There are more blockchain startups launching than ever before. As of April 2022, a staggering nineteen thousand tokens are currently circulating, up from a mere five hundred back in 2014. That number is expected to climb even higher at an exponential rate going forward, which means it is consequently becoming increasingly difficult to market effectively within the blockchain industry with a finite supply of “attention” that new projects are constantly competing over.

Flashy projects with lofty promises are popping up each day, and the quest to think up new and innovative ways to capture attention and build community remains a tricky one. On top of that, cryptocurrency companies place an inordinate amount of importance on ‘glamor metrics’ like community sizes on Twitter or Telegram, giving little thought to community engagement. 

Additionally, these fledgling companies fail to even consider the purpose of having such large communities aside from appeasing investors and demonstrating the ability to grow social media channels. A small, robust, fierce, and engaged community is much more essential for long-term success than a massive community with bots, bounty hunters, and inactive members.

Nevertheless, that’s a topic for another time!

How to Fix the Blockchain Space’s Marketing Problem 

Community growth and engagement are two of the most critical marketing challenges in the cryptocurrency industry. While there is no quick fix, there are certainly some tried and true ways to enhance marketing efforts and grow communities for your startups.

Some of the heavily relied upon pillars of marketing include:

 

• Partnerships and collaborative marketing
• Paid advertising
• Giveaways and competitions
• Guerilla marketing
• Automated inorganic growth methods (bots)
• Bounty hunters
• KOLs and Influencers

 

While some of these ‘tactics’ or ‘tools’ can be helpful, we don’t necessarily recommend leaning too heavily on giveaways or paid advertising. We certainly don’t recommend relying on artificial growth and bot farms, either. However, it’s important to consider both reach and awareness when crafting your marketing and growth strategy. 

While the methods we previously mentioned will provide a false sense of validation to the casual observer looking solely at the number of followers, they don’t necessarily translate to educating the average retail investor on why your project is important and what value it brings into the world. For this reason, we believe it’s important to not only consider a combination of all of these marketing methods, but also to employ ambassadors and champions to help the cryptocurrency sphere understand who you are and what you do. Enter KOLs and Influencers.

 

What are KOLs and Influencers?

Most people are familiar with influencer marketing, where individuals with tremendous reach are paid to promote and influence their communities to purchase products or services.

This payment can take shape in a number of ways, such as:

 

• Equity in a company
• Free products
• Paid travel expenses
• Cash payments

 

While influencers typically exist in every sector, they go by another name in the blockchain industry. KOLs or Key Opinion Leaders are seen as experts in their field. To most, influencers and KOLs are interchangeable, but there are a few distinctions between the two depending on whom you ask.

One major distinction being KOLs operate mainly out of a desire to help others, learn more, become an authority in their niche, and usher in more adoption of the things they are passionate about. Some notable examples are industry pioneers like Vitalik Buterin, the founder of Ethereum, or Binance’s founder Changpeng Zhao. Apart from managing their own companies and foundations, they hold a large social media presence that garners attention by talking about industry developments and news.

While influencers share one or more of these traits with KOLs, they are mainly motivated by earning potential and creating a brand or business out of their social clout. Unlike Vitalik or CZ, these individuals regularly leverage their media presence to promote or market other products and companies. The differentiation between “KOL vs. Influencer” comes down to semantics, and the distinction has largely been lost since many cryptocurrency influencers refer to themselves as KOLs. In any case, both can bring value in different ways, and many from both ends can be recruited for community marketing. The greater importance lies in the agreement and compensation, and what your project is providing for the services you receive. 

Cryptocurrency startups often need early backers and promotion to be able to fundraise effectively. As a founder, it’s important to understand how your KOL compensation structure will affect the quality of content and extent of support. 

Many KOLs will accept compensation in project equity. These promoters are incentivized to create awareness and educate their audience about the benefits of your project since their compensation is directly reflected by the value in their equity. Other influencers, promoters, or shillers normally opt for payment in cash, meaning they are less inclined to perform well and are simply incentivized to meet minimum contractual requirements like short-term support or social media mentions.

The Dark Side of Influencer Marketing in Web3

Although promotional marketing is an excellent tool for creating brand awareness and awareness across additional communities, it’s not without controversy. There have been many instances of KOLs and Influencers acting with malicious intent, heavily pushing and influencing their communities to purchase cryptocurrencies from projects they promote so they can create opportunities to capitalize on price movements. Ben Phillips, a Youtube Influencer, was more recently exposed for doing exactly this with his involvement in Safemoon. Openly available on-chain transaction data paired with his own declaration of his wallet address showed he gained over $12 million profit by dumping tokens immediately following tweets where he condemned investors who refused to hold the token long-term.

While we always recommend offering investment opportunities to KOLs in return for promotion,  there’s no guarantee they will operate ethically, and it’s important to understand this risk in these individuals manufacturing ‘pump and dump’ schemes. 

Another point of KOL controversy is centered around charging commission for referrals to platforms or services, regardless of whether they actually use that product themselves. Unfortunately, there’s no transparency on whether your favorite Youtuber actually uses that crypto trading platform or if they’re simply trying to give this impression because they get paid a flat fee for every referral-funneled sign-up.

Most people can agree that manipulating and spreading misinformation under the guise of educating people who trust you is unacceptable. That being said, everyone should always steer clear of financial advice and do their own research when making financial decisions.

 

Effectively Harnessing the Power of KOLs

All controversy aside, Key Opinion Leaders a critical role in web3.0 adoption. They bring attention to new startups worthy of consideration and inform the general audience of larger market movements and emerging trends. Luckily, there are many ways to connect with KOLs and influencer groups for your own project promotion. Some examples of resources include:  paid services, influencer platforms, launchpads, and affiliate networks. Additionally, you can always directly reach out to well-known KOLs to pitch them on your project and see if they might want to invest and help market the company.

When considering the utilization of KOL marketing for your startup, here are a few helpful tips to help you get started:

 

• Work with highly motivated people first and foremost, especially ones that are fully aligned with your company’s long-term vision and ethos, while also being a pleasure to collaborate and communicate with. 
• Don’t resort to cash payment in exchange for talking about or mentioning your project as it can come off as inauthentic, and it’s much better to have someone invested for the long haul.
• Create a healthy pipeline of content and calendar updates for your KOLs as they are investors first and foremost and also need the means to communicate good news to their communities.
• Create ironclad contracts for investors to protect yourself and your startup from KOLs that promise the world and end up delivering nothing. You shouldn’t have to remind KOls that they should be supporting, but in the event you do, it’s important to include metrics and Key Performance Indicators (KPIs) to hold them accountable.
• Focus on educational content, high-quality videos, and AMAs with strong communities. Tweets and RTs are helpful but teaching people about what a project does and why you believe in it long term is critical.
• Working with services or projects to help you run your KOL marketing initiatives can be helpful

 

Working with KOLs can be complicated but extremely rewarding, which is why we help coordinate strategies for marketing with companies we back and advise among other services.

 

Advice for Investors

It’s important to note that investors should be wary of taking any financial advice from anyone. “Do your own research” is often repeated ad nauseam within both the traditional finance space as well as the world of blockchain, but it is the only financial advice we are comfortable giving anyone.

While KOLs and companies can mean well, your financial circumstances are unique to you, so it pays to safeguard your own finances and only invest what you can afford to lose.

At the end of the day, take any promotion, educational content, video, article, post, announcement, mention, or advice with a large grain of salt. Question why a new company or investment opportunity is being mentioned. Research the source of information and their track record as thought leaders and educators. Is this individual or organization reputable, or is most of their content centered around shilling projects?

Looking for more help to empower yourself and become a better researcher and investor? Join our growing communities where we help teach people how to invest rather than tell them what to do.

About Arcanum Ventures

Arcanum Ventures is a venture capital investment firm, blockchain advisory service, and digital asset educator. We bring precise knowledge and top-tier expertise in advising blockchain startups.

Arcanum demystifies the blockchain space for its partners by providing intelligent, poised, crystal clear, and authentic input powered by our passion to empower and champion our allies. We unravel the mysteries and unlock the opportunities in blockchain, Web3, and other emerging innovations.

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