the blockchain. This opens up avenues for monetization from both reads and writes.

User Power: Historically, there's been skepticism about the real value of front-ends due to their limited differentiation - they all present the same back-end data through different lenses. This results in low switching costs for users, who can easily migrate between front-ends.

Why Front-ends are Poised for Value Despite these challenges, we're witnessing a paradigm shift. Front-ends are gearing up to be among the most valuable entities in Web3. This conviction stems from observing the evolving transaction supply chain, innovative front-end user experiences (UX), and user behavior patterns.

MEV (Maximal Extractable Value) and Its Distribution Previously a niche aspect of Ethereum, MEV's exposure has led to a complex web of intermediaries, each seeking value extraction. The distribution of MEV, particularly post-Ethereum Merge, is a zero-sum game, with validators currently holding the lion's share.

Exclusive Orderflow: The Game Changer Exclusive orderflow is emerging as a key determinant of value capture. Front-ends can direct their orderflow to auctions, where bids are placed on this flow, and auction revenue is returned to the transaction originators. Thus, front-ends and users stand to collect a significant portion of the MEV generated by their activities.

Innovations Driving Differentiation Front-ends are breaking free from the shackles of uniformity through innovations like fine-tuned LLMs, wallet extensions and application partnerships. These advancements are creating unique user experiences and network effects that are increasingly hard to replicate.

Brand Trust and User Behavior: The MetaMask Example A pivotal factor in front-end success is user behavior and trust in brand. MetaMask’s impressive revenue, despite technically low switching costs and minimal UX differentiation, highlights the power of brand trust. Users gravitate towards familiarity and security, often overlooking cost benefits for perceived reliability.

Monetization Strategies: A Diverse Landscape Front-ends have distinct monetization strategies based on user sophistication. While ad revenue and SaaS models are prevalent, more sophisticated users may opt for full node hosting, bypassing third-party services. The most telling development is the adoption of the PFOF (Payment-for-Order-Flow) model, mirroring practices in traditional financial markets, marking a significant step in Web3 front-end monetization.

TOP TWEETS

Check out the most insightful and game-changing Tweets just for you:

Still reading?

Before we say goodbye we’d like to hear from you! 🌟 Drop us a line by responding to this email and share the topics you want to explore or stay updated on. Your insights steer our ship, ensuring we continually bring you valuable content. Thanks for being part of the UFOstart journey! 🚀