Why do crypto projects have such a high failure rate?

Why Blockchain and Cryptocurrency Startups Have a High Failure Rate? The answer may lie in a variety of factors beyond funding. Mario Nawfal spoke exclusively to BeInCrypto to share his thoughts.

Blockchain and cryptocurrency startups have seen significant growth over the years. But only a few projects are successful. It’s no secret that starting and successfully running a blockchain project is a challenge.

When it comes to ever-evolving and complex technology, launching a project takes more than just a great idea – it requires a dedicated team with vision, knowledge and resources to succeed.

Blockchain startups are on the rise.
Blockchain startups are on the rise. source: media

Startups have a high failure rate

Blockchain and cryptocurrency startups have gained a lot of attention in recent years as they offer a new way of doing things in the world of finance. These start-ups operate in a complex and rapidly changing environment and face unique challenges that traditional companies can face. As a result, the failure rate of blockchain and cryptocurrency startups tends to be higher than that of other companies.

In fact, 9 out of 10 startups in the traditional or decentralized finance domain see a way out.

New Business Failure Rate Source: Failory
New business failure rate. source: Failory

According to a Deloitte report, less than 10% of all blockchain startups are successful, and the average lifespan of a blockchain project is around one year. BeInCrypto conducted a Reddit survey about the outage. While there have been many answers, one of the answers is:

“The reason for this is not lack of money. Many blockchain startups fail because they take too long to build. We need to do a better job to get companies on the right track to success quickly before they lose momentum. Money can help start-ups get started, but it eventually dries up, and this is directly correlated to the amount of time it takes to start and run a project. If the projects had the engineering resources and expertise from day one, they could focus on building their product and save valuable time and funds.”

Here are some of the key reasons why blockchain and cryptocurrency startups have a high failure rate:

No regulation

One of the major challenges facing blockchain and cryptocurrency startups is the need for more regulation in the industry. Since the industry is relatively new, companies must adhere to several established rules and regulations. This creates uncertainty and makes it difficult for companies to navigate the regulatory landscape.

Blockchain and cryptocurrency startups face legal and compliance issues without clear regulations, leading to fines and even closure. In addition, investors may be hesitant to invest in a company operating in a regulatory gray area, which makes it difficult for start-ups to raise funds.

High competition

Another reason for the high failure rate of blockchain and cryptocurrency startups is the high level of competition in the industry. As the industry has grown, more and more companies have entered the market, making it difficult for new start-ups to gain traction.

The competition is not just limited to other blockchain and cryptocurrency startups, but also to traditional financial institutions such as banks and credit card companies. These established players are also looking to break into the blockchain and crypto space, which could make it even harder for startups to compete.

No adoptions

Blockchain and cryptocurrency startups often need help with adoption as the technology is still in its early stages. While blockchain and cryptocurrencies offer many benefits such as transparency and security, they have not yet been widely adopted by the general public.

This lack of adoption could make it harder for blockchain and cryptocurrency startups to generate revenue as they may need help finding customers willing to use their products or services.

In addition, the lack of adoption can make it harder for start-ups to raise funds, as investors may be hesitant to invest in technology that has not yet been widely adopted.

Technical challenges

Blockchain and cryptocurrency startups face various technical challenges, such as scalability and security. Blockchain technology is still in its early stages and developers are still figuring out how to make it more efficient and more secure.

These technical challenges can make it difficult for startups to create reliable and secure products or services. In addition, troubleshooting technical issues can be time-consuming and costly, which can drain a startup’s resources.

No talent

Blockchain and cryptocurrency startups often need help finding the talent they need to succeed. The industry is still relatively new, which means that only a few seasoned professionals have the necessary skills to work in it.

In addition, the industry is very competitive, which makes it harder for startups to attract top talent. This can be especially true for startups that may offer additional compensation or benefits compared to established companies.

Finally, blockchain and cryptocurrency startups face the challenge of market volatility. The price of cryptocurrencies can fluctuate wildly, making it difficult for start-ups to plan and budget.

Market volatility can also affect the demand for blockchain and crypto products and services. For example, during a downturn, customers may be less likely to invest in blockchain and cryptocurrency startups, making it harder for these companies to generate revenue.

End; blockchain and cryptocurrency startups have a high failure rate due to a variety of factors including lack of regulation, increased competition, lack of adoption, technical challenges, lack of talent, and market volatility.

To expand further, Mario Nawfal, host of Twitter’s largest spaces and CEO of IBCgroup, spoke to BeInCrypto. Nawfal only provided quotes related to the given scenario, asserting that he was not surprised by the failure rate. Given that crypto is a risky asset, the failure rate is high. We asked Nawfal why and he cited the basic principle of supply and demand.

“We don’t need a million games right now. There are not enough players. There are more games in the bear market than there are players. It’s capitalism; let the strongest survive. So you have different games trying to do the same thing. You have various DeFi projects trying to do the same thing. You have to accept it. You must fail.

Further added:

“I will never launch a crypto project because I’m just too scared considering the odds are against me. I prefer to invest in many (projects).”

While these challenges are significant, startups still have a chance to succeed in the industry. Several factors can help the growth of startups in the ecosystem, as described by BeInCrypto in a January 31 report.


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