Gnosis Safe Internal Letter: A Builder's Guide to the Long-Term Crypto Bear Market

Original title: "Bear in Mind: Long-term builder's guide to the bear market"

Original author: Lukas Schor, Gnosis Safe

Original compilation: Bob, BlockBeats

Recently, there has been a lot of discussion about the "bear market". We have also heard many points of view. From alarmists calling out depression and doom, to optimists telling you that now is a golden time to build. Like most things, the truth is somewhere in between. Here are some experiences running the Gnosis Safe project, a multi-sig wallet in the crypto space that has been around since 2017.

(The following is an internal memo we communicated to the Gnosis Safe team in May 2022, slightly adjusted so it applies to other projects as well.)

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Challenging times in Web3

Some industry and macro challenges we need to address:

· Fewer funds available for projects: Especially late-stage investments in Web3 projects will become more difficult as venture capital funds ( VC) are less active and conditions are less favorable.

· Macro market slowdown: All cryptoassets will be less liquid in the secondary market. High volatility across all asset classes (far beyond cryptoassets) makes effective financial management difficult.

· Failed projects: Some dApps, blockchain networks and other participants may not be able to sustain themselves, whether due to Lack of funding, internal challenges or unsustainable cash flow.

· Regulatory Strengthening: Regulations surrounding crypto assets may tighten. While the latest events have been going on for a long time, they have significantly increased the pressure on regulators to act.

Clearly see and understand practices that will bring risk to Web3 projects

Risk can help you face challenges better. Here are some problems you may face:

· Burning cash too fast: Burning cash too early will be harmful to the next step spending and future growth pose challenges.

· Adoption stagnation: Due to the general decrease in active usage of Web3 products, we may see the current exponential user and usage volume growth slowed down.

· Treasury devaluation/inflation: Since asset markets are very volatile, effectively diversify the treasury to maintain the same Not falling behind on the track will be a challenge. Even holding large amounts of cash can face inflationary pressures.

Over-regulation:Increasing scrutiny mechanisms may lead to over-regulation by regulators and even adversely affect high-quality long-term projects . The compliance costs associated with operating a Web3 project are likely to be much higher in the future.

However, there will be plenty of opportunities for long-term Web3 builders

< h4>Even in this environment, especially with the chain reaction of risks and challenges, there may be some opportunities in the Web3 field

· Hiring and Investment Opportunities:Current market conditions may cool the war for talent and present exciting investment opportunities. The dismantling and layoffs of some projects will make it easier to recruit for Web3-native roles. Additionally, there will be an opportunity to make strategic investments in crypto assets, ecosystem projects or intellectual property.

Great time for infrastructure: While trendy apps get most of the attention in the bull market, But bear markets are usually when infrastructure projects shine.

· Better products win in bear market: In recent months, usage of Web3 projects has been largely driven by unsustainable Driven by token airdrop incentives that attract users to projects that may not have a clear product market need. Long-term builders will be able to find real users of their products in a bear market, and when every dollar is counted, solving real problems for users is key.

Ecosystem building: For most builders in a bear market, it's time to refocus on core products, not Continue to be keen on integrating various trendy features. This shifts partnerships to be more meaningfully driven by strategy, not hype.

Renewed focus on EVM and ETH: As non-EVM chains come under intense scrutiny, users may prioritize security over reliability Scalability, the market share of the EVM chain, especially the market share of Ethereum L1 may increase again.

· Reduce Noise/Focus on Building: A slowdown in overall ecosystem noise will allow us to focus more on building and Retool teams, processes and systems. Let's get ready for the next wave of users and builders entering the space.

· Innovative competition: During bull markets, end-user applications and DeFi protocols can easily grow in tandem with market size. In a bear market, these apps/protocols need to become more differentiated to attract users.

You should act now

The following measures are needed now more than ever to address a bear market

· Be Frugal: Rebalance talent costs, Adopt fairer, not hype-driven wages and outside payouts such as agencies, media, events, etc.

· Keep Commitment: Communicate long-term tasks internally to reinforce team member commitment.

Hire Carefully: Do not scale without good reason and carefully hire based on current and future needs . Skip the facilitation hiring and only hire for roles where you can really make an impact.

· Focus on Token Economic Model: Establish Token utility and incentives to create sustainable value for your community and project.

·Set clear goals and act on them:It may sound like a cliché, but it has never been better Time to do the basics well. Set goals, take action, and measure them. It's easy to go with the flow and lose your way in a "only up" time, but in a bear market, planning becomes even more critical.

· Preparing for the Next Market Uptrend: Construct scenarios of how and where the next wave of growth will come from assumption. Explore growth in a more regulated environment and what that would look like.

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