But, as industry veterans will tell you, this is not the first such downturn in cryptocurrency’s history. Like previous bear markets, the last few months have been marked by signs of capitulation: shrinking market caps, obituary predictions from mainstream news outlets and, possibly most painful of all, industry layoffs.
ConsenSys, one of the largest and best established enterprises in the blockchain space, has become the latest to announce layoffs as crypto winter rages. And the decentralized social media project Steemit lost more than half of its workforce.
These decisions are emblematic of one of the bear market’s most painful consequences and, by extension, they offer two windows into the state of decentralization today.
Restructuring or Throwing in the Towel?
ConsenSys, a Brooklyn-based company that develops a variety of software tools related to Ethereum and other blockchains, announced a significant round of layoffs on December 6. It affected 13 percent of the company’s workforce, which amounted to about 1,200 employees before the layoffs.
Layoffs are never fun, but the situation was exacerbated for ConsenSys leadership when CoinDesk obtained an internal chat log of discussions within the company related to the layoffs. The chat logs don’t reveal any particularly juicy information, but they do reflect a bit of anger and frustration on the part of employees toward the company’s leadership — which is, again, what you expect when people are laid off. A Reddit thread started by someone claiming to be one of ConsenSys’ newly laid-off employees also highlights the poor state of morale within the company.
Meanwhile, Steemit, a blockchain-based social media platform, announced a 70 percent reduction to its workforce last month. The company hasn’t publicly revealed how many people it employed beforehand, but Crunchbase put the figure in the 11 to 50 range.
Has Cryptocurrency Failed?
The value of bitcoin has dropped by nearly half in the past month alone, and it continues to decline, as do most other major cryptocurrencies. It’s clear that this market is directly tied to a company like ConsenSys needing to restructure in a way that reduces its workforce.
Since many crypto companies are funded to a large extent by investments held in the form of cryptocurrency, the market decline has drastically reduced the cash available to many of these companies, forcing them to shed workers.
It’s a safe bet that crypto gloom-and-doomers would contend that the rounds of layoffs are another sign of the impending death of the crypto market as a whole. We’ve already been told recently that bitcoin is in a “death spiral,” and large-scale layoffs do nothing to feed optimism about crypto’s future.
To be sure, the crypto market is facing tough times. The layoffs announced so far are unlikely to be the last we’ll see.
That said, it’s important to keep the restructuring in perspective. ConsenSys is losing only 13 percent of its workforce — a significant figure, but hardly one that spells the death of the company. ConsenSys was one of the largest and most important crypto startups before it announced the layoffs, and it will very likely remain in that position going forward.
Plus, in a way, shrinking a bit in size could be a good thing for ConsenSys. The company, like others in such a far-ranging and exciting space, has perhaps lacked focus in the past and has invested resources in projects that offer little profit opportunity. I’m not sure that helping to develop DAO Wars was the best use of ConsenSys employees’ time, for example. Layoffs occasioned by the crypto bear market may force the company to hone its focus a bit more, leaving it stronger.
Steemit’s restructuring also likely does not reflect any death knells within the crypto ecosystem as a whole. Anyone trying to figure out what layoffs at crypto companies mean for the market as a whole should bear in mind that 90 percent of startups fail, across all industries. If ConsenSys and Steemit operated in a different industry, these layoffs would hardly turn heads, and they would certainly not fuel doubts about the health of the industry or concept of decentralization as a whole. We’d just see them as startups that, like most startups, ran into problems.
To put it another way, layoffs and company failures are normal, especially in young industries like crypto, where business models and company cultures are still being established. The bear market is certainly a factor in the difficulties that some crypto companies are currently facing, but so is the simple fact that growing a company in a rapidly evolving industry is just hard.