A Web3 Survival Guide to Crypto Winter

The cryptocurrency market is no stranger to volatility, with rapid gains and abrupt drops becoming the norm. However, the Web3 market in 2023 has experienced more than its fair share of turbulence. Those committed to the industry are now facing the challenge of explaining how the actions of certain actors do not align with the core values of the technology. 

Staying with the fundamentals

The phrase, ‘don’t trust, but verify’ is a reminder that the open source blockchain is built to empower people.  Yet this runs deeper than users simply owning their own keys. The industry is still attracted to the promise of unrealistic yields, creating unsustainable leverage and price speculation that is not representative of the underlying technology and its value. Real protocol yields, however, have endured the storm. 

Blockchain infrastructure companies such as Allnodes have demonstrated that a core dedication to the technology and its efficiency of automation can help users and institutions make the most of this market and survive the crypto winter. They provide access to real protocol yield while also being non-custodial, users always have control over their funds – with the added benefit of participating in protocol governance. 

Weathering the storm

Agility is one of the most important factors to surviving the current market. Besides being over-leveraged many companies scaled too quickly during the bull market, and are now facing a trap in the bear. A primary driver behind this trend is the belief that employment growth automatically equals success and that demand was always going to increase at a steady rate. It leads companies to focus on fundraising,  growing their headcount and administering the business rather than a focus on the fundamental technology. 

As a result, companies with that business model tend to get stuck with bloated overhead. For decades, research on a global level has supported this theory. Scaling in the crypto industry during the last 2 years witnessed an enormous inflow of investor funds. In “The Timing of VC Investments and the Employee Growth of Startups” (Roy van der Loos, 2019), a positive correlation was found in Britain, where startups indicated a higher growth around financing events. But in Web3, if the protocol does most of the work, and the rest can be automated by relying on smart contracts and dApps, do the same Web2 growth rules apply? The likelihood that the same principles apply is extremely slim if adoption is the watermark.

Allnodes, a non-custodial staking provider, has proven that Web3 doesn’t need to follow the same growth model as Web 2.  They oversee a substantial amount of blockchain infrastructure with over 33k nodes supporting 65+ different protocols, but with just under 15 employees they still maintain one of the highest ratings compared to other staking and node operators.

How is this possible with a team of fewer than 15 employees? What’s the secret? Blockworks sat down with Allnodes’ Robert Ellison to find out.

“Our performance speaks for itself, however don’t take my word for it, you can visit a site like rated.network and view a breakdown of effectiveness ratings for ETH,” said Ellison.

Figure A: Rated. Network Node Operator Effectiveness Rating 

Allnodes credits its success to a low headcount, agile development, and its engineering team’s efficiency. 

“Blockchains are very resilient and decentralized, but they are also complex so we’ve automated management and onboarding into our tech stack from day one. We have exceptional engineers that allow us to be very efficient and scale on demand while also monitoring our infra to ensure everything is healthy.  Our primary goal is for managing and optimizing staking and running nodes for clients to be as simple and straightforward as possible, this encourages adoption and use,” said Ellison.  

The team also credits its success to limited red tape and efficiency.

“We have less hoops to jump through from an administrative and corporate structure. It’s not perfect, we have a backlog and roadblocks when it comes to development and onboarding and sometimes it is hard to figure out what to prioritize,” said Robert.

Our business is cash-positive without venture capital backing which allows for a lot of freedom, this translates into having the majority of the staking commissions flow directly to our end-users while still maintaining an expansive infrastructure.

We try our best to stay true to the values of the block-chain itself, so we remain non-custodial, take a fair and minimal commission, do not lock anyone into long-term contracts, and encourage users to participate in governance. 

Allnodes currently runs approximately 16,000+ Ethereum validators with 6 MEV Boost options for users. They support both ETH validator nodes and Testnet nodes. And while 32 ETH is required to run a node, they also support RocketPool nodes which only need 16 ETH. This type of staking diversity lowers the barrier of entry for self-stakers, while encouraging validator diversity. 

The benefits of growing pains  

In the dotcom bubble of Web2, companies like Amazon and Google survived because they were agile and rooted in the fundamentals. Even though the market collapse wiped out over 200,000 jobs and 17 companies, these few went on to revolutionize the web and society. Ellison believes that these events help clean out the hype and speculation. He said, “I think the industry has sobered and will be much more mature and practical. The technology is an incredible leap forward and there are too many amazing people in space to stop building with it.”  

Agile companies that stick to the revolutionary potential and efficiency of blockchain infrastructure and Web3 will be able to carry the industry toward new heights. So even if there are a few more growing pains to come, blockchain infrastructure companies like Allnodes will be here for the long run.

This content is sponsored by Allnodes.

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