BNB Chain Faces the Fire

The BNB Ecosystem has undoubtedly received positive media attention over the last few weeks. The collapse of the FTX empire and erosion of trust in other centralized exchanges (CEX) has led many crypto holders to a mass exodus to more self-custodied solutions.

Ironically, as people flee CEXs, Binance reportedly witnessed a rise in inflows, probably because Binance CEO, Changpeng Zhain (CZ), led the charge for custodial exchanges to publish proof of reserves and made a public commitment to transparency regarding on-chain metrics.

Despite the good press of Binance, The BNB Chain ecosystem itself, which should benefit massively on the tailwinds of CZ and Binance’s PR victories, has been wrought with many projects failing, rug-pulling, and closing up shop.

Here are just a few in the last seven days:

• CZodiac - a exploit on their stablecoin minter caused significant liquidity issues on many associated projects
• The Living Dead - An NFT project that tried to build a community around a collection of Zombie NFTs (not to be confused with RugZombie, which the author helped to create)
• MoonPot - A Community Driven No-Loss Lottery project that recently shuttered its lottery game

You probably have yet to hear of most of these projects. And that is one of the points here. 99% of all top projects on BNB Chain were built on other chains. Value accrual on the chain owes less to innovation and more to borrowed interoperable projects.

The Death of Community

The simple fact is this: Every Web3 project requires three things to thrive: community, innovation, and revenue. The majority of BNB Chain projects lack two of the three.

BNB Chain is known for its proliferation of community-oriented projects. This is often a good thing: it means there are real users and actual people using the chain.

But many projects on BNB Chain form communities only to extract value from within that community: for the project to properly incentivize the project owner, money must flow from holders to devs/project owners.

Simultaneously, the only reason the public will engage in such projects is based on the expectation of financial returns.

The financial expectation on both sides of this equation is a deep misalignment of incentives that fails to do anything productive. Project owners pontificate hollow rhetoric about community while extracting value from the community. Meanwhile, community members expect growth but fail to participate in building and growing the project meaningfully, like grifters expecting something for nothing.

Curiously missing from this set of expectations is innovative products and true utility. BNB Chain is saturated with small, community-based projects and copycat projects of existing innovations from other chains.

Most (if not all) community-based projects lack substantial development on anything remotely close to innovation and choose to recreate what has worked on other chains or projects. Thus, their only value proposition to users is “come stake with us for higher yield than X” or “join our community and ‘govern.’”

Even more alarming, many projects (secretly) don’t have core developers and outsource the most fundamental component of their project––the actual code––to anons through platforms like fiverr. This creates substantial risk for users where project owners don’t know if the code is good enough to avoid attacks and because they started with tokenomics in mind, they fail to offer anything that users truly want or need except the promise of “token go up.”

What is coming is the decimation of community-driven projects. Most token holders are only active when times are good and the promise of return on investment is strong. The irony here is the word “strong.”

What kind of community is only around when prices are good?

As much as project owners and community members preach about the power of community in Web3, we all see the unveiled truth…it’s about the money! And as the bear market continues, more projects will die because they don’t innovate and will realize the “engaged community” idea was a myth. The bear market painfully reveals this truth.

BNB Chain’s Innovation Moment

Here we are at a crucial moment in the history of BNB Chain. A call to action.

BNB Chain has a chance to break the generational curse of failed/rugged projects. It can be a place where value can be created, but not simply by preaching about community, not by copying what works elsewhere.

Value is created by making something people want or need, and projects that focus on building something unique and of value and monetizing that project in a sustainable way (outside revenue, DAO run, etc.) will do well. This is an invitation to all builders on BNB Chain to make things-new and interesting things.

Doing a quick survey of BNB Chain projects on CoinGecko, there is no unique BNB Chain product in the top 50.

This is a huge problem.

The massive value accrual on the chain is happening because innovative projects are bridging to BNB Chain. The chain is riding under the shadow of CZ’s massive wingspan––and bridged projects.

This could be the time for an explosion of innovative, fun, and boundary-pushing projects to build on BNB Chain. If the chain fails to embrace this moment, BNB Chain will continue to be known as the chain of “Degens” and “Demons.” A chain known for hosting rug pulls, scams, and unoriginal and tired projects––one which the smart users pass on.

Builders, with what is happening in Centralized Finance right now, we have the attention of the crypto community…let’s not waste it.

When a new bull market inevitably comes, new projects similar to these existing ones will come and promise more significant upside than existing projects: many tokens will “relaunch” because of failed tokenomics, or simply for a facelift on their image. At the same time, many projects will just slowly die over time as they were built on a foundation of hype and viral marketing of a “new token with major upside,” which is impossible to recapture once it has left. New projects will come and simply displace them.