Own your tomorrow

Many have observed that while most companies initially develop a wedge around some proprietary technology or product, great companies evolve into distribution channels for a wide variety of products. Most blockchain projects have largely ignored distribution, focusing primarily on tech, governance, and mechanics, rejecting the precedent set by companies like eBay, Robinhood, and others. 

Without a focused distribution channel, some of today’s best products have been wrapped up (albeit, almost always in weaker forms) and offered by consumer-oriented platforms. Coinbase offering wBTC loans through lending market Morpho on Base is one example; Webull offering prediction markets via Kalshi and Robinhood offering prediction markets directly are others. 

Future versions of this phenomena could include credit funds like Bitfinex/Tether expanding their credit holdings and decreasing its take rate from 100% to penetrate USDC-based DeFi further. Another example could be exchanges building out memecoin and project launchpads themselves in an attempt to own every stage of a memecoin across its half-life.

This may sound alarming (CeDeFi is both annoying to say and the opposite of crypto’s founding ethos), but particular DeFi projects are inherently defensible no matter the distribution advantage of the derivative. Protocol wedges which can’t be credibly verticalized by apps (such as Lido’s mutually beneficial relationship with staking operators or Aave’s risk management expertise) in turn creates tit-for-tat ties between certain DeFi protocols.

These wedges create soft-power and entrenchment (which are their own issues), that if developed alongside a distribution channel can create much larger businesses.

Personally, I’m hopeful the next wave of DeFi involves a subset of protocols which leverage their wedge state, proprietary tech or encryption, or simply their expertise into a distribution channel. Of course, not every project needs to own consumer relationships, but I’d love to see a distribution focused company (decentralized front-ends, anyone?) with DeFi in its founding blood as opposed to a less-than fully baked derivative of the idea tacked on to another platform. 

If you're working on something adjacent, the team at Standard would love to chat :)