Crypto Super Brands Are Closer Than You Think
Opinion by Hendrik Ghys, co-founder and CEO of Thalex
In theory, nothing is stopping blockchain networks or crypto platforms from becoming super brands. However, we frequently hear industry chatter about how plateaus in adoption are temporary embarrassments due to macro-market factors or audience mismatches. A great brand is not defined by awareness alone but by customer captivity. This core insight comes from "Competition Demystified" by Bruce Greenwald.
Demand-Based Competitive Advantages
In answering the question of how to build a captive customer base, Greenwald suggests playing to at least one of three core tenets of demand-based competitive advantages: habit, switching cost, and search cost. Many crypto companies, namely exchanges, are well on their way to becoming household names have a distinct advantage here: They embody all three.
Separate Starting Points
Super brands in traditional finance didn’t reach their status overnight. Market leaders in fiat banking and trading have developed over decades. Crypto exchanges don’t get a shortcut here, but they have distinct characteristics based on how and why they were created. Crypto’s inception was that of a borderless currency built for the internet by the internet. The crypto community was global from day one — a far cry from the traditional financial industry’s localized, geographically bound, and hierarchical structure.
Crypto Exchanges: A New Era
Crypto exchanges were built to welcome users from anywhere worldwide, uninhibited by regulatory restrictions. There is no New York or London Stock Exchange in crypto. The most critical driver of customer captivity is habit — those who use a product without thinking twice or considering the competition. In the early days of crypto, habit formation was limited. The space innovated too quickly, and customers looked for new exchanges that would be quickest to list new coins.
The Evolution of Crypto Exchanges
That stage was followed by competition for leverage, first with margin trading and ultimately with perpetuals. Once perpetuals started to dominate as the preferred instrument to trade and stablecoin settlement opened up the path to altcoin perpetuals, habit formation became a significant competitive advantage. As trading volume and customer bases grew, so did regulatory intervention and the widespread implementation of KYC protocols for onboarding.
Regulatory Intervention: A Turning Point
This evolution raised switching costs among exchanges and introduced friction to trying new exchanges or products. Recent changes in regulations have led to an increase in regulatory requirements for crypto exchanges, making it more difficult for new players to enter the market. Regulatory intervention has become a significant factor in shaping the competitive landscape of the crypto exchange industry.
The Exchange Paradox
However, once a smaller exchange "cracks the code" on what will drive users away from leading exchanges and entice them to pay the switching and search costs, they can scale quickly and start consolidating success. By breaking the habit factor that leading exchanges build with their user base and offering enough reasons for them to search and switch, competitors can grow their footprint exponentially.
Becoming a Super Brand: A Challenging Task
For an exchange to break this cycle and become a super brand, it has to create a network effect that plays on habit, switch, and search costs to their advantage. Retaining an entrepreneurial and innovative mindset is critical here, as those are the keys to staying ahead of competitors. Likewise, remaining proactive on regulation rather than adopting a "too big to fail" attitude can help shrink the targets placed on the backs of market leaders.
Conclusion
No brand is invincible. Trust and habit are built on a millimeter-by-millimeter basis, so it’s up to exchanges to internalize this and move forward with that approach to win new users and keep them engaged. Hendrik Ghys is co-founder and CEO of Thalex. Having transitioned to the crypto sector in 2017, Hendrik was instrumental in negotiating the acquisition of Bitstamp and served as chair of its board post-acquisition.
Disclaimer
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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