The most ill-defined word in crypto

Woah, what do you mean by “users” don’t make sense in crypto? On the surface that sounds like a bit of a weird statement. However, if you think about this a bit deeper you’ll realise where the flaw in this term lies.

Let’s think from first principles around what a typical user journey for any crypto application looks like.

1. Bob visits some web-page

2. Bob is then prompted to connect his wallet

3. Bob visits some pages and clicks some buttons

4. Bob is convinced to finally pull the trigger and make a transaction

5. Bob then repeats steps 1-4 with his second wallet

Now, there’s two simple questions we need to ask ourselves with the above scenario?

1. At what point do we classify Bob a “user”?

2. How many users do we have after step 5?

Let’s start off with the first question. Each of you reading this I guarantee is going to confidently say a different answer to everyone else. To iterate though, the logic you might use is:

1. Bob is a user as soon as he visits the web page because he actually came to the site.

   1. Problem: but he wasn’t even engaged enough to connect his wallet, so is he really a user?

2. Bob as soon as he connected is wallet

   1. Problem: but does someone really connecting their wallet mean much? Especially if they didn’t make any transactions. Is the product the website or the underlying contracts? It might be the website in some instances but most likely only once a contract is called is real value contributed.

3. Bob as soon as he visits more pages/clicks buttons

   1. Problem: similar to the case above. How do we necessarily know which buttons/pages are signal versus which ones aren’t? Furthermore, if they’re pressing buttons why aren’t they pressing the one where they hand over their money?

4. Bob as soon as he finally makes a transaction

   1. Problem: it’s great that that user actually made a transaction, but what happens if it’s a DeFi app where you only need to make a loan once then check in on it every month? Unless I update my debt position regularly I won’t be counted as a user. This doesn’t sound right either.

As you can see above, what started out as a simple question suddenly opens us to many logical errors and assumptions.

Okay, what about the second question — how many users do we have?

1. We could say we have a single user, Bob. However, how do we necessarily know that he has two wallets?

2. We could say that we have two users. That’s also unfair to say because we know that there aren’t two human beings in this example. However, we can’t know that for sure once again. We may be able to use algorithms with strict assumptions to infer this, but it’ll never be perfect at scale.

Regardless of what we do know about Bob, the number of actual users should be less than wallets in a strictly mathematical sense.

Now we extrapolate this to Crypto Twitter when investors say “we just invested in X because it has 30,000 users”. What does that even mean? That term “user” can be gamed and quantified in so many ways with everyone’s subjective interpretation VERY wide with VERY different conclusions.

• Is 30,000 users just 30,000 unique visitors to your site? What if they’re gamed?

• Are they transacting? Okay, but with how much value on average?

• What percentage have transacted any value?

• Are there any estimates as to what % are using multiple wallets to farm airdrops with?

The deeper you go, the more the waters become unclear. Luckily after months about thinking on this problem, we’ve got a more elegant way to think about it and expressed it in ARCx Analytics. I’ll leave that for the next post.