Editor’s note: This post originally appeared in our newsletter — a guide to trending topics in crypto with insights and resources from engineers, researchers, and others on the a16z crypto team. Subscribe to see it in your inbox every other week.
Tokens need business models: When to flip the fee switch
The question isn’t to fee or not to (take) fees, but when.
Many marketplaces heavily subsidize user activity to bootstrap initial growth and liquidity by giving their product or service away for free (or at a steep discount). But that’s not sustainable: At some point, a business has to start taking fees so that it’s valued for its business.
Flipping the “fee switch” can seem scary because when you start charging for something that was previously free, surely usage will go down? And yet it’s important to remember that while raising prices can divert some customers away in the short run, it also means making more money from those who stay — and creating a more sustainable business model for tokens.
Too many businesses wait too long to flip the fee switch, or set prices too low. So here’s how to reason about the what, why, how, and when to turn on fees in a network.
Planning for chaos: You need an operating plan
There are many, many things that founders — especially those in the crypto industry — can’t control: Markets are volatile, regulations are evolving, expectations are high.
That’s why it’s so important for founders to focus on what they can control, which is where operating plans come in. In concept, an operating plan is simple — it’s keeping track of everything your business is doing. But keeping track of everything can get complicated, which is why having a plan to organize it all helps.
An operating plan isn’t a strategic plan, though. It translates vision into velocity, without burning your runway or your team, because it focuses on people, cost, and timelines. We cover where founders can start, how budgeting works, and some common mistakes to avoid.
The latest news and policy updates: White House report on digital assets
The White House recently released its first comprehensive report on digital assets. The report covers the nuances of the DeFi tech stack; stablecoins as a means to protect the primacy of the dollar-based international monetary system; approaches to countering illicit finance; and many other top-of-mind topics.
We’ve come a long way in a short time — so what’s next? Most importantly, the Senate building on the CLARITY market structure legislation, which recently passed the House with broad bipartisan support…
The Digital Asset Market Clarity Act or “CLARITY Act” recently passed the House with broad bipartisan support. The bill is now with the Senate, which has proposed its own market structure legislation preserving the core tenets of CLARITY.
So what do we think of the Senate’s draft? It’s a meaningful step forward — it asks the right questions and reflects broad consensus that the industry didn’t have a year ago. We’ve proposed meaningful improvements and clarification on key issues here and here.
By leveraging and integrating the broad industry effort and support that went into CLARITY, this legislation can create clear, lasting rules — and help make the U.S. a leader in crypto.
Congress passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS) Act on July 18 — the first clear rules of the road for stablecoins in the U.S., and the culmination of years of bipartisan efforts. Why does this matter? And what did it take to pass it, including the recent high-stakes vote in the House of Representatives?
Our Head of Policy Miles Jennings, and Government Affairs partners Ben Napier and Michael Reed share what went into the bipartisan efforts that passed this groundbreaking bill, in conversation with web3 with a16z show host Robert Hackett.
… USDCeased 💀
— a16z crypto editorial team
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