And then there is Bitcoin dropping below $24,000 and Binance halting its withdrawals, Ethereum dropping below $950 in Uniswap, and so on…My beloved crypto newsletter Decrypt reports all the craziness that’s happening under a new segment called the “2022 Crypto Crash”. The current situation is nicely summarized by Yano on Twitter:

https://twitter.com/JasonYanowitz/status/1536365738906202112?s=20&t=UhJlGsroe9t3JCNmXGviNQ

Yikes.

Some of the likely reasons why the crash is happening include the overall state of the economy (e.g. high inflation), regulative pressures, security attacks, Luna crash, now Celsius, and so on…A lot of this is really related to each other. As an example, it was recently revealed by the Nansen’s research team that Celsius was involved in the Luna crash by holding a large amount of UST that is their customers’ money.

After every major protocol crash, we see authors writing about the how and the why the crash occurred. We are talking about the “too big to fail”s of the industry, the players that we never thought could crash. But it happens. In my opinion, apart from the facts listed above, there are two other reasons why we’re having a meltdown right now: a lot of the web3 projects are built on hype 2) web3 remains inaccessible to the every day user.

The first reason (a.k.a. ‘hype factor’) can be explained by taking a quick look at the role Discord plays for web3 applications. There are countless number of Discord channels today. It is impossible to really follow the conversations that are happening in there unless you are a part of just a few groups. Most of us use Discord with the notifications turned off because there are just too many of them. The issue isn’t just quantity of things, it is also the quality. The incentive mechanisms that are around just to create a bigger crowd around a project or just to get some conversations going in the channels may set up the project for success in the short-term, but what happens in the long-run?

Similar issue exists in the DeFi protocols that are now crashing. We see that a lot of them have had issues with promising users really high APYs and then not being able to keep their promises because someone (most times a whale) always discovers the hole in the system. In these kind of bear market times, one crash brings the other just as it happened in the Luna & Celsius case. The projects that try to get users in via highly sweet promises that almost feels too good to be true face what I call the “sweet domino effect” eventually.

The other issue is the inaccessibility of web3. This week I was chatting with a friend from college who works at Meta and when I mentioned that I work for a web3 company she went: “what is web3?” In the bubble that we’re in it feels like everyone knows and understands web3, but the reality is far from that. The space is so new that even people who are fully emerged in web3 feel like there is so much to learn every day (I feel that way for sure). Thus, it is hard to expect someone who is just starting to invest in crypto to understand how everything works. Seeing a project with smart founders, well-recognized name, sweet interest rates is most times enough to have a level of trust in the project for those who are just starting. Even the investors who bring these projects into life don’t go far enough to recognize the holes that could cause issues that we are facing today. I don’t blame them, we’re all learning and making mistakes.

There are fundamental issues with the user experience in web3 projects. Even though I love the lens protocol and I am quite excited for it, every single thing you do in there requires a signature. That totally makes sense, but for every day users who are yet starting to understand the value in web3, poorer user experience like this could be an intimidating factor.

The fix is simple. We need the kind of projects that don’t draw users in with promises like whitelists, high interest rates, incentives that don’t drive meaningful interactions. A project that sustains a long-term success is the one that gathers a community around universal principles that can be applied in web2, web3, or in web5. The companies who are successful in doing so are set to survive the 2022 crypto crash.

I do love projects like Rally that empowers creators and help them with launching their own tokens, or projects like Boys Club that brings people with a common goal together (they do have a great newsletter as well, and I’d like to get more involved with them for sure). It is also the same reason why I love working at Cohart and believe in our project with my heart and soul. Cohart connects visual creators with their consumers in web3. However, there is not a visible element of web3 in the app’s user experience currently. Anyone who uses any other app in web2 can go through our onboarding process and use the app without feeling intimidated. The web3 elements are hidden in details such as the answer to the question: “what happens when I like someone’s video?” We are bridging web3 elements to the web2 user experience so smoothly that if you have no interest in web3 you can still have an amazing experience on the platform. As long as one is interested in a bit of creativity, they will be able to find a niche community for themselves at Cohart.

Disclaimer: I am not a financial advisor. Do not take anything I write as a financial advice, ever.

One can argue that the rise of creator/passion economy was the actual start of giving the power back to the community. Even though I agree that creator economy was revolutionary just as the gig economy was, eventually it still ends up benefiting the tip of the iceberg: the corporation (e.g. Meta –– sry NGMI). The rest of the visible part of the iceberg is influencers or the very talented few who can still benefit from the corporate dependency. Not too long time ago Only Fans almost cut the income stream of many of its creators and Meta (then Facebook) had a power outage for many hours. As long as the creator is dependent to the corporation, the main benefactor of the system will stay as the corporation. The creator will stay as the pawns of a chess game with an important position in the game but often sacrificed so that most powerful can carry the game. Winner is always a corporation, no matter which side of the chess board.

The invisible rest of the iceberg, we the “regular people”, are sitting below mostly working at our 9 to 5 jobs or doing more than 1 job as a creative, scrolling on TikTok hooked on the influencer content for hours and often asking ourselves how they made it. It is mainly a combination of network, money, and luck with the first two being most prominent. Think about how many very talented visual creators you have encountered in the creative economy who are not traditional influencers. Not many, right?

The issue is the system that empowers the tip of the iceberg in a positive feedback loop. The mega rich (think Jeff Koons) sells artwork to other mega rich at Sotheby’s so that he can make more work to keep on selling to the mega rich. Mega rich keeps Koons and auctions it back in a couple years for a doubled price (turning it into an investment) so that other mega rich can buy it. See this paragraph? a repeated loop of mega and rich playing their own game.

So we need a system that gives the power back to hands of the community. We need mechanisms that awards the effort, passion, and determination rather than the money, family-based networks, and status. Think about today’s Instagram. You just see paid content everywhere. I am aware of the needs of a business –– profit potential, traction, and all other metrics of a business that would impress a Venture Capitalist. But, there is not one way to become a profitable business. We just need to start by thinking with a box-not-existing mentality. No box. at all.

I explain the solution with what I call as a “flipped iceberg” model. In this model, if you have money, network, and power it will likely take you less time than the rest to move above the surface (if we keep this model long enough, even this will change ––but for now we start from here). However, you will do this without preventing less privileged to move to the top. The success of one creator does not mean the failure of the other. It is not a zero-sum game. Yes, some in the community will stay under the surface, but that is because they put in less effort, less passion, and less determination in what they do.

So, how do we succeed this?

The change won’t happen in one night, but it has already started. We see projects like Rally, Roll awarding coins to individual creators. We see projects like Audius, Mirror taking the Spotify and Substack to the next level via social tokens. We do need a decentralized Only Fans, we do need a decentralized Visual Creative Community that has its own token and they are on the horizon. These are the mechanisms that allow creators build their own economies independently from platforms. Platform can cease to exist, but the creator’s economy will stay. Community has a say in the decisions that will shape the future of the platform. Community is empowered while the initial builders of that community still win as they have put a lot of effort, passion, and countless hours into building this new system. It is a win-win model.

The future is democratized. And I am all for it.