Nearly a decade into smart contract platforms, many are huffed that as of late 2023, the most successful crypto products still feature crypto as the “what,” rather than the “how.”

Products where crypto is the “what” revolve around assets as investments: users buy, earn, trade, lend, borrow, lever assets including internet money, memecoins, and NFTs in hopes the number will go up. Fortunes are made and lost, sometimes quickly. The extremes are celebrated internally in crypto by self-proclaimed “degens” and derided externally by the establishment.

Many are disappointed that there has not been more innovation beyond crypto assets as investments, but this class of products has incredibly strong product-market fit, and I think that trend is likely going to intensify and grow. I’ll try to explain why I believe that; the reason is nuanced and also under-appreciated.

Our thesis at Variant is that the next generation of internet networks will turn users into owners—specifically asset owners. The internet enabled everyone to become a publisher, and similarly, crypto enables everyone to become an asset owner, and therefore, an investor. You don’t need capital to invest, you can invest your time or work by producing art, running machines, or doing physical work.

Through this lens, crypto can be viewed as the “democratization of investing.” Robinhood did it for stocks. Crypto does it for many other forms of internet-native value: money, digital art, memes, and early-stage technology projects.

Both in and outside of crypto, the democratization of investing has materialized in the most spectacularly speculative ways, giving credence to the saying “the most entertaining outcome is the most likely.” GameStop, Dogecoin, Bonk, Dogwifhat. What is going on?

The recent movie “Dumb Money” attempts to capture the cultural milieu underlying this trend. It offers a view into the world of modern retail investing that is marked by online accessibility, social media’s influence on information cascades, David vs. Goliath mentality, and a chance to get a piece of the action.

To the establishment, this kind of speculative investing seems like a joke, or maybe a weird form of entertainment. For participants, it’s a lottery ticket, a movement, a team sport played with friends online, or some combo thereof. Like all games, there is an expectation of winners and losers. And there are cheaters who try to gain unfair advantages (this should be refereed.)

I ask every crypto entrepreneur I meet how they got started in crypto. The most common story I hear is that they got started by making a speculative investment, usually BTC, ETH, ICOs, DeFi summer, or NFTs. And I’ve heard countless stories of people who made their first “real” money this way. That resonates, because that’s my story too. For many entrepreneurs, myself included, those early investments were life changing—they went from having little or no savings to having some, a cushion to take another risk.

And suddenly, they were also investors on the ground floor of some technologically optimistic project or community. That initial investment catalyzed their interest in the underlying technology or ideology, and many took jobs in crypto, or founded startups. Often, the investment didn’t work out. But nowhere else could anyone who was simply paying attention get that kind of access to bleeding edge financial opportunity.

At the extreme, memecoins still represent the same prospect to people who are paying attention today. The prospect of participating in economic growth is what has drawn in so many entrepreneurs and users—and it’s important because some portion of those users learn from those experiences, to think, and act, like investors. It often starts with things that look like toys (or dogs) but drives towards a serious shift in psychology, where money, effort, or skill are honed to contribute more seriously to the space. Many people also get hurt in the messy, volatile free market process. But despite that, speculative investing continues to drive crypto’s growth and in turn, technical progress towards non-speculative use cases.

Variant’s vision for crypto is a more equitable internet; the mission is to make a billion users into owners. Its a long term, ambitious goal. I believe the path there is forged by this cultural shift that is already underway, toward more users thinking like investors, and wanting to own things they believe in and know because they use them. That means embracing memecoins like we embrace memes: as part of internet native culture and an invitation through the front door to investing/using/contributing to projects that have legs (maybe four).

In late 2023, the speculative side of crypto is once again the game on the field. It has the most activity, users, and attention. In parallel, permissionless rails continue to develop and enable innovation around non-speculative use cases. Its not a question of if, but when the latter will make a dent that will validate the speculative fervor around the former.

Avoiding the speculative reality can seem “high status,” even in failure, while embracing speculation is considered a “low status” path to success. The reality is more nuanced: speculation can be a powerful tactic to get users through the front door and invested in the success of a project, and the space at large; it’s not only an end, it can also be a means.

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Thanks to Li Jin and @worm_emoji for feedback on this piece.

This post is for general information purposes only. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. It should not be relied upon for accounting, legal or tax advice or investment recommendations. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Variant. While taken from sources believed to be reliable, Variant has not independently verified such information. Variant makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This post reflects the current opinions of the authors and is not made on behalf of Variant or its Clients and does not necessarily reflect the opinions of Variant, its General Partners, its affiliates, advisors or individuals associated with Variant. The opinions reflected herein are subject to change without being updated.