This Is What Mark Cuban Thinks Is Wrong With the Crypto Industry

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  • Cuban thinks crypto needs to move beyond replication and start to innovate.
  • The billionaire investor is looking for the next big must-have that even non-crypto fans want to use.
  • For crypto projects to succeed, they need to generate revenue just like any other business.

Hint: It's not the slump in prices that bothers Cuban.

The cryptocurrency industry has struggled this year, with many cryptos down 80% or 90% from their all-time highs. But that's not what worries billionaire investor and Shark Tank judge Mark Cuban. For him it's the lack of innovation in crypto that's most concerning.

Imitation isn't enough, it will take innovation to drive crypto

Speaking to Altcoin Daily, Cuban said he's still bullish on cryptocurrency. However, he wants to see new ideas and the emergence of the next big thing that will bring a new wave of crypto interest. "We went from DeFi to collectibles but now what?" he said. "What concerns me is that there's not the next application."

Cuban says if you look back at the way crypto evolved in recent years, first there was the DeFi summer, followed by NFTs. Each brought in more people, increased interest, and new investor money. The issue is that now projects are playing on the edges and imitating previous successes instead of pushing to create something new.

"Rather than seeing true innovation, you're seeing replication," said Cuban. "That's not going to be enough to bring people back to crypto." He compared it to the evolution of the internet, where streaming, websites, and online shopping each drove a new wave of interest. Then everything went quiet around 2000 and 2001 before social media and app stores started to attract new users again around 2004.

"The thing that's going to drive crypto above and beyond just the crypto-ites is something where you just have to use it," he said. "Crypto has not had that moment yet where your grandma, your little brother, your little sister all have to use it."

What Mark Cuban looks for in a crypto project

Evaluating cryptocurrency projects can be difficult, but one crucial component is to think about how the crypto will generate revenue. Just because it's a cryptocurrency, doesn't automatically make it a functioning business. Cuban explains, "The thing about crypto that I think people sometimes fail to realize is that you need users in order for people to buy and use Ethereum (ETH) or whatever it may be."

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If we're talking about an ecosystem like Ethereum, that means you need to see applications that will generate gas fees. "Look at the number of transactions," says Cuban. "For me, that's the bellwether of success."

In terms of play-to-earn, another crypto trend that exploded in 2021, Cuban says there needs to be a reason people buy the tokens outside the game itself -- or another source of income such as advertising revenue. The crypto guru says if your play-to-earn doesn't have a way to generate revenue outside of the tokens, you're in trouble.

Bottom line

Last year's crypto frenzy is well and truly over, but many crypto enthusiasts like Cuban still see long-term potential for the industry. If you're considering buying crypto, Cuban's advice to look for utility and revenue generation is valuable. There's a lot we don't know about how the industry will evolve, but if a project can't sustain itself, it is difficult to see how it will survive long term.

Cryptocurrencies are high-risk investments. It's important to only invest money you can afford to lose and ensure crypto only makes up a small amount of your wider portfolio. Don't assume that a project will be successful just because it uses the blockchain. It still needs to function as a business if it is to thrive and generate strong returns.

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