IndieHackers - 🗞 What's New: The US crypto crackdown

The US Department of Justice has created a special team to prosecute crypto crimes:

• The National Cryptocurrency Enforcement Team (NCET) will investigate and prosecute crypto crimes, with a particular focus on exchange platforms. Here's what increased crypto regulation means for founders.
• Most networks subsidize early activity while building, but many users want ownership in the networks that they build. Dru Riley shares how founders can reduce financial friction to unlock opportunities in yield farming.
• Brothers Nadav and Gideon Keyson launched their podcasting platform with just two users, and they are now on track to unicorn status. Their top tip? Double down on your technical advantage.

Want to share something with nearly 85,000 indie hackers? Submit a section for us to include in a future newsletter. —Channing

🕵️‍♂️ The US Crypto Crackdown

from the Indie Economy newsletter by Jay Avery

The US Department of Justice recently announced the formation of a special cryptocurrency crime team. Here's what the advancing regulations mean for founders.

Crypto crunch

The news: The National Cryptocurrency Enforcement Team (NCET) was created to investigate and prosecute crypto crimes, focusing on currency exchange platforms. The US Department of Justice cites preventing abuse on the platforms as a top priority:

The team will consist of federal Criminal Division experts and attorneys from across the country.

The no-background: As with other tech innovations, the crypto space is advancing quickly, while the law struggles to keep up. As the field has evolved, there has been very little regulation, leaving crypto platforms and exchanges vulnerable to criminal activity.

Throughout the year, the Biden Administration has introduced initiatives to crack down on nefarious players, and the creation of the NCET is the latest of these efforts. Crypto exchanges have been used for money laundering, for the illegal sales of drugs and weapons, and, most notably, for ransomware attacks.

What it means: The formation of a dedicated team (and allocation of top Department resources) indicates that we'll likely see major changes when it comes to crypto dealings. Just last month, the US Treasury Department issued sanctions against crypto exchange Suex, citing that 40% of transactions on the platform came from illegal activity. This is the first time that the US government has sanctioned a crypto exchange, but it likely won't be the last. The Department vowed to take "robust actions" to disrupt currency exchanges, in an attempt to fight ransomware:

Ransomware payments reached $400M in 2020, up 4x the amount in 2019. The Treasury maintains that crypto exchanges have played a large part in this activity, since there is much potential to manipulate the market.

Legal tender: Crypto does not currently have legal tender status in the US. In September, El Salvador became the first country in the world to adopt Bitcoin as legal tender, with analysts predicting that other countries could soon follow.

Implication nation

Sanction, sanctions: In cracking down on exchange platforms, the sanctions issued can reverberate to other players in the crypto ecosystem. Here's what was ordered against the sanctioned individuals in last month's crackdowns:

1. All property subject to US jurisdiction were blocked.
2. Any entities 50% or more owned by one, or more, designated persons were blocked.
3. Any banks or individuals who engaged in further transactions with the sanctioned entities and individuals also exposed themselves to sanctions or other enforcement actions.

Indie hacker interests: Indie hackers who have invested in crypto should be aware of increasing regulations in the space. We have already seen the start of crackdowns when it comes to crypto tax reporting, with the Internal Revenue Service (IRS) issuing notices for individuals and businesses on the tax status of crypto transactions.

Outside of exchange platforms, the US government has announced its intent to increasingly focus on entities that accept or facilitate crypto transactions. For founders who own businesses falling into this category, or individuals who buy, sell, and trade crypto, keeping abreast of advancing regulations and requirements is a must when it comes to avoiding potential compliance issues.

Taking it mainstream: Some say that they're excited to see increased regulations for crypto, arguing that federal regulations will make investors feel more secure about throwing their money into the ring. Although some are concerned about regulations decreasing trading value, others argue that adding regulations will stabilize the market over the long-term by taking some of the current risk out of the equation. Making crypto safer could be a giant step towards taking it mainstream, as it may entice more people to invest. Opponents argue that the market will remain speculative with or without regulation.

What do you think of the crypto crackdown? Share below!

Discuss this story, or subscribe to Indie Economy for more.

📰 In the News

from the Volv newsletter by Priyanka Vazirani

📈 Bitcoin has hit a five-month high, surging above $57K.

🍎 Apple has appealed the Epic Games ruling.

🍺 Tesla is now making its own beer.

🚀 India's stock market is on track to overtake the UK's in value.

🚨 This startup is using AI to tackle human trafficking.

Check out Volv for more 9-second news digests.

🌾 Yield Farming for Founders

from the Trends.vc newsletter by Dru Riley

Why it matters

When you change friction, you change everything. Reducing financial friction unlocks a new form factor: Yield farming.

Problem

Protocols want to build networks. Yield farmers want to maximize yield. True believers want to own a part of the networks they build.

Solution

Most networks subsidize early activity to build network effects. Once networks reach liquidity, subsidies are removed as the "flywheel" takes over.

PayPal, Robinhood, and Lyft subsidize networks with signup bonuses and referral programs. Protocols subsidize networks with tokens representing governance and/or ownership stakes.

Web2 networks rarely offered ownership. Uber offered early drivers cellphones, not stock. Web3 is the era of user-owned networks.

Players

Protocols:

• Compound: Interest-bearing lending pools.
• Sushiswap: Platform to swap, lend, and borrow.
• Balancer: Automated portfolio manager.
• Curve: Liquidity pool for stablecoin trading.
• Synthetix: Liquidity protocol for derivatives.

Yield aggregators:

• Yearn.finance: Yield optimizer governed by the YFI token.
• Harvest Finance: Yield optimizer with an interest-bearing token, iFarm.
• Yak: An autocompounder on Avalanche.

Tools:

• Zapper: Dashboard for DeFi.
• Zerion: Build and manage a DeFi portfolio.
• DeBank: Track portfolios, compare rates, and analyze risk.

Predictions

• Aggregators will extract more value than exchanges. SushiSwap and Uniswap are aggregated by Matcha. Commoditization makes it hard to capture value. Tokens incentivize loyalty to some degree. If a loyal Delta Airlines customer can fly the same route at 10% of the price on American Airlines, they will. Zapper is the DeFi equivalent of Google Flights. Aggregating exchanges and airlines is the same game.
• NFT farming will thrive. See ZooKeeper and CyberKongz. NFTs are shifting from status symbols to revenue-generating assets. A Genesis Kong yields 10 $BANANA a day. After 60 days, you can make a Baby Kong for 600 tokens (currently valued at $67K).

Opportunities

• Use apps such as Zapper and Zerion to track and manage assets. The DeFi space is fragmented. These are user-friendly command centers for your assets.
• Learn on Layer 2. Polygon has lower transaction fees than Layer 1, allowing you to get more reps in, iterate, and learn faster. The tradeoff is centralization. Centralization can be an acceptable tradeoff when experimenting. Layer 1 can be used as a settlement layer.
• Build a media brand around yield farming. See curators like DeFi Pulse, podcasts like Bankless, and YouTube channels like Finematics.

Risks

• Smart contract risk: Bugs in smart contracts. The DAO was hit by this.
• Poor mechanism design: A subset of smart contract risk. Iron Bank was hacked by manipulating the value of a "stablecoin."
• Oracle risk: Hacking a dependency of a protocol. An oracle that Synthetix depends on was manipulated to drain 37M sETH.
• Rug pulls: When protocol teams steal from stakeholders. See 12 rug pulls.

Haters

"Protocols want network adoption, but some yield farmers immediately flip protocol tokens. Aren't these incentives misaligned?"

Yes. This is hard to prevent. If protocols want to offer an opportunity to own part of a network, ownership means the freedom to sell. Some do, then jump to networks where rewards are more attractive.

"Are these the new ICOs?"

These networks have utility, so I think it's unfair to compare them to ICOs that lacked this attribute. They had whitepapers. We have working apps.

"Where's the moat here?"

Code can be copied. Teams can't. This may be the last moat.

Key lessons

• Less financial fiction makes yield farming possible. Strategies can be deployed and switched, with money automatically moved to chase the highest yields.
• Protocols subsidize networks with rewards. Lyft, PayPal, and Robinhood subsidize with rewards and referral programs. DeFi protocols subsidize with governance and ownership tokens. These can be held or sold. The goal is the same: To boost network adoption.
• Traditional networks offer subsidies until they reach liquidity, then extract monopolistic margins. Vampire attacks control this rent seeking behavior.

Links

• Who should I talk to about yield farming? The tweet behind this report.
• Why Decentralization Matters: Chris Dixon on web2 and web3 networks. The former extracts monopolistic margins once network effects are established. The latter can't.
• DeFi Orientation: An introduction course to DeFi from Nat Eliason.

Related reports

• DeFi: Yield farming is a branch of DeFi.
• DAOs: Some protocols act as DAOs with governance tokens.
• Ecosystems: Protocols are ecosystems.

More reports

Go here to get the Trends Pro report. It contains 200% more insights. You also get access to the entire back catalog and the next 52 Pro Reports.

Discuss this story, or subscribe to Trends.vc for more.

🛠 Building in Public: The Value of a New Feature

by Ivan Romanovich

When unveiling a new feature, users don't want to hear what you did. They want to hear what the feature will do for them. How will it add value?

Discuss this story.

🎙 Nadav Keyson is Eyeing Unicorn Status

from the Listen Up! IH newsletter by Ayush Chaturvedi

In March 2020, brothers Nadav and Gideon Keyson launched Riverside, a tool to record studio-quality podcasts and interviews from anywhere.

When they first launched on Product Hunt, they had just two paying customers. Now Hillary Clinton, Guy Raz, and Ali Abdaal (DeepDivePodcast), are all customers. In fact, the Indie Hackers Podcast is recorded on Riverside as well!

Earlier this year, Riverside raised $9.5M in a Series A round led by Alexis Ohanian, cofounder of Reddit. Indie Hackers sat down with Nadav to chat about his plans to make Riverside a dominant player in the creator economy, and his goal to hit unicorn status.

Failing and trying again

Nadav and Gideon didn't start out wanting to build a podcasting platform. Initially, they had built a platform similar to Clubhouse (way before Clubhouse went viral) where politicians could come on and debate each other in front of a live audience.

Nadav is based out of the Netherlands. It was easy for him to get Dutch politicians to agree to join the platform for debates, but it was difficult to get people to listen.

When they decided to stop the project, their users didn't even notice! No one even asked where the product went. The brothers decided to try again when Gideon figured out a way to record participant audio and videos locally on their computers, then upload them to the cloud after the recording.

This meant that the quality of the recorded files was top notch, even on a choppy internet connection. Podcasts recorded through Riverside looked and sounded beautiful, and no other player was doing this. The technical advantage became their selling point, according to Nadav:

Learning from early users

Nadav tried to pitch Riverside to podcasters and influencers. His angle was that Riverside was a way for podcasts to have a live audience on their shows. Fans could even join the discussion as the podcast was happening.

But he didn't receive positive feedback from prospective users. Podcasters didn't like the live aspect of the platform because it added a new hurdle: They would need to get a significant chunk of their audiences to tune into the live show, making the situation time-sensitive.

Nadav and Gideon realized that users cared less about the features and more about how good the recorded audio was. So they decided to double down on that.

Remote audio was taking off during the pandemic, with Zoom being one of the top options. But Zoom was designed to make the live-calling experience great; it didn't focus much on the post-production aspects of audio and video quality, which are very important to podcasters.

Riverside's home page decided to take Zoom head-on with a side-by-side comparison, displaying the recorded video quality of both platforms. On one side, the Zoom video fluctuates in quality based on the internet speed, while on the other side, the Riverside video is at 4K all the time, regardless of internet speed. That's a high-impact landing page strategy.

Unicorn vision

Nadav believes that Riverside can hit unicorn status by focusing on creators:

Riverside's growth has mostly been through word of mouth. Total traffic:

The primary channel is direct.

The secondary channel is search (72% organic and 28% paid). Nadav and Gideon also ran paid Google ads for the name of Riverside's top competitor, Zencastr:

They do content marketing as well, writing articles that target long-tail keywords like "how to start a podcast:"

Insights for indie hackers

• If a product isn't getting traction, reposition the value prop.
• Early user feedback is crucial for figuring out the right product to build.
• A tech advantage can work if you figure out the right problem to solve.
• Word of mouth is the strongest form of marketing.

Ideas

• Podcast setup as a service: Help newbie podcasters acquire the right equipment for their shows, depending on budget. Cashflow Podcasting is currently doing something like this.
• Live audio to podcast: Tools to connect to live audio platforms like Clubhouse and Twitter Spaces, and record the audio for later publishing.
• Podcast cross-promotion: A platform to match similar podcasts with each other for cross-promotion. Users can submit their podcasts and see other shows with similar niches and audience sizes.

Check out the full episode on the Indie Hackers Podcast here.

Discuss this story, or subscribe to Listen Up! IH for more.

🐦 The Tweetmaster's Pick

by Tweetmaster Flex

I post the tweets indie hackers share the most. Here's today's pick:

🏁 Enjoy This Newsletter?

Forward it to a friend, and let them know they can subscribe here.

Also, you can submit a section for us to include in a future newsletter.

Special thanks to Jay Avery for editing this issue, to Nathalie Zwimpfer for the illustrations, and to Priyanka Vazirani, Dru Riley, Ivan Romanovich, and Ayush Chaturvedi for contributing posts. —Channing