"What was that thing again where you could sell pictures?", my friend joked after his credit card didn't work at the rental car place. "You mean NFTs?", I asked. "Yeah", he said "How weird was that?"

Mention NFTs to anyone outside the web3 world and you can watch the gears turn in their heads as they excavate the memory. NFTs have vanished from mainstream discourse and mainstream thinking.

If you experienced the 2021 mania, it makes sense:

• Floor prices are down

• A struggling economy creates more pressing issues

• Rumblings show that there's only a few thousand active trading wallets left

• New collections rarely skyrocket in price.

There are also less tangible signs of the downturn: If there ever was cultural cachet to NFTs, it's gone.

The remaining hexagon profile pictures on Twitter seem to follow the same philosophy: Stick it out until the next bull market drives prices up.

But what about the prices now? They aren't good, so it's time to find culprits: Recently, the community found one in Proof founder Kevin Rose. He was pilloried on Twitter Spaces for not developing the Moonbirds IP enough, which (according to them) tanked the floor price by 95%.

While Kevin Rose and Moonbirds is a starkest example, you could find dozens of examples on Discord, Twitter and more. The pattern is the same: Communities accuse founders of not doing enough to keep floor prices up.

Most judge the success of NFTs (and specific NFT projects) in terms of (floor) price, market cap and sale prices. ‌

I find this obsession over prices stupid. NFT buyers act as if they're early investors, when in fact they're early customers.

In this essay, I want to explore why that's a mistake and why NFTs could become a widespread, successful technology, even if prices remain low. 

To do that, let's first face something hard to admit:

The Uncomfortable Truth: Most NFT Trading was/is a Ponzi

NFTs are not a Ponzi scheme. They’re a vital technology to advance digital ownership and a decentralized internet. But some of the dynamics that emerged certainly resembled a Ponzi.

Most NFT transactions were placed as speculative trades.

Sure, there are the in-game items, community memberships and artwork people bought for the aesthetic value or utility they provide. That's not what I'm talking about.

What I mean is that most NFT purchase decisions were motivated by profit on secondary transactions. Even promised utility or IP expansion only mattered as far as it would entice other people to buy the NFTs at a high price.

Even the standard NFT project playbook of announcing companion NFTs, launching an ERC-20 airdrop and creating staking were basically strategic constraints and expansions of supply and demand—not an organic increase in people wanting to buy more NFTs.

Most of the NFT market was/is a zero-sum game. It may not have been an outright Ponzi scheme, but it felt like one—and then behaved like one: Once a collection's price started to fall, it crashed.

And then buyers faulted the creator/company behind the collection for not doing enough. What those buyers forgot:They bought NFTs, not shares. By buying an NFT, they bought a tradable blockchain token.

This doesn't mean that it's the company's job (or even intention) to increase secondary market prices.

If you own a first edition of the first Batman comic, that's now worth a small fortune. But that was never DC Comics' goal. DC Comics wanted to sell comic books people wanted to read.

But owning that comic doesn't mean you own part of the company. It makes you an early customer. But DC Comics has no responsibility to increase the value of comic books on secondary markets.

NFT traders seem to think buying an NFT means the company now has to increase its price:

NFTs don't exist to increase in price

Just because something is tradable doesn't mean it should trade at ever higher prices. You can theoretically sell any item on eBay, but most things are (almost) worthless on secondary markets. That's because we buy most sneakers to wear them on our feet and most comic books to read and shelf. 

If NFTs usher in a new era of digital ownership, the same dynamic will be true: Most NFTs will be bought for the things they enable, while also being basically worthless on secondary markets.

(To dive deeper into this, read the section "Primary Transaction Thesis" in my previous piece)

Your price could’ve been wrong

Secondary market prices aren't decided by the company selling the items. NFT prices might go up as the collection's cultural significance increases, but that doesn't mean the price an individual trader paid was actually a fair price.

For a while, people were dunking on Moonbirds nesting rewards, stating that getting a fanny pack and socks was a joke because people paid hundreds of thousands of dollars for them. 

But when you buy something on secondary, you don't get to complain about the price for what you get to the original company.

It's like buying the original Batman comic ahead of a major movie release and then complaining that the hype subsided and the comic now sells for less. 

Just because you decided to buy an NFT at a certain price (maybe motivated by expectations of price increases) doesn't mean the company has to deliver you value equal to that secondary price.

A "good" NFT market doesn't have to mean high floor prices

There’s an unspoken expectation in the crypto world: If a bull market arrives, my tokens will be worth more and I’ll profit. 

That's probably not true. The total NFT market has shrunk and might expand again. But that doesn't mean individual NFTs will sell for high secondary prices again. 

NFTs are a technology, not an asset class. If blockchains are the rails, tokens are the containers on the trains. 

Let's imagine NFTs become the standard way to issue digital event tickets. Concerts, sports, lectures—all the tickets issued as NFTs. This would massively expand the NFT market and increase adoption of web3 and decentralized infrastructure. But it probably wouldn't increase the price of any 2021 PFP collection.

A company's success doesn't have to correlate with NFT prices

Imagine you're a venture capitalist and buy 10% of a company for $25,000 as their first investor. 12 years later, that company sells to a big tech firm for $100 million. How much do you get? You own 10% of the company, so you'd get $10 million.

(I know things can get trickier in practice, but I'm keeping the math simple for the example.)

Now imagine you're that company's first customer and buy a lifetime deal to their premium subscription for $1000. Even as others pay hundreds a month for enterprise subscriptions, you get the same benefits without paying another penny. When that company sells for $100 million to a big tech firm, how much do you get? Zero. You're not a shareholder.

NFT traders are the customer, not the investor.

If tradable on a secondary market, your lifetime subscription might be more valuable than the $1k you paid because the company expanded its offerings. But that doesn't have to scale 1:1 with the company's success.

NFT companies don't win much from secondary sales

If, as so many NFT traders insist, it's an NFT company's job to increase secondary prices, most NFT companies will not be viable businesses. 

Businesses run on money and exist to make more of it. Unless today's NFT companies find a way get consistent cash flow and create viable economic models, they'll eventually crumble. 

Secondary sales don't bring in money. While it's great for NFT owners to sell their NFTs at a profit, the company issuing those NFTs doesn't benefit from that. 

Royalties exist in web3, but those are not a realistic revenue stream:

1. They're not enforceable

2. They make things more expensive for buyers

3. To make enough from royalties to generate just one extra "sale" at 10% royalties, you need your NFTs to 10x in price.

4. You don't have any influence over when these transactions occur.

Royalties are a great concept. But they're not a reliable or sizable revenue stream for anyone but the top few collections and creators.

There's little to no incentive for companies to spur secondary sales—besides the expectations of their own customers.

Where do NFTs go then? What happens in the next bull market?

Most people believe the future of NFTs will look like the past, but better. They think it'll be like 2021 with even higher prices.

I don't think so.

Most projects will disappear like 2017's ICOs. Sure, the same way the ICO bubble gave us stuff like Aave (then called ETHlend), we might see some successful enterprises bloom from the ashes of this cycle.

But I for web3 to be a success, we must be able to envision a future of NFTs that doesn't look like 2021. I believe all of that starts with a core insight:

NFTs are infrastructure

When we think of NFTs, our brain thinks of artwork, PFPs, memberships and other types of NFTs we've interacted with. 

But that obscures an important truth: The ERC-721 and ERC-1155 token standards aren't the cargo. They're the the shipping container.

The shipping container transformed logistics across the world, supercharged globalization and lowered worldwide shipping costs. Even though it completely changed logistics, nobody at the store cares if their items got there by shipping container or packing mule. 

This could be true for blockchains (and, by extension, NFTs): They might become infrastructure that fades into the background. 

If this decentralized infrastructure enables entrepreneurs to deliver experiences faster, cheaper, safer or otherwise better, then using blockchains becomes a competitive advantage:

• If it's more economical for Ticketmaster to issue all their tickets on a blockchain as an NFT, Ticketmaster wins.

• If using an NFT protocol makes it easier to build in-game item systems, game developers win.

• If selling virtual collectibles as NFTs makes Marvel more money, Marvel wins.

In these scenarios, customers might not even know they're buying NFTs, the same way they have no idea what infrastructure is powering Ticketmaster's current operations or what ship got their iPhone to their local Apple Store.

This would skyrocket adoption of NFTs and decentralized infrastructure. It would advance the vision of true digital ownership. 

But it would probably create little to no change in price for PFP projects. 

This is not a bad thing. In fact, what's good for NFT adoption doesn't have to be good for NFT prices. 

That's perhaps my central point: A world in which NFTs are widespread and ubiquitous doesn't have to mean a world in which most NFTs are valuable.

===

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2021’s NFT market felt like a casino: Mints felt like a spin of the roulette wheel, Higher-than-floor listings like a bluff and Twitter threads like a dubious system designed to give you an edge.

NFT marketplaces seemed like casinos, taking their 2.5% cut on each irresponsible financial decision.

In gambling, the house always wins. In 2021’s NFT craze, NFT marketplaces certainly did.

But NFT marketplaces aren’t casinos. Yes, they benefitted from millions of folks basically gambling on JPEGs, but they didn’t make the odds or design rigged games.

In early 2023, the casino times are over. NFT volume has cratered, floor prices tanked. The few remaining traders look more like unwitting pedestrians gawking at a three card monte than cigar smoking tuxedo wearers enjoying a game of poker.

The few holdouts perform all this on a stage of economic turmoil in which markets are subtracting speculation from organic market volume. For the Web3 market, the result of this Great Subtraction will be the organic demand for NFTs (which hopefully exceeds zero).

We’re discovering which NFTs people actually want to own.

The end of the everything-goes-10x-because-JPEG-funny extravaganza challenges NFT marketplaces. Taking a cut of transactions is less lucrative when transactions are both fewer and smaller. For some marketplaces, this threat is existential. Are they taking the correct steps?

A good portion of what’s left of web3 looks like a cargo cult trying to summon The Next Bull Run™.

They seem to hope that if they just tweet “it’s time to build” enough (wagmi now sounds unreasonable to even the most fanatical web3 enthusiasts), hopefully before the VC dollars run out, a new speculative bubble will emerge and make them all rich.

This obsession with The Next Bull Run as Web3’s messianic savior feels like long-term ponzinomics. Don’t get me wrong: The next bull run may very well create wealth, innovation and progress. But the promise of a speculative bubble can’t be the raison d’etre for an industry.

If an enterprise—NFT or not—can’t maintain non-zero cash flows and equity values without a bubble, it shouldn’t exist. Web3 can only prevail if we create products and services people pay for—which creates businesses whose survival doesn’t depend on VC cash infusions.

I believe this is possible. And the same way the ICO bubble gave us Aave, some survivors of the 2021/2022 web3 hype can likewise become robust (if not antifragile) infrastructure of our digital economy. But that requires adhering to business fundamentals and creating useful companies from first principles.

Because they’re so fundamental, NFT marketplaces are a useful case study to form predictions of the web3 ecosystem as a whole and of individual players specifically.

This essay explores the future of NFT marketplaces from first principles, draws parallels to survivors of the dotcom crash and analyzes the viability of different business models.

Let’s start by understanding marketplaces and their competitive dynamics from first principles.

The Core Behaviors of Marketplaces

We can only understand NFT marketplaces deeply when we understand the principles of marketplaces (the same reason we started with transaction costs when analyzing DAOs).

The next few paragraphs are economics 101, but bear with me. At its core, a marketplace matches supply to demand via a price mechanism. This results in each marketplace requiring two parties to complete a transaction and generate revenue:

1. A buyer who wants to obtain something at the lowest possible price (demand)

2. A seller who wants to sell something at the highest possible price (supply)

Prices mitigate these competing incentives: They rise when demand exceeds supply and fall when the opposite happens.

The product experience thus improves:

• For buyers: The more sellers there are

• For sellers: The more buyers there are

This leads to something called network effects. Per Hamilton Helmer, network economies happen in “a business in which the value realized by a customer increases as the installed base increases”.

This makes the success of marketplaces self-perpetuating. The more users you have, the better the experience, the more you’re likely to attract. That’s why some of Silicon Valley’s biggest winners have been marketplaces: AirBnB, Amazon, Etsy, Uber, etc.

Network effects also work the opposite way: Fewer users create a worse product experience, which negates any great UX or novel features your product may have. Marketplace competition usually follows winner-takes-most dynamics.

Marketplaces, in other words, compete for liquidity, which measures how reliably someone can complete a desired transaction at their desired price. In Finding Power, Every’s Nathan Baschez calls this “The basis of competition”:

“The basis of competition is the collection of product attributes that cause customers to choose one product over another.”

Holding other factors constant, liquidity determines which marketplace builds network effects and wins. In NFT-land, OpenSea has captured the most liquidity (read: network effect) and operated as a quasi-monopoly for much of 2021 and 2022.

But as we’ve seen with the rise of Blur, network effects don’t cement a marketplace’s dominance. Competitive dynamics in network effects-driven industries can shift.

As per Nathan Baschez’ Why Winners Sometimes Take All, And Sometimes Don’t, early winners may decline for one of two (related) reasons:

1. Misunderstanding: The current winner serves a different need than they think, which enables an upstart to serve that need better and disrupt the incumbent.

TikTok is an example of this: Network-effects-powered Instagram thought people cared about their friends’ content, but TikTok realized people wanted entertainment.

1. External factors: The overall market changes, which shifts power in the value chain or transforms demand.

The government intervention of AT&T is a stark example of external factors affecting a champion’s market dominance.

The NFT marketplace space is currently undergoing an assault of external factors right now, which makes OpenSea’s juggernaut position more assailable than ever.

Besides illegible-to-me factors like the financial health of the companies themselves, a giant contributor to transformation is less visible now, but will become apparent in the near future. It’s what I call the primary transaction thesis.

The Future Won’t Look Like The Past: Primary Transaction Thesis

Many Twitter users enthusiastically predict the future of NFT trading. While their predictions are usually about prices or types of NFTs being traded, they all seem to assume NFT trading will mostly look like it did in ‘21/’22.

I believe NFT trading is about to transform based on a simple insight. This is the most important assumption this essay rests on: Most NFTs won’t go up in value.

You’ll realize this if you imagine a world after The Great Subtraction of speculation demand from real demand. If NFTs succeed as a product category, it won’t be because of speculation or trading. NFTs will succeed if people demand the experiences they unlock and the art they’re linked to. While 2021’s NFT market looked like a WallStreetBets field trip to the Ethereum blockchain, NFTs aren’t primarily financial instruments.

They’re digital items that could represent art, a software subscription, a membership, a ticket, an in-game item, a collectible… the list goes on. Pre-blockchain, most of those things were not investments, but purchases. I don’t see why that should change. Yes, the lack of physical logistics makes NFTs easier to trade, but that in and of itself won’t transform things into investment assets.

That doesn’t mean some NFTs won’t multiply in price and that some people won’t profit on them.

But speculation can’t remain the main use case of NFTs. Like physical things, almost all NFTs will decline in price after we buy them. Some specialized art dealers make money by speculating on art, but that doesn’t mean buying up the inventory at your local art gallery is a sound financial decision.

If NFTs are to be viable, we need them to unlock unique experiences people want for their own sake. This will mainly happen through primary transactions, not the secondary sales most marketplaces rely on.

Why? Creators/companies need money to sustain operations.

Syrupy fantasies of sustaining companies and artists through royalties only are just that: Syrupy fantasies.

Yes, royalties provide some income, but their economics suck: If you set a (high) 10% royalty and sell out a collection at a 0.1 ETH mint price, you’d need the price to 10x just to make one more 0.1 ETH. If your initial mint was 1000, you’d need every piece to change hands to get your day one cash flow. That’s just to stagnate. It gets worse if you want to grow. And if you want people to hold, the picture gets even more bleak.

For all but the top 0.1% of creators, royalties are a bonus, not a business.

There may be a moral case for royalties, but the economic one is weak. Compare mint proceeds to royalties & OpenSea fees:

Creatoers and companies earn more from mints than from secondary sales. Excluding outlier collections, it has been this way and it will continue this way. Most money will be made on primary transactions, the sale of an NFT from a company/creator to a customer. This creates multiple advantages:

• If/when primary transactions do become the bigger driver of NFT volume than secondaries, you capture a slice of a bigger pie.

• Peer-to-peer sales are unpredictable while primary sales let you control the price.

That said, let’s make a bold comparison:

Is OpenSea the eBay of Web3?

eBay used to rule eCommerce. It started by facilitating used (read: secondary) collectible sales between amateur sellers and captured a network effect. eBay became the high-liquidity marketplace, which made it the winner—for some time.

When you think of eBay today, you probably think of a peripheral eCommerce player, not the undisputed champion. Like Britain after losing its empire, eBay is still around and functioning. But it languished as a shell of its former self, playing third fiddle to Amazon and Shopify.

eBay has not only declined, it has also abandoned its roots of being a second-hand collectibles marketplace. 80% of transactions are now of new goods sold by professional sellers. Within our context, this is the Primary Transaction Thesis at work: A shift towards primary transactions.

(Interestingly, eBay was founded on a vision of ‘the perfect market’ by a techno-optimist libertarian, which resembles the dogma of web3, which often stands in the way of mainstream adoption)

A peer-to-peer secondary marketplace under competitive pressure became a primary marketplace between companies and customers.

I believe OpenSea is in a similar spot to eBay: A functioning secondary marketplace has captured a lion’s share of market share, but reckons with deteriorating conditions and changing customer behavior.

To be clear: It’s not bad to be eBay (or Web3’s eBay). The company has a $24B market cap, founder Pierre Omidyar is estimated to be worth $20B and it employs around 10,000 people.

The triumphant winner of ecommerce, of course, is Amazon.

With the PTT in mind, Amazon’s rise seems logical: Amazon focused on primary transactions, which is simply a bigger market.

This reminds me of Nathan Baschez’ point about misunderstanding: While eBay reigned supreme in eCommerce, Amazon redefined the market. Amazon likely couldn’t have defeated eBay by trying to win at their game. Instead, Amazon’s rise was driven by an insight that online markets might mirror offline markets—where primary transactions reign supreme.

(This, of course, is post-hoc reasoning. But whether conceptualized as such by Bezos or analyzed in hindsight, the insight is useful for drawing further conclusions about the future of NFT marketplaces).

As this crystallized, the eCommerce market was redefined into one where eBay was the follower, not the leader—which allowed Amazon to capture the liquidity and win eCommerce.

I’m sure the Amazon/eBay rivalry also involves other factors. But eBay’s position maps to OpenSea’s—and questions its future dominance which creates space for someone to win in the NFT space.

Who’s best positioned to do so? Let’s survey the current landscape:

NFT Marketplace Ecosystem

OpenSea is to NFT marketplaces what Google is to search engines. Yes there are alternatives, yes some people use them, but to most, they’re synonymous with the category.

With market share towering above the rest and a $13B+ valuation, it was first to get significant network effects and won the market.

But the market hasn’t stood still. Many competitors and other business models have sprung up. We’ll dive into their features and competitive positions in the next few paragraphs:

The Normie: General Purpose Marketplace

This is the OpenSea model. Users include OpenSea (duh), LooksRare, X2Y2, Solanart, Objkt, etc. You can trade any NFT unless it’s banned. Listing and buying are core mechanics, with some quality-of-life features like statistics, multi-buy, etc.

They make money when a listing on their platform is purchased. OpenSea is the leader, but there are others.

While OpenSea and others have shipped launchpads to facilitate primary transactions, these initiatives look more like experiments than anything else.

Normie Plus: Tokenized Marketplaces

LooksRare and X2Y2 (and probably others) are marketplaces with similar features and business models OpenSea, except for one difference: Token rewards.

LooksRare’s $LOOKS airdrop was a shrewd strategic move to get users form OpenSea: It gave OpenSea users free tokens in exchange for using LooksRare.

The ‘tokenomics’ expanded: There are buying rewards, listing rewards, participation in revenue shares, etc.

These tokens promise decentralization with a “by the people, for the people” rhetoric. While these increased trading volume for a while, these tokens were usually treated as ‘free money’ and have declined 95%+ in price. They also attracted wash trades, where traders sell items to themselves with another wallet in order to capture the trading fee.

Token-enabled marketplaces have captured and retained some trading activity, but both X2Y2 and LooksRare remain peripheral players compared to OpenSea, even as they’ve lowered fees.

Whether you view token rewards as a valiant attempt at decentralization or a glorified cashback scheme, the frothy exuberance after the airdrop doesn’t seem to translate to long-term market disruption.

Reserving moral judgment, I believe token rewards are a competitive disadvantage for undifferentiated products.

It’s hard for an organization with less capital, smaller market share and essentially the same product can win against a first-mover in a network-effects driven industry. I don’t see how incurring expenses for paying people to use your product fixes this.

Sidenote: Blur may be a counterpoint here. While their token bonanza isn’t over yet, their growth has been spectactular—this is in part because the user experience is differentiated, while X2Y2’s and LooksRare’s wasn’t.

The Dark Horse: Protocols

NFT Protocols are perhaps the most uniquely Web3 business model. These provide the basics of NFT marketplace infrastructure:

• Auctions

• Indexing

• Buying

• Selling

• Listing

• etc.

Protocols disintermediate the front-end of an NFT marketplace from its backend.

While some protocols have their own dedicated front-end (e.g. Zora.co), the core mechanism is similar: You provide the lego blocks and convince others to build something with them.

This makes it easier to build trading and liquidity into another application (because you can import listings and the like).

While the obvious business model is to charge fees for transactions, there are more speculative ideas: Zora’s Jacob Horne describes hyperstructures; free-to-use protocols that are valuable despite charging no fees because they’re such an important piece of infrastructure.

The success of a protocol, again, rests on its ability to become defensible and capture network effects.

If a product creator can improve their own user experience by importing liquidity via a protocol (which improves the experience of other protocol users, which makes the protocol more attractive for builders…), a flywheel kicks off.

But builders also import dependencies. If protocols “turn on the fee switch” or prioritize their own front-ends, building on protocols can become a liability.

So far, most NFT protocols came from existing marketplaces (e.g. OpenSea’s Seaport and Rarible Protocol), likely because there’s some existing liquidity and building from zero is hard.

The Big Equalizer: Aggregators

When gas fees were high and a plurality of marketplaces made it hard to get the best prices, aggregators came along.

Aggregators like Genie and Gem (acquired by Uniswap and OpenSea, respectively) display listings from multiple marketplaces and let you purchase them in one transaction.

By reducing into one transaction, aggregators save users gas fees and help them find good prices without navigating multiple marketplaces.

They have a useful place in the ecosystem because they benefit both sides:

• Marketplaces get demand funneled towards their listings

• Buyers get cheaper prices and lower fees

Theres precedent for this in web2. eCommerce aggregators like price.com do the same thing for eCommerce sites. While web2 aggregators send users to other websites, smart contracts enable NFT aggregators to execute transactions on their own website. That way, a marketplace’s specific front-end matters less as long as they have the lowest prices (something Blur seems aware of).

Aggregators fill a need. They gained adoption quickly and two big ones were acquired quickly. But they also currently have no revenue model: a of them charge fees and affiliate commissions are rare in the NFT world.

This is a solvable problem: Marketplaces could launch referral schemes to reward aggregators, as major web2 e-commerce players have done. Aggregators could also charge users a fee on transactions.

(A PTT-esque recognition of the importance of primary transactions has also led to mint aggregators like mint.fun)

Aggregated Marketplaces

Aggregated marketplaces like Rarible and Blur combine a marketplace and aggregation. You can buy from all marketplaces on their platform, but you can also list natively.

This solves the business model problem by charging OpenSea’s transaction fees on secondary sales, but also introduces new principal-agent problems.

Pure aggregators and pure marketplaces are symbiotic. Marketplaces make money when aggregators help them process transactions and aggregators offer a better experience the more listings there are on marketplaces.

Aggregated marketplaces blur the line between symbiosis and parasitism.

Like other marketplaces, the goal of aggregated marketplaces is to capture liquidity. To do so, they need initial liquidity, which they get from aggregating orders.

OpenSea and other aggregation targets make money from aggregated marketplaces (because they process their orders). Because both compete for native listings, they’re also competitors. But once liquidity shifts toward an aggregated marketplace, normal marketplaces are incentivized to shut down API access, leaving aggregated marketplaces with their native listings only.

This puts aggregated marketplaces in a precarious position: Their value proposition (get the best prices on the market) might get subverted by their own success.

(this is not theory, it’s happening)

The Niche Marketplace

Most marketplaces we’ve discussed are for more or less everyone. OpenSea, LooksRare or X2Y2 aren’t optimized for a specific use case or target market.

Niche marketplaces like SuperRare and Foundation serve more specific audiences (in their case, artists & art collectors). They use the same technologies—a blockchain base layer, smart contracts that enable bids, offers and listings, etc.

But these are best defined by what they abstain from rather than what they do.

SuperRare’s UI reveals their focus on art. It uses words like “collecting” instead of “trading”, “artists” instead of “creators” and call their fee a “gallery fee”. Artwork consumes much of the screen and is the clear focus. There are no analytics, price movements or other elements for traders.

Compare SuperRare’s item page to OpenSea’s, where artwork and numbers are more balanced. Or compare it to Blur’s, which looks like a Bloomberg terminal.

(While Blur’s business model differs from SuperRare’s, it’s also a niche marketplace because it specifically aims at traders)

SuperRare only allows artwork minted on their site to trade on SuperRare—and only allow approved artists to mint. SuperRare deliberately misses out on earning commissions on big collections like Bored Apes, CryptoPunks or Doodles.

Because it serves the artist/collector segment better than anyone, it can charge higher fees for this specialized experience. Its 15% gallery fee is way higher than other marketplaces (X2Y2 only charges 0.5% and aggregators are free). Even its 3% secondary fee is higher than the 2.5% standard set by OpenSea. Anecdotally, it also has extremely high rand loyalty.

SuperRare thus requires a primary transaction to even enable secondary transactions. If the Primary Transaction Thesis holds and most value is created in initial sales, SuperRare benefits. The fact that SuperRare’s primary sale fee is 5x that of its secondary fee is also some evidence that I’m not the only one who believes more in primary sales.

The Vertical Marketplace

We analyzed the eBay-Amazon rivalry, but so far omitted another e-commerce winner: Shopify.

When you sell goods on Amazon, you tap into a wellspring of existing demand, and fulfillment by Amazon (FBA) helps you hand off logistics. But Amazon’s demand requires a sacrifice: You have to play by Amazon’s rules, pay Amazon’s fees and appease Amazon’s algorithm.

Having your own Shopify store gives you more freedom. Shopify’s customization lets you build a brand, collect emails, etc. and gives you more control with fewer dependencies. But those privileges come with the responsibility of demand generation—no Amazon search traffic is coming for you.

If we predict physical ecommerce trends like the primary transaction shift to emerge in NFT commerce, we should also see a Shopify analogue for NFTs, right?

Vertical marketplaces aren’t new. In fact, the collection-exclusive CryptoPunks marketplace was one of first NFT marketplaces ever. From custom-built marketplaces like Scapes to self-serve tools like Rarible’s community marketplaces, NFT collections seem to want independence from OpenSea’s fees, rankings and brand.

Comparing vertical NFT marketplaces to Shopify stores is salient, but hand-wavy.

Amazon is a Marketplace, Shopify a Storefront

It’s easy to claim “Trading on a collection’s own marketplace is like buying a from a brand’s own Shopify store”. Both give brands more control over branding, data and features. But the economics differ:

Vertical NFT marketplaces suffer the same chicken-and-egg liquidity problem as any other secondary marketplace. Instead, Shopify stores sell new goods, aka primary transactions.

Rather than setting up a brand’s Shopify store, building a vertical NFT marketplace is like setting up a brand-exclusive flea market: You rely on owners to list things on your platform. Shopify stores don’t.

That doesn’t nullify the benefits of running your own marketplace. You can import liquidity with aggregation protocols. This makes vertical marketplaces mostly front-ends to other marketplaces, which weakens the Shopify comparison. Shopify helps you pay fewer fees and choose your own prices. Neither is true on vertical NFT marketplaces—you can’t control prices on secondary sales and you depend on a liquidity protocol for fees.

Having your own secondary marketplace is useful, even if you have zero native listings: You can build an on-brand experience, portray the artwork/media in the right context, capture more data, build your email list, etc.

These benefits are valuable and something brands might pay for. But with an incoming shift to primary transactions, capturing secondary trading fees on one/a few collections is unlikely to be the home-run OpenSea is.

The real “Shopify store of Web3” is the minting site.

Minting has rarely happened on marketplaces. With NFT companies and creators having every incentive to focus on primaries, I believe that’s unlikely to change.

Who Wins The Future?

While secondary markets will keep existing, the post-PTT NFT ecosystem will look different.

It’s hard to predict a market where use cases, sentiments and valuations morph. Perhaps NFTs join the Beanie Babies, Furbies, Tamagotchis in the ranks of fads we can look back on and snicker at our own financial imprudence.

But let’s assume web3 has a future after The Great Subtraction in which there’s organic demand for NFTs. Which marketplaces will prosper in the post-PTT world?

It’s hard to predict who’ll win. But if a shift to primary transactions is underway, we’re headed for big changes. SuperRare seems great at leveraging the perhaps only undeniable use case for NFTs (art).

But if we go back to the eBay-Amazon rivalry, we shouldn’t look among the obvious contenders. Instead, we need to find the equivalent of the inconspicuous online bookseller about to skyrocket and capitalize on the new demand.

Perhaps it’s the primary-focused minting platforms like Manifold and Bueno that win the future of NFT trading. I’d keep an eye on them.

Perhaps it’s something completely different. And while the casino is closed for reconstruction, I hope you found this essay helpful top understand where the NFT market is headed.

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Last year, fueled by 2021’s saccharine crypto utopianism and a dog-eared copy of the Sovereign Individual, Twitter users envisioned themselves waving goodbye to corporate overlords to be full-time DAO contributors.

I was one of them.

To me (and many others), it seemed inevitable that swarms of contributors would converge to contribute to DAOs. Powered by ✨Vibes✨, DAOs would accomplish ambitious objectives and make web2 incumbents look like an Ancien Régime.

Blockchain technology would enable thousands of internet strangers to collaborate on and ship projects without centralized companies.

But that just kinda, sorta, didn’t happen.

Operationally, DAOs feel more like the stinky ol’ companies they wanted to replace. A core team receives salaries and freelancers collect occasional payments on clearly defined tasks, assigned by the core team. Payments are often in crypto (but not always).

DAOs haven’t ushered in a new era of work. That doesn’t mean DAOs have vanished or that they’re idle. Many have crashed and burned. Some continue to hold votes, create initiatives and ship projects.

But we’ve stopped seeing DAOs as a wunderwaffe and realized it’s just an org structure. Right now, DAOs feel a bit like when a dad buys a new power tool and then figures out what it’ll be useful for.

In their current form, Most DAOs are startups with voting. A board of (often unqualified) directors vote on usually unanimous issues. Contributors wade through proposal demands that make it feel like you’re wrangling an academic grants committee.

But I’m not a DAO pessimist. I still believe DAOs can create meaningful change for the better. They can still align internet strangers to collaborate on worthwhile work. And they can proliferate decentralization and become awesome enterprises. Just not the way they’re trying right now.

Let’s start from first principles to discover how DAOs can accomplish this. In this essay, we’ll discover why organizations exist, examine what’s actually new about DAOs and outline how they might accomplish things traditional businesses can’t.

Before we start, let’s define what a DAO is for the purposes of this essay.

WTF is a DAO?

Most blogs and media outlets define DAOs as basically „It’s a company but you can vote“.

More specific definitions might mention Discord servers, ERC-20 tokens or Snapshot votes. But tools or activities don’t capture DAOs. Let’s get on the same page by defining each letter of the acronym.

• Organization: An organization exists to facilitate an activity. While a community is simply a group of people with shared characteristics (as I explained in my essay on NFT communities), an organization coordinates activities

• Autonomous: „Autonomous“ does not mean „automated“. In this context, autonomy is about independence. It means that DAOs are not subsidiaries of state- or privately-owned enterprises, which may include a degree of automation.

• Decentralized: What’s decentralized and what’s not is debated. What matters is that blockchains are immutable, which means DAOs can’t be shut down by any one person or entity, while tokens ensure that there’s some distribution of governance rights.

These descriptions aren’t complete, but sufficient for this essay. Now let’s discover the first principles of what DAOs could be good for—and how to make them the forces of change they can be.

We’ll start with a painfully obvious-sounding question that’s actually not-so-obvious. Why do we have organizations at all?

What are Organizations for?

Just like understanding cryptocurrencies must start with „what is money?“, understanding DAOs must start with „What is an organization?“.

The foundational text on that question is an essay by Ronald H. Case. His 1937 article „The Nature of The Firm“ answers the following question:

In other words, if the market is great at allocating resources, why isn’t everyone a freelancer? You could buy labor from everyone you work with and they buy yours. Instead of a company paying everyone from a central pool of money, everyone pays each other for labor from their own bank accounts.

Ultimate decentralization.

But Coase (and anyone who thinks about this for more than 2 minutes) argues that wouldn’t work. You’d spend most of your day invoicing, paying bills, hiring, firing, negotiating…

The ‘work of doing work’ skyrockets until you’re not doing your real work.

This eats into the labor you can sell and costs you money. The more people you add, the higher the share of organization versus money-earning labor.

You might reach some local optimum where you’re still making money while trading freelance labor with everyone else, but you’d probably work with a handful of people at best.

That’s because network effects scale exponentially. Each person added introduces more connections to the networks.

Humans created organizations to scale collaboration by minimizing transaction costs.

In most organizations, you don’t have to negotiate paperwork with each coworker. You don’t even have to talk to most coworkers!

By simplifying, standardizing and codifying interactions and transactions, organizations increase how many people can collaborate, which allows more complex chains of activities to emerge, which creates more intricate products and services.

‘Work of doing work’ costs can be considered transaction costs:

If you worked in growth marketing for a SaaS platform, you might have a weekly meeting. With marketing aiming at increasing sales, this meeting exists to create a customer => company transaction.

But the meeting only coordinates the labor involved in that transaction, it does nothing to facilitate the transaction itself. You get paid by your company for participating in the meeting (labor that does not lead to transactions). While meetings don’t show up on invoices, customers pay for your internal coordination indirectly: If your company was more efficient, you could increase scale or lower headcount, both of which would lead to lower prices.

The marketing meeting is a transaction cost. So are internal correspondence, negotiations, credit card fees, broker commissions and so on.

(For the purposes of this article, we’ll examine the transaction costs related to collaboration and organization, not monetary ones like fees and commissions)

Organizations still have limits dictated by transaction costs. At some point, the marginal cost of adding another person to an organization—due to coordination, politics, bureaucracy and deadweight—aka transaction costs—exceeds the marginal benefit.

The stereotypical workday at a large corporation is a swamp of meetings, forms and approvals and very little doing what you were hired to do. These transaction costs are often a feature, not a bug: As startups become corporations, they go from upside-maximizing to downside-minimizing. This prevents major failures, but also stunts innovation.

Organizational innovation expands the boundaries of human collaboration.

And because each relationship creates transaction costs, productivity declines. While a basic organization decreases transaction costs compared to the dystopia of forced freelancing, adding too many people causes it to devolve into a bureaucracy where nobody does actual work. The internet has lowered transaction costs associated with freelancing, but only tiny organizations are viable as freelance collectives—a design agency might work, but good luck manufacturing the iPhone.

That’s because networks scale exponentially. While 2 people create 1 connection, 4 people create 6. When you reach 25 people, there are 300 possible interconnections. Chances are that you’ve worked in a functional organization with more than 25 people without maintaining 299 lines of communication.

Just like organizations were an innovation that lowered marginal transaction costs, you can innovate on the organization to lower them further.

Structure and process innovations like Taylorism invented our modern conception of management. The aim of management is to reduce transaction costs by reducing the interconnections between people.

Because managers report to leadership and others report to managers, hundreds of possible connections are reduced to two. This reduction in transaction costs enabled larger organizations, which enabled mass manufacturing.

Further innovations that lowered transaction costs, both technological and organizational. From project management tools to management methodologies, we keep finding ways to reduce transaction costs.

Reduction in transaction costs via technology or management innovation enables also breeds innovation.

In his 2008 book „Here Comes Everybody: The Power Of Organizing Without Organizations“, Clay Shirky explains how there’s always a „Coasean floor“: A set of activities which would have value to people, but where transaction costs are too high to make it worth doing.

Shirky describes an example of an obscure New Jersey parade of which you could find hundreds of photos online. In the early 2000s (when the book was written), this was astounding. I’ll paraphrase his argument:

Many events were not worth covering in the mainstream. And if they were worth covering, then you’d see the few photos the newspaper’s photographer took, not hundreds of pictures from hundreds of people. Pre-internet, transaction costs for producing a collection of every picture taken at an event were too high to be worth it.

Imagine doing all of the following:

• Run newspaper classifieds to make people aware you’re looking for pictures from the event.

• Convincing people to print their pictures and mail them to you at their own cost.

• Sorting through the images to make sure they’re all from the event

• Arranging the pictures in a layout for print.

• Working with a company that prints them and get them to print samples.

• Pay for a print run of the collection

• Find a way to sell the collection

There are easier ways to waste your time and money.

Today, transaction costs of collecting photos from any event are effectively zero: You add „#burningman2022“ to your Instagram post. Instagram does the rest. We take for granted that we can find 122,031 pictures from Burning Man 2018 in a few seconds, but it’s quite an accomplishment!

There is value to this, but pre-internet transaction costs made it not worth doing. It was buried under the Coasean floor. A more recent example is the creator economy:

There have always been thousands of people interested in medieval history, vinyls of Japanese jazz music and Stone Age construction techniques. But finding, reaching and distributing media to them just came with such high transaction costs that it wasn’t worth doing, which made creating in these spaces not economically viable, which meant nobody did it.

Transaction cost reduction lifts products and services above the Coasean floor and makes them worth doing.

ConstitutionDAO is an example of this. Without smart contracts and ERC-20 tokens, transaction costs would’ve been too high to coordinate thousands of people to build trust in an entity and send their money to it.

But few DAOs do genuinely new things. Most DAOs do stuff companies have always done, but with higher transaction costs. When everything requires proposals and votes, DAOs do the same things companies do, but they’re slower in executing them.

Just because you have the option to call a vote doesn’t mean you constantly have to do it!

Look at most Snapshot votes and you see that much of it is LARPing democracy. Out of the last 10 FWB votes, only one ended with the winning option having less than 95% of the total vote, with none being close at all. The same is true for most DAOs: It’s rare to see a vote with less than 85% on the winning side. The sentiment should’ve been obvious.

For DAOs to proliferate, the future can’t be in doing stuff we did before crypto, but with endless proposals, snapshot votes and a token. In other words: We need to figure out which things DAOs could unearth from the Coasean floor.

What might those be?

Learning from a proto-DAO: Wikipedia

Before Wikipedia angered high school teachers all over the world, there was nupedia. Nupedia was supposed to port the encyclopedia to the internet. Jimmy Wales wanted subject matter experts to contribute knowledge and have it reviewed by an editor before it goes live. Same process as a physical encyclopedia, just without having to print anything.

nupedia eventually failed. But the online encyclopedia wasn’t dead. It just needed the exact opposite approach!

Nupedia was reborn as the decentralized Wikipedia. Editing tools were available for anyone to contribute as little or as much as they wanted. Transaction costs were (and still are) basically zero! You didn’t have to ask for permission, write a proposal, attend meetings or take a seminar.

The user base exploded—and so did Wikipedia’s content, mostly created by amateurs who contributed as little as a comma or as much as thousands of words.

Ranked #7 on the internet’s most visited websites, Wikipedia’s neighbors on #6 and #8 (Baidu and Yandex) have 45,000 and 10,000 employees, respectively. Wikipedia has around 280—and legions of volunteer editors who are compensated with digital “barnstars”. This is even more impressive when you consider that Wikipedia isn’t some indie alternative to Encyclopedia Britannica, but the leading product in its market.

Wikipedia is the most impressive, but there are more projects where pseudonymous contributors build impressive things together:

• Video game modding communities often create “mods” that could be sold as standalone games.

• Fan fiction series often spawn multiple novels’ worth of writing.

• Open source software forms the foundations of much for-profit software.

Wikipedia, modding, fan fiction and open source all fulfill some part of the promise of DAOs: Decentralized creating with ephemeral teams of highly motivated contributors who don’t need to know each other.

These contributors receive Github ‘stars’, forum ‘likes’ and Reddit ‘upvotes’.

And none of them ever touch a blockchain.

Do DAOs even need blockchains?

Many of these proto-DAOs eschew commercialization. Many gaming mods could sell as standalone games. And while there’s probably some idealism around creating public goods, I reckon it also comes from tacit knowledge that introducing money would skyrocket transaction costs, plunge the project into the Coasean floor and kill it.

Imagine trying to publish a book of fan fiction by 10 contributors. You’d have to find out everyone’s real name, figure out payments to each member’s home country, maybe even a business entity, negotiate proceed splits… you may as well just write your own book.

This is a perfect example of the Coasean Floor: There’s value to publishing the book (the content is popular), but transaction costs make it such a pain that it’s not worth doing.

Explicitly commercial projects have higher transaction costs. People write fan fiction in their free time without expecting money because the activity itself is the reward. But nobody comes home after a long day of work and designs toothpaste packaging for toothpaste. There are two reasons for this:

1. Utilitarian activities are usually less fun than creative pursuits.

2. It feels wrong when others commercialize work we do for free.

That’s because the more we consider something work (as opposed to pleasure), the more we want compensation. And compensation causes negotiations, agreements, invoices, contracts—transaction costs. And as transaction costs rise, this work falls below the Coasean floor and doesn’t get done.

Contribution to a DAO may not feel as work-ey designing toothpaste packaging for a company does, but it’s rarely as fun as writing fan fiction.

That’s why DAOs do need blockchains (and, more specifically, tokens) to create commercially successful offerings. Tokens also align incentives and provide a standardized unit of measurement.

The proverbial handshake deal might have low transaction costs, but only works in high-trust environments. A handshake deal works when somebody’s reputation is at stake. But there’s nothing at stake when MonkeyBoy69 can run with millions and reincarnate themselves as iHaveYourNose91. This makes it impossible to trust anonymous strangers online.

A (fungible or non-fungible) token gate means everyone sends costly signals, which improves trust and thus lowers transaction costs. The other part is the efficiency of smart contracts.

Instead of agreeing on a bunch of things every time you contribute to a DAO, you interact with a smart contract where terms are pre-defined, movement of assets is transparent and enforcement doesn’t require lawyers and courts—as long as you don’t break the law.

The jurisdiction of smart contracts ends where the traditional financial system begins. But ERC-20s and smart contracts drastically lower transaction costs, which lets DAOs enable new types of work previously below the Coasean floor.

DAOs: The Knowledge Worker’s Paradise?

DAOs have a unique opportunity: They could get the best work of highly skilled professionals.

Organizations have always evolved. We take limited liability companies, corporations and conglomerates for granted. But no law of the universe requires them to exist. As Venkatesh Rao notes:

Corporations are a recent invention, and instances that had the ability to transform the world in magical ways did not really exist till the [East India Company] was born. Businesses of course, have been around for a while. […]

What was new was the idea of a publicly traded joint-stock corporation, an entity with rights similar to those of states and individuals, with limited liability and significant autonomy (even in its earliest days, when corporations were formed for defined periods of time by royal charter).

Organizations change to help humans solve the challenges the world presents. The present iteration of work in organizations is a skeuomorph of the industrial age. Productivity soared when factory workers turned screws for 8 hours per day, so office workers should hit keys for 8 hours per day, right?

Knowledge work has different economics.

Factory work has a linear relationship between screws turned and cars produced. Extra screw-turning means the factory worker creates extra value. But if you’re a copywriter, the additional value plummets between spending one hour writing 10 headline ideas and spending ten hours writing 100 headline ideas.

The same is true for lines of code, marketing graphics and all other types of knowledge work.

Labor and value were linear in the industrial era, but they’re exponential in the knowledge era.

Skilled knowledge workers create most of their value in a few hours per week. A well-known study found that most office workers spend about 3 hours per day on value-producing work, even if they spend 8 hours or more at the office. If power law dynamics apply to those ~15 weekly hours, about 3 hours generate the majority of the someone’s impact.

To fill the 8 hours mandated by industrialism, offices make up meetings to socialize and play status games, but most of those could be eliminated with zero loss in productivity.

DAOs can arbitrage this inefficiency because for contributors, the high-impact hours don’t come in a package deal with a cubicle, endless meetings and tuna-microwaving colleagues. On the DAO’s part, the few high-impact hours don’t come in a package deal with the low-impact hours.

So if DAOs enable skilled tech workers to contribute their best work with radically lower transaction costs, both sides win.

This scenario allocates resources (capital and labor) more efficiently. DAOs only buy the high-impact hours, contributors only spend the high-impact hours.

Web3 detractors and other heathens might now say we’ve come full circle and invented freelancing, which isn’t exactly new.

As we saw in Coase’s argument against the freelance dystopia, freelancing increases transaction costs compared to employment. From reading/writing applications to negotiating prices and handling invoicing, freelancing has high transaction costs:

Many skilled tech workers would be happy to make money on the side for a few hours of work. But freelancing comes with invoicing, outreach, etc., which turns the few hours into many.

Transaction costs throw this potentially fruitful collaboration below the Coasean floor.

Powered by ERC-20s and smart contracts, DAOs can turn the high-transaction-cost freelancing economy into a low-transaction-cost contributor economy where contributors focus on creating value (instead of proposals).

This requires DAOs to innovate beyond proposal-writing and constant votes, which are pure transaction costs. The goal should be to lower the transaction costs of DAO contribution to let new ways of collaboration emerge.

But for that, we’ll have to change a few things. Right now, contributing to most DAOs has giant transaction costs: You have to buy some tokens, write a proposal (often multiple pages), hope your proposal goes to a vote, then market your proposal so people vote for it. Only then do you get to contribute.

Instead, see how easy our role model Wikipedia makes it:

While Wikipedia has gotten less anarchist over the years, you can still contribute by clicking edit. Your edit could transform the page, add a paragraph or merely correct a typo.

On the other hand, DAOs require you to write multiple pages worth of proposals, do Q&A and then change a paragraph somewhere. Assuming there is a Coasean floor of people who have something to contribute but won’t go through the bureaucracy of proposal-vote-implementation, we need something simpler.

Minimum Viable Contribution

Minimum viable contribution is the smallest unit of activity a DAO recognizes and rewards. Like a software MVP, it’s neither perfect nor complete. But it’s a starting point that has some merit.

In Work is a Software Product, I argued:

We access work as a software product. This is not only true conceptually, it’s true literally. I do 90+% of my work in:

• Google Docs

• Google Meet

• Google Mail

• Notion

• Slack

(You could replace Notion with Google Sheets and Slack with Google Chat and all my work runs through Google).

Even if you don’t work in marketing, you probably do most of your work using less than 10 pieces of software. It’s obvious enough that we access work through software. But work also behaves like software. [...]

Your outlook changes when you stop thinking about your team as labor units to arrange and start thinking about them as software users. This improves things for everybody:

1. UX design is a user-focused process that aims to help people reach their goals. Make it easy for your team to do their best work—and they’ll do their best work.

2. Great UX scales. Software keeps working after you stop, so you’re creating assets that help your team do their best work, even when you’re not actively managing.

Few companies nail this. If work is software, most companies have atrocious UX.

This should also be true for DAOs. Let’s set aside the lens that views DAOs as cities, countries or organisms and see them as a software product. Good UX simplifies and clarifies things for users.

There’s a concept every self-help book regurgitates: To build a flossing habit, floss one tooth. And as you’re flossing one tooth, you’ll start flossing all your teeth. The principle: Start with something tiny and your brain won’t dread it as much. This tiny action contributes little to the goal, but it removes every excuse to start.

Looking at DAO contributions through a product lens reveals a shocking picture. Before doing anything fun (contributing) you have to sift through previous proposals to figure out how to write one, hope you can find some documentation or a template, then you have to write it and pass a vote… just for a chance to get to do the thing you want to do.

To lower transaction costs, we need to remove these barriers and reward permissionless contribution as small as “flossing one tooth”—writing one line of code, adding one line to a piece of content, etc.

DAOs tend to see contributions at the project scale. Contributors need to own and manage the project they proposed. And a lengthier process makes sense for consequential projects. But MVC looks at contributions at the task scale.

MVC itself may not do much, but it’s intended to show people how easy it is to contribute and receive a (tiny) reward. This could lead to bigger contributions in the long run, especially if DAOs invent intermediate steps between MVC and proposal-worthy projects.

Allowing any token holder to contribute may sound chaotic. But that’s the point of the Coasean floor: We need to unearth what nobody is doing, but DAOs enable. And it might look like thousands of people contributing something tiny (or more). This will require organizational innovation (the same way industrialization required the invention of management) and likely new technologies like token-gated collaborative tools.

DAOs can’t keep being startups with the operations of academia. MVC is one way to lower transaction costs to simplify contribution and fix DAOs and discover what decentralized value creation might look like.

Wrapping up

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(Note: In this essay, when I say GPT-3, that doesn't always mean that model. You can substitute other models or its successors. The models might change, the principles this article discusses don’t.)

Triggering GPT-3 in Lex was brutal. It felt like training my replacement before getting fired. I was excited to get Lex access, but I felt apprehensive for 500 words before triggering GPT-3.

My hands shook when I first triggered the AI with “+++”. A loading icon started spinning as the AI gobbled up and digested my writing. Dramatic as it sounds, those few seconds felt like minutes. My brain almost hoped the output to suck—so that I wouldn't have to worry about my future. The hope was futile.

But the circle stopped spinning. My robot replacement assistant spat out accurate writing. And a jarring realization crystallized in my brain.

AI will transform writing and writers forever.

The above might sound like I hate AI. I don't. But it's changing everything. In this essay, we’ll explore how AIs transform writing itself and the profession of writing.

We'll discover its consequences and outline potential futures for (copy-)writers. We'll focus on utilitarian business writing like content, articles and copy. The principles might apply to disciplines like fiction and academic writing as well.

I want to share a nuanced perspective. I’m not a luddite longing for the good old days. Neither do I subscribe to Tech Twitter's utopianism where all technology is only great for everybody, always.

Every technological shift has up- and downsides for groups of professionals.

While VCs remove web3 off of their Twitter bios, pencil in AI/ML and request 🧵s from ghostwriters, let’s explore the future of writing!

Why Pervasive AI Will Replace (some) Writers

Before exploring its consequences, we need to define artificial intelligence. The popular discourse misconstrues the term. AI has come to mean something like “Computers doing things I didn’t think computers could do”.

But artificial intelligence is machines doing anything that used to require human cognition. By that definition, the following are AI:

• Calculators

• iOS autocomplete

• Chess computers (even if they lose)

• Facebook friend suggestions

• Photoshop’s magic brush

These aren’t exciting (anymore). But calculator used to mean a job, not an object. When you realize that, you see AI has been changing the landscape of work forever. But we move he goalposts of what qualifies as AI.

AI isn't new. What's new is that AI is coming for creatives who believed their jobs couldn’t be automated.

Let’s explore why writing is next. Here are a few properties writing AI has right now that make it so transformative:

It’s gotten good and useful!

Writing AI produces content indistinguishable from human writing. At least for simple topics with ample information online, GPT-3 is as good as many human writers.

It's also useful. Many technologies start as gimmicks before being useful. It's impressive that GPT-3 can generate an Emily Dickinson poem about washing machines.

But it becomes useful when the AI produces outputs we can use in business processes. We've reached that point with tools like copy.ai.

Plummeting costs

Technologies usually decline in cost over time. But something magical happens when that cost approaches zero.

Think about graphic design. You could always get cheap design from overseas freelancers. But Canva let, anyone create good-looking graphics in minutes for free. So Canva template designs became pervasive in newsfeeds, event posters and Tinder profiles. That last one might only be me.

The same is happening with written content creation.

AI copywriting software Jasper charges $500 monthly for 700,000 words. Even if you found a writer to produce this amount at 1 cent per word (unlikely), that content would cost you $7,000 monthly!

While $6,000 yearly is cheap for most businesses already, few companies need 700,000 words per month. If you need a more reasonable amount, you can get your content needs met by an AI for less than $100 a month. Peanuts for most B2B clients.

GPT-3 is way cheaper than human writers. With AI solutions competing in the market, we’ll soon see the cost of content approach zero. That doesn't mean we'll pay nothing for content. But we'll likely pay for fine-tuned versions of models and integrations, not for words.

AI plummets the cost of content creation. And if AI tools improve , it’s safe to assume they'll soon deliver all the content you need at a tiny budget.

Near Zero Coordination

Writing projects often end up on the backburner. Website copy, content, SEO—these are often eternal projects reserved for "someday".

In most companies, the constraint for writing projects is rarely budget. It's coordination. More companies would revamp their website copy if they could press a button, get copy and pay an invoice.

Instead, they have to:

1. Find a copywriter

2. Negotiate pricing

3. Sign a contract

4. Tell them about your company

5. Review

6. Request edits

7. Get feedback from team

8. Review

9. Request edits

10. Approve

11. Send invoice to finance

12. Implement

Much of this is redundant now that the magic button actually exists.

GPT-3 doesn’t only reduce writing labor, but coordination labor.

Revisions, hiring, interviewing, contracts, etc., are laborious. If you could skip those, more companies would execute their writing projects.

There you have it: AIs are cheaper, faster and often as good as human writers.

That begs the question: How will this impact writers? Let's first define why writing matters.

Why Writing Matters So Much

Every company is a combination of activities its team performs in pursuit of profit.

A B2B SaaS company might perform, the activities of shipping code, maintaining databases, designing workflows and interfaces...

The same applies to departments within companies. The marketing department is a set of activities performed by its members.

This lens is useful for sober analysis. Companies, departments, teams and even individuals are activities designed to produce an outcome.

This viewpoint is not comprehensive. Fuzzier concepts like culture and brand matter. But the model is useful to intercept the emotional reaction many have to automation. When we don't want something to happen, it's easy to manufacture theories about why it won't.

And writing is one of the most important activities in any marketing team.

This might sound crazy. Writers often earn little and have low status. Many see writing as an entry-level profession and escape for management or strategy. But writing matters more than most strategy or management activities.

Let’s make this concrete with an example. Imagine you’re in a mid-sized company and plan to publish a blog article. Here’s what the chain of activities may look like (excluding meetings, messaging, etc.):

1. Business strategy

2. Marketing strategy

3. Creative brief

4. Writing

5. Editing

6. Visual production

7. Publishing

8. Social media sharing

Regardless of pay and status discrepancies, these activities have a hierarchy. How might a solo founder tackle this? In most cases, the process would look like this:

1. Writing

2. Publishing

Fewer resources force you to reduce to the essentials. The activities you can’t skip. Not writing and publishing is like multiplying by zero. The rest of the variables don’t matter—the result will be zero.

You can publish without a coherent strategy and get a result. You can publish unedited writing and you'll still have something to show. But your content strategy becomes worthless if nobody writes the content you planned.

This is shows how important writing is to marketing. Whether it’s a blog article, a new website, a social campaign—skipping writing sets it to zero.

If we analyze this activity chain, we can enrich the data. Each activity has a place it’s performed and a responsible person, e.g.:

Activity: Writing Place: Google Docs Person: Writer

Activity: Creative brief Place: Notion** Person: **Creative Director

A blog article is like physical items moving from factory to warehouse to retailer. Content creation is a process that happens in various places and people. This is what I called knowledge logistics in Work is Software:

Knowledge work may not involve physical shipping, but it involves logistics.

The above example is for a blog article. But it works for any marketing effort.

How AIs will transform professional writing

The changes writing AIs will bring will show up as a change in the activity chain. It will change who performs the writing activity and where. Writers are currently core to these processes. But as these chains change, they'll affect the day-to-day of professional (copy-)writers.

Let’s outline the most likely scenario:

A Writer in every SaaS

Content marketing isn't only one place where writing is mission-critical. Lots of business software becomes useless when you have no copy/content to feed it:

• Email marketing provider

• Social media marketing softwares

• Helpdesk

• etc.

What happens when we can AI-generate content for all these? Many believe less skilled, folks armed with AIs will replace writers. They'll generate writing and paste the copy over to these tools.

In our value chain, this would mean the person would change to somebody less well-paid while the place in which the writing activity is performed would change to some AI tool.

I don’t believe that will happen. Instead, the changes will look different. The writing activity will disappear and the person will change to whoever manages the channel, while the editing activity will be performed on auto-generated copy within the platform.

Instead of introducing a new place, an adjacent activity absorbs writing by integrating AI within their platform. As Evan Armstrong points out, fine-tuning is an important part of using (writing) AI.

Software providers are most likely to capitalize on this. They can fine-tune the AI to produce output for a specific use case.

Imagine you’re running an email marketing tool ActiveCampaign. You can fine-tune GPT-3 to produce copy of a certain length and format. Then you feed it the customer’s best-performing emails as source material. Now you bundle it into your service or charge extra as an upsell.

Tools like ActiveCampaign already have preset automations. Imagine those auto-generated copy when you used them. You'd only have to approve or edit the copy. If you assigned this to a writer, you would wait for the copy, then request revisions and wait again. With AI, your automation would be live in hours, not weeks.

In the value chain, this would condense the process. Writing would join the editing phase and be done within ActiveCampaign.

Email marketing is one example. You can imagine writing AI in every software that needs writing:

• Your SEO software could generate content for any keyword you’re exploring.

• Your social media suite could auto-generate content based on your existing content.

• etc.

This is a brutal scenario for writers. AI would remove every trace of them from the process. Former writers either become editors overseeing AI or become channel managers.

That doesn’t mean writers will vanish. But the writing profession will change.

Where do writers go from here?

Many low-end writing jobs will go to AI, not humans. But even outside of lower-level work, (copy-)writers need to adapt to changing realities.

The value chain dictates that your best bet is to elevate yourself to an adjacent stage. Creative direction and nuanced branding decisions are harder to automate.

AI might reduce total writing gigs. But automation doesn't tend to create mass unemployment. Automation tends to change the types of employments.

These are a few ways writing professions may morph into:

Writer Archetypes in the Age of AI

Before AI, writers performed different functions within companies. That won’t change with AI. But the types of activities writers perform will change. Here are a few roles AI-augmented writers will play.

The Strategist

Good writing is only useful if the strategy is. Great SEO is useless if your chosen keywords don’t align with business objectives.

Writers need to understand how their work plugs into strategy. You need to know what you say and why you say it before how you say it.

Good copywriters have long added value by helping out with strategy. AI makes executing a strategy easier and cheaper. This enables more writers to capture the strategy activity.

When creating content is more accessible, more people do it. This means lots of people will create content without the skills to make it effective. Pre-AI (Copy-)writers will understand the thinking behind the copy. They'll advise companies on messaging strategy and oversee the AI content generation process.

The Source Material Creator

GPT-3 generates generic business writing well. Here's a snippet with the prompt “how to create an effective marketing strategy”:

“To create an effective marketing strategy, you need to understand your target audience, your product or service, and your competitors. You also need to set realistic goals and objectives.”

This might be enough to fool Google crawlers, but it’s and boring. Differentiated brands wouldn’t use this. It’s not that GPT-3 is bad. The prompt sucks. If you want better results, you need to give AI good source material to work with.

Don't fire off a generic question like “How to create an effective marketing strategy?”. Provide more context:

• Who is your audience?

• What do they care about?

• What features are unique to your product?

• What medium is this for?

AI results improve when you feed them more specific info:

Good source material requires knowledge of the industry, company and its positioning. Complex, data-rich prompts are hard to create. They flow from the messaging/strategy piece I describe above.

Writers who can tell good writing from bad will be best at defining what the AI should react to.

The Writer

AI makes writing almost free and instant. Even so, it won’t eradicate human writers. In the age of 3€ IKEA mugs, people still pay 30€ for a handmade one.

As Nathan Baschez points out, writing is changing. But we won't completely remove writers from all processes.

IKEA didn’t eradicate ceramics studios. McDonald’s didn’t kill home cooking. And GPT-3 won’t exterminate human writers.

But mass production did reposition the handmade mug from a necessity to a luxury. Our emotional experience with handcrafted goods differs, even when features are the same. It’s not about utility, but the story we tell ourselves.

The same will be true for hand-crafted copy or content. Some companies hire humans to write bespoke copy and content, even if it costs 10x as much as an AI-driven team.

But these artisans will need to offer more than words in a Google doc. This will revolve around helping founders feel connected or as a flex (signaling).

Humans will also write for complicated industries and new categories. Simplifying complex science is harder for AIs than rephrasing 7 ways to start a business.

The Prompt Engineer?

Some are predicting companies will hire legions of “prompt engineers” or “prompt creators”. It seems obvious. New tools demand specialists who maximize their utility.

General AI rarely gives you the precise output you want. That’s why people use long prompts. There are even prompt marketplaces! When you buy a prompt, you get a set of AI inputs you enrich with specifics.

But prompt engineering won't be a common job in most companies. The UX of copy-pasting 30-word prompts is awful. Instead, there will be fine-tuned front ends that have prompts baked it.

Some former writers may be engineering prompts. But they'll likely work for AI software providers, not companies with AI in their workflow. Writers can best judge the AI's output, which is why some may flock to this.

These are all examples of shifts in the activity chain. As I explained in the beginning, this is a reductionist, but useful take. But shifts like these always have a human component.

The Real Tragedy Of Automation

I recently went on a date with an illustrator. Her main AI worry wasn’t about income or job security. Instead, she surprised me when she said this: “When these AIs can illustrate, who’s going to need me?”

Automation started with farming, continued with manufacturing and keeps going with knowledge work. Centuries-old fears of automation-driven mass unemployment have never manifested, but they create distress.

“Who’s going to need me?” goes deeper than a paycheck. Whether it’s writers, illustrators or developers: Humans want to feel needed. We want somebody to shed a few tears if we vanished tomorrow.

We want to feel valuable, appreciated and competent. If society tells us we're not needed anymore, a coding boot camp won't fix that.

Former typesetter Anastacia Moore writes on Quora about the advent of computers:

As a typesetter, I also developed excellent typing skills (speed), and a very extensive knowledge of the 'inner workings' of these various typography machines, thus making the transition to computer typography seamless. What a jump from those old methods of rubber cement, wax, vertical and horizontal cameras, negatives, stripping, masking, platemaking with the advent of computers! I LOVED IT . . . . . . . until I came to the realization that NOW, anyone that could figure out how to run all these wonderful programs like Pagemaker, Quark, Photoshop, Indesign, Illustrator, etc. was making the 'profession' of the typesetter/graphic artist much less of an 'art', thus overall lowering the wage for having a skillset that few had mastered. This new age where just any old Joe can go out and buy the aforementioned programs, slap them on their computer and suddenly call themself a graphic artist has, in my personal opinion lowered the standard for a profession that back in the old days required an extremely wide range of knowledge and technique.

Note how money isn’t the focus and only mentioned in passing. It’s the skills she’s learned, the competence she felt and the status her skill conferred!

It must be crushing to spend your career perfecting a skill, only for that skill to become a party trick.

When a core source of self-esteem evaporates, it's a disaster for mental health. We’re already living through a mental health crisis. Making hordes of tech workers feel useless only exacerbates this.

Many writers will find other careers or level up to write things AI can't (yet) produce. But for every success story, there will be a freelancer unable to pay her bills. There will be a copywriter close to retirement who has a hard time learning new skills.

We can't stop the rise of AI in writing and other fields. But let’s be mindful of the people it impacts.

As Anastacia Moore concludes her Quora response:

'We' the professional typographer . . . are dinosaurs now, and for those who have not adapted to modern technology, have more than likely gone the way of the dinosaur . . . never to be heard from again.

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This is a Porsche 911 at an industrial design museum I visited in Munich, Germany. Its timeless form has endured since the 70s and earned it a spot in many design museums.

Even though this Porsche 911 found its final parking space just a floor below paintings by Matisse, Macke and Marc, it’s not art.

Product designers juggle many constraints artists don’t face: The thing needs to house an engine, provide safety, insulate from noise, be aerodynamic… the list goes on. 

If it didn’t do those things, the Porsche 911 might still be beautiful. It would turn from design into sculpture: An object that only exists for its own sake. 

Both sculpture and design can be beautiful and transformative. But while they’re both aesthetically pleasing physical objects, they’re different: Design has a job, art is unemployed.

Art with a job: Why creativity isn’t everything

The same is true in marketing. It’s not enough for a logo to be aesthetically pleasing. It needs to embody the company it represents. It needs to work contexts from website to packaging. A logo is not art. It has a job.

Good copy is the same: It’s not there to sound cool, poetic or creative. It’s there to do a job. To sell a product, to persuade, to educate. To be effective, it needs to be clear, concise, and on-brand. If it’s not those things, it’s not good copy. Copy is words with a job.

All of marketing is like this: If it doesn’t accomplish its goal, it has failed. No matter how entertaining, creative or poetic it is. As advertising godfather Claude Hopkins put it:

The only purpose of advertising is to make sales. It is profitable or unprofitable according to its actual sales.

-Claude Hopkins

I don’t think that’s totally right. Yes, the first purpose is to achieve a measurable goal (sales, donations, funding etc.). 

But this viewpoint is myopic: There are many advertisements, websites and infomercials that sell well—until they don’t. Anyone who’s spent time in the jungles of direct response marketing knows:

Overblown promises, fake scarcity and pressure sales tactics sell.

They just don’t sell forever. Because customers feel tricked and stop buying from those companies. Marketing that’s effective in the long run builds on respect and trust. 

So while marketing needs to sell to be good, you unlock something else once you’ve done that. 

Once you’ve satisfied the constraints of the media you work in and the purpose you’re creating for, you’ve unlocked creativity. 

Level Up: Creativity unlocked

The same way the Porsche 911 layered beauty on top of functionality, marketing layers creativity on top of persuasion. 

Marketing at its best is persuasion with a soul.

This 1997 Apple ad is persuasive: The way it tells you you can change the world? How you’re a revolutionary by buying Apple? How it equates you with Einstein, Gandhi and Lennon?

Yes, it creates a desire to buy Apple products. But it also inspires people 25 years later. Compare that to the forgettable ads that scream their product name until they infiltrate your brain and you relent.

The best marketing not only sells, but also makes our world more interesting, more beautiful, and more humane. It has an element of costly signaling: “We have so many resources we can make something awesome for you!”

This is true for copywriting as well: As long as you communicate your message and inspire action, you can brighten your readers’ day and be entertaining, motivating and inspiring.

And for design: You accomplished your job of communicating? Good, now you can make it beautiful! 

Marketing is art with a job. But it also has hobbies. 

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The UX of Work

In The Great Online Game, Packy McCormick wrote:

„The Oxford English Dictionary defines a video game as, “A game played by electronically manipulating images produced by a computer program on a television screen or other display screen.”

If you’re working remotely from a computer, what you’re doing perfectly fits the definition of a video game.“

The Great Online Game (TGOG) was a „hidden in plain sight“ idea. Like the word FOMO, it packaged something we all knew and felt, but couldn’t articulate. The concept rippled through Twitter, gaining adoption with minor and major tech personalities.

The discourse has cooled since then. TGOG sounded much more plausible when you could make thousands of dollars in a day by staking your Cyberkongz NFT for Banana tokens. As economic tides changed, we all shockingly realized that Axie Infinity wasn’t as viable a career choice as we thought.

But even after this latest balance patch, The Great Online Game is still up and running. And in this eSport we call creating, building and side hustling, lots of teams want the best names on their jerseys.

In other words, companies need talent. And it’s hard to get good players to put on your jersey. To do that, you need to make the game fun to play.

And who makes games fun to play? Game designers!

That’s why it’s odd that nobody talks about Great Online Game Design. While many people play TGOG, a good game needs a good game designer. And games are software. Managers might not know it, but they’re building a software product, even if they never write code.

Work is a software product

We access work as a software product. This is not only true conceptually, it’s true literally. I do 90+% of my work in:

• Google Docs

• Google Meet

• Google Mail

• Slack

• Notion

(You could replace Notion with Google Sheets and Slack with Google Chat and all my work runs through Google).

Even if you don’t work in marketing, you probably do most of your work using less than 10 pieces of software. It’s obvious enough that we access work through software. But work also behaves like software.

As a writer, I put an input into Google Docs and transfer it via a Notion task API so that my colleague in Slack outputs an error or success message.

Feel free to substitute your specific tech stack, but you’ll realize that your work resembles using a software product more than any traditional notion of work. This is true even if you’re at the office full time. In that case, you’re creating digital inputs to generate physical outputs.

It sounds heartless to reduce your work, the time you spend to make a difference in the world, to programming an abstract machine running in the cloud. What about the beaming customers thanking you? Or the team camaraderie that gives you purpose? The feedback that makes you feel appreciated?

Modern management advice almost exclusively talks about this. They regurgitate:

• Trust your employees

• Give clear feedback

• Show empathy

• Be transparent

• Take feedback

While these are essential, they neglect technology. If you’re lucky, they humor it with a point like „use technology to your advantage“ that tells you to use Trello.

Telling knowledge work managers to use project management tools is like telling logistics folks to use shipping containers. Every tech company has abundant tools. It’s about using them to facilitate good work.

The problem is that we’re operating in the wrong management paradigm. Work is a software product and managers are building it. But the current management paradigm is one of logistics.

Designing Work UX Instead of Managing

Let’s prevent some confusion first. Management is a broad title: One company’s marketing manager might write copy, run paid ads and create graphics. At another company, someone with the same title oversees a team of 11 and does no hands-on work herself.

So let’s demarcate what we mean by management for the purposes of this essay: Management is the task of organizing and enabling work for yourself and/or others.

If your title includes the word manager, this likely describes a good portion of your work. If you’re not a manager, you probably still do some management. The activity of managing doesn’t require you to manage others (or a manager title), though that’s often the case.

We’ll also distinguish it from leadership, which is the work of motivating, goal setting, inspiring and so on.

With the boring stuff out of the way, here’s the problem with today’s management paradigm:

In any type of knowledge work, most managers unknowingly think about their work as „knowledge logistics“.

Imagine a logistics manager needs to ship some bananas from Brazil to Belgium. The bananas go from palm tree to supermarket shelf through various stages. They find packaged in crates, containers and conveyors. They cross the Atlantic by ship, rest in warehouses and sprint to the finish on a truck.

She decides whether the bananas go via Itaqui or Valparaiso, which warehouse to store them in, where to offload the shipping container, etc.

Knowledge work managers are similar. Let’s replace bananas with bookkeeping and walk through a tech example: A SaaS company launches a new feature and tasks its marketing manager with launching it.

This starts a chain of knowledge logistics: The manager takes some knowledge (we have this feature and customer should use it) and convenes a meeting to determine the best ways to transport this knowledge to their customers. Let’s keep it simple and say the team agrees to promote it with a blog post.

Like a banana farmer loading product into crates, the manager now packages that knowledge into a briefing for the copywriter and graphic designer.

Like supermarket workers unloading crates and filling supermarket shelves, these two unwrap the knowledge from the briefing and transfer it to a customer-friendly container: A blog article and a graphic.

Like a shopper at a supermarket, the customer unwraps the knowledge and understands „The company now has this feature and I should use it“.

In reality, processes are less linear. But this example shows how intuitive logistical thinking is as management. Even management language springs from logistics:

• „Let’s ship that this week.“

• „How should we package this?“

• „Let’s wrap this up“

We see management as knowledge logistics. And optimizing work like logistics can make you more efficient. But logistical thinking has 3 giant constraints

1. You have limited control

No logistics manager can shorten the distance between Brazil and Belgium. You can optimize the route, but you can’t change the distance itself.

2. Shipping routes are (almost) set in stone

Logisticians don’t build new ports. You need big scale to even have your own warehouse. And unless you’re Amazon, you won’t have your own trucks or planes—and you definitely won’t have your own container ships.

Because you can’t change the infrastructure you operate on (without spending dozens of millions), you can only arrange preexisting pieces.

3. You don’t decide what to ship

If you’re in logistics, you don’t decide if you ship bananas or blueberries. You also don’t influence quantities. You’ll lose your job if you decide to ship 420 tons instead of 500 because it had better vibes.

In essence: Logisticians manage a fixed amount of work and with a fixed set of tools.

When work is software, these constraints don’t apply:

• Knowledge Managers can determine processes freely.

• Knowledge Managers control the spreadsheets, kanban boards and templates they work with.

• Knowledge managers usually get strategic directions, not tactical instructions.

Constraints also loosened around other work. Unlike physical labor, knowledge work escapes narrow boundaries. It’s not only the tools and methods of management that have changed. The things managers manage are less tangible, too.

The old paradigm won’t serve the new reality. We have move on from the logistics paradigm and think of management as UX design.

Management As UX Design

Your outlook change when you stop thinking about your team as labor units to arrange and start thinking about them as software users. This improves things for everybody:

1. UX design is a user-focused process that aims to help people reach their goals. Make it easy for your team to do their best work—and they’ll do their best work.

2. Great UX scales. Software keeps working after you stop, so you’re creating assets that help your team do their best work, even when you’re not actively managing.

Few companies nail this. If work is software, most companies have atrocious UX. Imagine the sum of softwares and interfaces you use to get work done as a software product called Werk.

Because it’s so versatile, Werk is infinitely customizable and modular, with each company running its own implementation. Most Werk implementations follow UX worst practices:

• Meetings that should’ve been an email are like customer support calls that should’ve been a setting.

• Feedback like „Will have a look and circle back if necessary“ is like a success message that doesn’t tell you what has happened and if you need to take further action.

• Absent documentation is like a lack of FAQs and support docs, leading to conversations that delay processes.

• Lacking dashboards and overviews are like, well, lacking dashboards and overviews, leading to frustration and confusion.

(For the rest of this essay, we’ll use Werk as the combined software experience of work)

Good UX design reduces overwhelm by simplifying processes to the minimum required to get the job done. It creates clarity by clarifying the inputs required and the outputs the user will get. Most importantly, it creates joy by helping the user reach a goal better than alternative products.

In other words: You want your version of Werk be stress-free, clear and simple.

Logistician-driven Werk does the opposite: It shuttles you back and forth between 5 different platforms, jams you into meetings you don’t say a word in and frustrates with ambiguous feedback.

To fix these issues, take off your management top hat and put on your UX designer beret.

Here’s how to improve your Werk’s UX:

Defining Your User Journey

Any good UX design process begins with a user journey. Where is the user? Where do they want to go? If you don’t know these things, no pretty illustration will make users care.

You need to know your user’s goals and frustrations before worrying about fonts and gradients.

UX designers will first map out the user’s milestones. For Mirror users, milestones might be „first publication“, „claim subdomain“, „first subscriber“, „first NFT sale“.

The next step is engineering where and how they happen. The corollary to the above might takes you through the editor, draft stage, wallet confirmation, etc. If it took 12 clicks and 3 tabs to publish on Mirror, fewer people would do so. A good user journey is simple and to the point.

Good UX hides what’s unnecessary in a given context and surfaces what the user needs to accomplish their goals.

Most Werk implementations are the opposite: They maximize the steps you need to take and pages you need to visit.

Tasks that should take 30 minutes expand into hours when they take you on a scavenger hunt for information between Github, Slack, Jira, Notion and Docs. And that’s before the „oh, I forgot to tell you this…“ in the next recurring meeting!

This frustrates team members, lowers productivity and wastes resources. Ambiguity also makes work more stressful: When work diffuses into a cloud of obligations, you never know when you’re done and your brain keeps stressing, even when you want to sleep.

Instead, you need to define your team members’ user journey within Werk to give them clarity. It’s probably best to do this together with your teammate. Here’s how to create clarity for them:

Define starting points

Many teams don’t have clear stages for their work. It needs to be clear when something goes from an idea to being something your teammate is expected to work on.

A good way to do this is to create an item somewhere in Werk (and NOT IN SLACK) with a deadline and expected deliverables, assigned to someone responsible for delivering.

Clearly outline the phases your work goes through (e.g. with a kanban board) to create more clarity for everyone. It also forces feedback to happen in feedback rounds, not in a „looks good at first glance but I’ll have a detailed look later) way.

Define end points

Teammates need to know when they’re done with something. Many teams stop working on something when everybody kinda sorta agrees it’s done—not by a clear, documented process.

Define formats & expectations

This is one of the biggest levers in Werk user journeys. Things become radically easier when you:

1. Standardize briefings: When you develop (and use) a briefing template, you ensure your team gets the information they need.

2. Define where and how to deliver work. Dropping files in Slack buries them in a pile of messages and muddles your organization. Instead, clearly define the format (PDF? Google Doc? Docx?) and create a plan to deliver it (e.g. a spreadsheet).

3. Clearly outline expected deliverables and the ultimate goal of the task. This boosts motivation and lowers overwhelm.

Defining the user journey of work this way streamlines operations, removes many meetings and leads to less stress for everyone. But there’s a risk, too:

You want processes to serve people, not people to serve processes.

This means you should keep the process as simple and short as possible. As Gall’s Law states:

„All complex systems that work evolved from simpler systems that worked.“

Your UX may grow more complex as you add more people, sophisticate strategies and systemize QA.

But it should start simple. Don’t demand complex processes, but give broad directions and document from there. Process documentation should follow desire paths, like Ohio State University: They let students walk to class and back and paved the paths they already walked.

Your Werk user journey should be the same: Give a start and end point, see what works (and what doesn’t). Then „pave“ those paths by turning them into documented processes and systems.

UX design isn’t done after the website goes live. It’s an ongoing process. As in design, so in Werk.

But a user journey is only the beginning.

Why FAQs matter

Oh no! An evil wizard has turned your entire team (including you) into chickens. Luckily, HR already hired a new team and they’re starting today.

Question: How well could that team run your operations? How long would it take them to replicate your effectiveness?

If the new team (assuming the same skill level of the pre-chicken team) could start where you left off, awesome! If they had to start from scratch… you’ve got some work to do.

Now, your team (hopefully) won’t spontaneously become chickens. But asking this question is a useful heuristic for operations in your team. For many teams, a gang of fresh faces would start from zero. The knowledge of „this is how we do things around here“ only exists in the heads of the team.

And that works for knowledge logisticians. After all, the process does create outputs. But what happens when somebody quits? Takes a vacation? Turns into a chicken? That would paralyze operations.

That’s why Werk admins think different. UX-driven managers understand that keeping knowledge in people’s heads is like having no FAQ and sending every question to support.

Software with good UX makes it easy to find the information you need, where you need it. As a manager, this means:

• Creating playbooks, instructions and documented processes

• Surfacing those resources when you need them

Both matter. The materials themselves provide instruction to reduce revision rounds, meetings and ambiguity. The surfacing matters because you need people to use the materials, not treat them like a McKinsey 300-slide PowerPoint.

UX designers put settings close to the features they govern and provide links to FAQs, blog posts, etc. at points where users might need further input. You can do the same in your Werk. Here are a few examples from marketing operations (you can probably translate to your area):

• When assigning articles, auto-populate an article template that reminds your writer of the structure you’re looking for.

• Create or adopt frameworks by which you evaluate work—and reference them in your feedback.

• Turn successful efforts into repeatable playbooks to create more consistent success.

These activities create objective standards, free up everyone’s time and create more consistent results. They also provide a higher-leverage optimization mechanism: When something goes wrong or exceptionally well, you can enshrine the insights at a systems level rather than noting it once in a meeting.

This is the UX equivalent of having useful error and success messages, FAQs and blog articles right where the user needs them.

Like UX designers, UX-driven managers can step away from what they’ve built and know it’ll run itself. Sure, you need to fix errors, optimize things and get user feedback—but the system is designed to keep running, even when you step away.

As you’ve read my thesis UX design as a management theory, you may not have liked parts of it. That’s because perfectly streamlined Werk implementations make human collaboration transactional.

Should Werk UX Be Perfect?

So far, the „management is UX design“ theory has abstracted away humanity. We’ve reduced the colleague you’ve mentored for the past year to user. The meetings where the team laughs together? Replaced by some templates and automations. The random conversations from which unique ideas bubble up? Replaced by standardized to-dos.

The reason the theory above sounds dystopian is because while Werk might be a software product, work is not. Our work embodies our ambitions and contributions. It’s a core part of our identity.

Do we want work to be roaming through a sterile internet ghost town of templates, standardized processes and step-by-step playbooks to obey?

From this extreme, „Management as UX design“ sounds like it turns knowledge work into the very factory labor it helped us escape.

But that’s off. Management as UX design doesn’t advocate abolishing meetings or figuring things out together. It creates space for them.

Most teams (and most people) put off the things they need to do most.

The fundamental strategy work repeatedly gets postponed to „when there’s time“ so we can keep running on momentum until just one more thing is done. But „when there’s time“ is on nobody’s calendar.

The work that constantly gets postponed is where we get to share ideas, brainstorm and tell stories. It’s where we’re creative. Where our ambitions roam free. It’s what makes work worth doing.

But as the chaos of knowledge-logistics-management rages on, cobwebs grow on the high-leverage foundational work.

Being a UX-driven manager isn’t about eliminating the things we love about work. It’s about making space for them.

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The past few months have been brutal. Crypto prices plummeted, NFT trading volume collapsed and many speculators fled the market.

This spawned the „Use Case Debate“: Tech and media establishment folks yell that crypto is worth-, use- and pointless. Web3 folks respond by outlining use cases and a potential future.

These debates often focus on the financial infrastructure, but overlook the cultural aspects of crypto and NFTs.

Because if you’re in web3, you know many NFT communities are incredibly supportive and helpful—distinct from any non-crypto community. That’s not an accident. And a theory rooted in economics, game theory and evolutionary biology might explain why.

In this essay, we’ll explore why NFTs create such great communities. It all starts with a simple, but ridiculous insight.

“Wasting“ money is an NFT use case.

That sounds crazy coming from a guy who works full-time in NFTs. So let me clarify.

The collapse in NFT activity and prices seems like it vindicated the right-click-save regiment: Most now-worthless NFTs turned out to be just JPEGs. But that doesn’t mean the whole technology is useless. If you've ever been in a great Discord, you know NFTs are great at creating awesome communities.

If you've ever been in one, you know NFTs often generate better collaboration and culture than other online communities. Community might seem like a gimmick, but membership communities can be big:

• Chief is an 8-figure business, likely bringing in more than $10 million in revenue yearly.

• Depending on your source, Tiger 21 makes revenues between $16 million and almost $50 million.

Those are just two companies among many. So if NFTs are better at orchestrating useful communities, it could spawn big, decentralized businesses.

But while we’ve got tons of „bullish on community“ tweets, „Here’s how to build a 10x community🧵“ threads and community manager job listings, nobody seems to ask a simple question:

Why are NFTs so good at creating community?

Because nobody seems to be asking this question, I did.

In this essay, we’ll explore why I think NFTs build great communities because they let us waste money in the most effective way—and the biology/economy/game theory underpinning it.

We'll start with a primer on community, continue with the basics of signaling theory and finish with how it helps you build a great community.

(Note: This is not a definitive theory or the only reason why NFTs create great communities. It’s a lens that augments your toolkit of looking at NFTs. And the obvious disclaimer: Because NFTs can be anything and everything, this doesn’t apply to all NFTs, just ones with holders/builders actively creating communities.)

What is community? A primer

In true high school valedictorian fashion, let’s start with a dictionary definition.

"A group of people living in the same place or having a particular characteristic in common."

That's community according to wherever Google gets its definitions. This might seem vague, but is useful when you compare it to the definition of organizations:

"An organized group of people with a particular purpose, such as a business or government department." (Bolding mine)

A community doesn't have a built-in purpose. An organization does.

You've seen this with mature NFT projects. They often have a DAO and a community. The DAO (where the O stands for organization) has a purpose: Make decisions about the project's future. The community doesn't: It just vibes.

Now, we said in the beginning that NFTs create great communities. But if a community is just a bunch of people with things in common, what makes one good?

Specifics depend, but let’s agree on these principles for this essay:

• Members want to be part of this community and identify with it.

• Members interact with the community regularly.

• Members feel others in the community wants the best for them and they want the best for the community (and other members).

With that in mind, let's dive into how to create an NFT community which fulfills those ideals—by wasting money. And by „wasting money“ in all the right ways. The backbone to this is called signaling theory.

Why Signaling Makes NFT Communities successful

Why do people spend $250k on Lamborghinis? $5k on Gucci handbags? Millions on rockets that get them to space for a few minutes?

Signaling. We all have a fuzzy sense of signaling: Somebody buys/believes/says something not because they want/believe it, but because of how others will see them.

But signaling is more than flexing your belongings or spewing political beliefs onto Twitter/Instagram/otherwise peaceful Christmas dinner conversations.

Signaling is at the core of how humans interact. And because NFT communities are a function of human interaction, signaling drives those too—and NFTs make signaling way more efficient.

But let’s first clean up signaling’s image.

The Truth about Signaling (it's actually great)

When you first read „signaling“ you might’ve thought it's about buying useless things to impress others.

Yes, that's signaling. But while flexing is signaling, signaling doesn’t equal flexing. It originates in game theory (no strategy matrixes or math ahead, promise!).

In game theory, signaling solves a simple, but ubiquitous problem: Information asymmetries.

Here's an example: Let's say you're rich and you want to get a loan. The bank doesn't know you. In a post-Neural ink world where the banker knows everything you know via Bank-to-Brain API, they’d throw the money at you—the more they loan you, the more interest! But we don’t have Neuralink. In fact, when you walk into the bank, they know nothing about you. And if they gave out loans to anyone, they’d go bankrupt from the defaults.

The information asymmetry (the bank doesn’t know what you know) keeps you from making a mutually beneficial transaction.

Once you know the pattern, information asymmetries exist everywhere:

• Good applicants know they're hard workers, but employers don't. If employers knew what the applicants know, they'd both be better off.

• Brands know their products are superior, but their target market doesn't. If the target market knew what the brand knew, they'd both be better off.

• Many people feel attracted to each other, but never make a move. If they both knew what the other knew, they'd both be better off.

You could come up with hundreds more. Information asymmetries are everywhere. And signals are a way to overcome them.

Signals bridge information gaps and enable cooperation.

„Why should we give you a loan?“, the bank teller mutters, clearly assuming you’re yet another huckster trying to build one of them newfangled NTF things.

„I’m actually pretty damn rich bro, made a lot of money couple years ago“, you respond. Adjusting your Ed Hardy tanktop to emphasize the point, you expect the money in your account tomorrow.

You know it’s true. And yet, the bank teller rolls his eyes, sighs, hands you a stack of loan application papers and hopes he’s exorcised you from his premises.

This hopefully somewhat entertaining story illustrates that merely telling people something is a weird signal. As they say, talk is cheap. That’s why we need more expensive signals:

To finish your loan odyssey, you have to make a down payment and/or provide collateral for the loan. This proves that you have money. In game theory lingo, this is called a costly signal. Costly signals have a cost (who woulda thought?), which makes them harder to fake.

Costly signals are more trustworthy and reliable than cost-free signals.

The more costs you're willing to incur to send this signal, the more likely your signal is to be reliable, i.e. accurately conveying the information that bridges the gap in the information asymmetry.

Let’s see how costly signals bridge the information asymmetries from the examples above:

• The applicant gets into debt to attend a famous university which requires hard work to graduate from. The employer presumes the applicant is a hard worker.

• Brands spend millions on primetime TV campaigns with celebrities and Hollywood-level filmmakers. Consumers presume the brand must have something to say if they’re willing to spend that much.

• The single man brings the single woman flowers. Because that’s something he’d never buy just for himself, she believes he did that just for her. (Hat tip to Rory Sutherland for this example)

On the surface, these things all „waste“ money or energy. Universities teach next to nothing in terms of practical job skills. TV campaigns create no direct product sales. Flowers have no practical use to the man.

„Uselessness“ makes things work as signals. The receiver knows the sender expended resources only to convey information that enables cooperation.

Now, before I release you from the purgatory of terminology, we need to answer one more question:

What happens when an insincere person emits a costly signal?

Costly signals aren’t perfect. Some primetime commercials advertise questionable products and services. But on average, what’s advertised on primetime TV is more likely to be legitimate than what’s advertised on handwritten paper taped to street lights.

That is why these signals are also called honest signals. They’re not perfectly true all the time, but they’re true often enough to be useful.

So while down payments and collateral don’t eliminate credit defaults, they allow banks to offer loans at a profit.

Alright, grab a towel, wipe the sweat off of your forehead—we’re done with definitions. What does that mean in practice?

Luxury Products (and NFTs) Are “Just” Signaling

As we explored, the uselessness of costly items makes them better signals because they lower the share of resources spent on utility and raise that spent on signal transmission.

That’s why Gucci handbags are smaller than Eastpak backpacks, why the flashiest Lambos only have two seats and why mediocre cartoon JPEGs sell for big bucks.

Tk pie chart signaling vw vs. lambo

This is why this take is naive:

"That's a waste of money because it does the same thing my much cheaper/free alternative!“

(This is a generalization of the „right-click save“ NFT criticism)

But a Lamborghini doesn't exist to get you places. Gucci handbags aren't for storage and NFTs aren’t for anything tangible. They’re mostly signals—which is precisely the point.

In biology, this is called the handicap principle.

A flower is just a weed with an advertising budget. -Rory Sutherland

A male peacock's beautiful feathers serve no purpose besides attracting females. The bigger, more colorful the useless feathers a male peacock drags around, the more females he attracts. This transmits a signal of extreme evolutionary fitness: “Look how many useless feathers I can drag around and still be fine!“

The same is true in humans. A Lamborghini communicates: "I'm willing to overspend on a sports car with almost no utility over a VW… and still survive.“

If you’re mostly paying for signal transmission, then you’re not buying the product, you’re buying away an information asymmetry.

If the utility of removing an information asymmetry is higher than the utility of the money it costs you, „wasting“ money on useless things is quite useful.

If you want to convince a community it’s worth having you as a member, could there be a better signal than buying a silly cartoon animal JPEG for thousands of dollars, just so you can join their Discord server?

Now, this „buy less to signal more“ doesn’t work ad infinitum. At some point, the cost either exceeds the utility of bridging the information asymmetry or the utility becomes too low—if you buy a Lamborghini to signal your wealth to women, you can’t drive them home with you in a single seater.

So costly signals have some boundaries. More specifically, there are 3 of them:

How many resources should the signaler spend on a signal?

Buying away the information asymmetry is a rational cost. Anything beyond that is truly wasted. That’s the theory.

But in practice, we don’t know what the right price for a signal is. Will a BMW be enough to signal you’re the richest person around—making a Lamborghini purchase wasted money? Not knowing the right price makes it hard for signalers to send the information they

How does the receiver know the signal is real?

A costly signal is only effective when the receiver recognizes it as such. If I spend millions on a Cy Twombly painting to signal my taste and sophistication, but you think it’s my toddler’s scribbles, the signal doesn’t work.

When does the signal stop being useful?

No signal is useful forever. If you want to signal something by always having the newest iPhone, then your current signal wears off whenever a new iPhone is released.

Similarly, a bank might reevaluate your loan if you lose your job—even if you made a down payment.

Wrapping up Part I: Signaling 101

People and/or organizations often fail to cooperate because of information asymmetries: One party knows something the other doesn’t. If both parties had the same information, they could collaborate and both would win.

You can bridge information asymmetries with signals which deliver that information to the other party. Because signals are so useful, people will fake them.

To deter lying, people are more likely to believe in a costly signal. Anyone willing to incur a cost to send a signal is more likely to be sending a true signal.

But even costly signals have 3 constraints:

1. What’s the right cost? Signals need to expend resources to buy away the information asymmetry, but not too many.

2. How do receivers know the signal is authentic? Receivers need to verify the signal conveys accurate information.

3. When does the signal stop being useful? Signals cease to be effective when circumstances change.

The Handicap Principle explains why costlier signals often have less inherent utility: By incurring a high cost for less utility than cheaper alternatives, you send an even stronger signal: You can „waste“ your money on something which only exists to signal and still be okay.

That’s a short introduction to signaling theory. Now, our examples so far examined 1:1 interactions. But we’re here to explore why NFTs are great signals for cooperation in groups of people—communities.

So let’s turn on multiplayer mode and dive into Part II.

Signals & NFT Communities = Match Made in Heaven?

Now that you know signaling theory, it’s easy to jump to conclusions about why NFTs make great signals and call it a day. But we need to start from first principles—why do communities require signals? What’s the information asymmetry?

Communities are flows of resource contribution, resource extraction and resource creation.

At its simplest: If you’re answering questions in an NFT Discord, you’re contributing resources. If you’re asking questions, you’re extracting resources.

And community resources are always constrained. A simple example for the Discord above is that of community member time. There’s a total amount of hours spent by community members in the Discord. Let’s call that x. When the time required to answer each question exceeds x, you need to either lower extraction or increase contribution.

This applies to every resource a community may have, from talent to capital to emotional support.

In that sense, there’s an intangible, immeasurable balance sheet to every community. If it’s in the red, the community is on a runway before it breaks down. If it’s in the black, it’s growing and creating benefits for its members. This is a concept called social capital.

(Sidenote: Social Capital is a fascinating topic itself—and central to community building. If you’re curious how it applies to web3 communities, please harass me on Twitter to coerce me into writing an essay on it.)

So when someone wants to join a community, existing members need to discover whether that person will increase or decrease the bottom line of the sheet.

They can’t know that. And ét voila, we have an information asymmetry shining a bat signal for our superhero, the costly signal. So while it’s donning a cape and putting on a mask, let’s look at a successful example. Here’s how costly signals enriched the (non-crypto) punk community. These guys:

How Costly Signals Made The Punk Community Powerful

Since the mid-70s, the Punk movement has been a safe haven for weirdos, radicals and other outcasts. The movement has had its peak, but you can still see them asking for change in many major cities.

Punks have strong community. While they judge, insult and trample anything remotely resembling an establishment, they accept other punks with all their quirks.

This unwavering support is social capital that would be wasted on non-punks. That’s why, like many subcultures, punks sniff out posers like well-trained Rottweilers.

Posers would never invite the societal judgment that come with a rainbow Mohawk, spiky leather jacket and denim vests adorned with anarchy buttons. With „punk signals“, you’ll never get a normal job.

That’s what makes the punk community work:

The cost is high, so anyone willing to pay this cost to emit the Punk signal is authentic and will see the community welcome them with open arms.

The mechanics are almost identical in NFTs.

A weird phenomenon swept Twitter in 2021, causing confusion and outrage in its wake: From household name celebrities and tech CEOs all the way down to anonymous accounts, people changed their profile pictures to CryptoPunks.

Like the colorful bunch blasting hard rock music, NFT degens visionaries traded in their normal appearance to signal where they belong—even if their appearances had made them rich.

The same is true for Bored Ape Yacht Club, Gutter Cat Gang or whichever combination of adjective, animal and association you choose.

This is the social cost that adds to the financial cost of NFT PFPs. In other words: NFTs are good costly signals.

That’s because they solve the 3 constraints of costly signals uniquely well:

How NFTs simplify creating great communities

Let’s recall the 3 constraints that can inhibit effective costly signaling to break down:

• How does the signaler know how much to pay?

• How does the receiver know the signal is real?

• When does the signal stop being valid?

Let’s talk about how NFTs solve these:

1. The market dictates the price.

NFTs have a transparent market price. That way, anyone knows the minimum price of emitting the signal without overspending (or spending without getting the result).

2. Blockchains serve as a base layer of truth.

The core function of blockchains is to authenticate which signals are authentic. A confirmed blockchain transaction never leaves the signal receiver guessing.

3. Token-gates kick you out.

Token-gating solutions kick out users who don’t hold the NFT (anymore). This clarifies when community membership is over and somebody has no more rights to the community’s resources.

Strong communities emerge thanks to these 3 points. Because they’re built into an NFT community’s social fabric, members trust each other enough to build together, meet up and create treasuries.

“But you don’t need a blockchain to do that!“

At this point, crypto skeptics, right-click savers and other heathens would shriek at you:

1. “Communities can do these things without NFTs. Off-chain communities create useful signals and build things, too!“

2. _"People in NFT communities mistrust, cheat and steal from each other too!“  Both true. The signaling properties of NFTs don’t _eliminate _mistrust. Floor price obsessed, speculating gremlins haunt many communities. And NFTs don’t enable building together—modding and fan fiction communities have shipped impressive projects before blockchains ever existed.

But NFTs lower the bar to trust and cooperation. Information asymmetries require off-chain communities expend lots of resources increasing trust and decreasing mistrust, i.e. creating, exchanging and verifying signals before they collaborate.

As outlined above, NFTs automate most of this. Collaborating with strangers online (whether that’s a supportive community, launching fashion brands or building software) on the internet wasn’t impossible before. It just came at a high cost of bridging information asymmetries manually.

NFTs collapse these costs by providing signals that bridge those information asymmetries. People deterred by these high coordination costs now start to collaborate. NFTs don’t make new forms of community possible. They make them viable. So when people call NFTs a waste of money purely intended as signaling, they’re right. They’re just not the audience.

Community-driven NFTs signal to a community that someone is likely to be a net-positive member. The prospective member pays a cost for something „useless“, the community knows they truly want to join the community.

Because the signal is honest—true often enough to be useful—new forms of collaboration between strangers on the internet become viable.

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Most NFT projects ignore business fundamentals like a disappointing Tinder date’s text messages. There are many examples, but this essay explores a specific one: Customer lifecycles. It doesn’t sound sexy, but the lack of consideration for them stifles innovation and keeps NFT culture from becoming the driver of innovation it wants to be.

One Man’s Rug is Another Man’s Failure

On May 9th, 2022, the celebrated Azuki founder Zagabond fell from grace and became NFT Twitter’s villain.

In an article titled „A Builder’s Journey“ (clearly referencing the „Hero’s Journey“), he detailed his ascent:

Zagabond ventured into web3 as an unknown, anonymous founder. Under the name „Philip the Intern“, he launched CryptoPhunks—the 10,000 CryptoPunks, but horizontally flipped. Larva Labs had OpenSea take down the collection, which sparked a debate. Instead of backing down, Zagabond wrote a manifesto and minted it as an NFT. The ensuing debate about NFT art, culture and more was big, but the conversation went the way of every Twitter trend: It fizzled out and made way for the next topic.

Zagabond wasn’t done, though. After launching a „tendies“ collection which never sold out, CryptoZunks soon followed. And so did Zunk Pets. The collection was a success. But it, too, lost the market’s attention—and lost Zagabond’s right after.

But a few setbacks are nothing to a founder as ambitious as him! This time around, he’d do it right. Him and his co-founders put all the chips on the table. They quit their jobs, worked hard on the collection and—determined to claim a spot among the blue chip NFT projects, launched Azuki.

This time, it worked. The anime-themed collection skyrocketed up the charts, reached a floor price of dozens of ETH and spawned a whole anime-themed meta.

After this underdog story, Zagabond shares his values (innovation over convention) and shares lessons he learned (the road to success is unpaved) and finishes off with what almost reads like an incantation:

„We rise together.

We build together.

We grow together.“

Zagabond probably wanted to court attention by sharing his lessons and inspiring other founders. And he did get attention—when the piece turned him into web3’s worst villain for a day.

The thousands of holders of Tendies, Zunks and Phunks who spent hundreds, even thousands of dollars on these NFTs weren’t happy about him succeeding on the project they hadn’t bought.

Twitter was furious, calling Zagabond a rugger and predicting Azuki would eventually be rugged. That day was Zagabond’s fall from grace. His reputation is permanently tarnished—and Azuki’s floor price permanently dipped by two thirds.

Ouch. As a neutral observer, it’s easy to see both sides:

• As a hungry, young entrepreneur who finally „made it“, you’d probably also be proud. You persevered through failure and won out in the end.

• If you had spent hundreds or thousands on NFTs because you believed in the project’s long-term future, you’d be furious if the founders vanished.

Who’s right? Who’s wrong? It’s hard to answer that question because the NFT community isn’t asking a simple, yet important question: When is an NFT project over?

When we answer it, we create better outcomes for both founders and buyers—and improve the culture of NFTs.

„When is an NFT project over?“ sounds simple enough, but it has a few layers:

• When can a founder gracefully exit a project without changing their name or having an angry mob chase them down?

• What is the customer lifecycle of an NFT project? e.g. when does the project founder want holders to sell the NFT?

But let’s start with the fundamentals—why does it matter? And how will it improve our culture?

The Denial of NFT Death

Everyone knows that 90+% of startups fail. And with NFT projects being startups built on a speculative technology, we should expect that percentage to be even higher.

When a startup fails, a small circle of 1-50 people loses money–the founders, family & friends (if they invested) and a few VCs (if the company got that far).

It’s also quite clear when a startup has failed. If you’re not bringing in enough money to sustain your operations, you can’t pay your bills—you fail. Once you can’t feed yourself anymore, you shut down the servers, halt production and put your domain on sale. Your startup is gone in every practical sense. And when you eventually dissolve the company, your failure is government-certified.

That’s why many successful tech founders have a failed startup (or a few) on their resume before they made it big. This doesn’t harm founder reputation, it’s par for the course. VC firms don’t write scathing blog posts about founders who lost their money. That’s not because startup founders are all ethical, it’s because VCs know they’re taking a low-percentage bet.

This kind of culture is good—failure creates innovation. Startup ecosystems are antifragile. They produce monstrous successes not despite failure, but because of it.

The success of Silicon Valley is in part because risk-taking is encouraged and failure is seen as a stepping stone that helps everyone learn. Its culture around failure is an essential ingredient to its success—and web3 should learn from it.

As Nassim Taleb says in Antifragile:

“In order to progress, modern society should be treating ruined entrepreneurs in the same way we honor dead soldiers, perhaps not with as much honor, but using exactly the same logic (the entrepreneur is still alive, though perhaps morally broken and socially stigmatized, particularly if he lives in Japan). For there is no such thing as a failed soldier, dead or alive (unless he acted in a cowardly manner)—likewise, there is no such thing as a failed entrepreneur or failed scientific researcher, any more than there is a successful babbler, philosophaster, commentator, consultant, lobbyist, or business school professor who does not take personal risks. (Sorry.)”

Zagabond echoed this sentiment in his post:

Builders must learn from each experience, coming back to the drawing board with something innovative and significant each time.

Why wasn’t he treated like a pioneer who moved the space forward?

1. Most NFT projects have thousands of holders. The amount of stakeholders is orders of magnitude larger than with VC-funded startups.

2. Almost no NFT buyers are professional investors who are aware of the real risk of trading JPEGs. Worse, they often treat buying an NFT as an investment when it should be treated like a collectible.

3. You can’t shut down NFTs like a software or physical product. Once the token is in people’s wallets, it’s there.

In summary: As an NFT founder, you have a large group of people who expect you to deliver an increase in market prices. You have no good way to exit the project because you can’t shut down your product.

So when the founder can’t feed themselves anymore, it’s much harder to say „I’m done“ and do something else. This ironic response to Zagabond encapsulates it quite well:

https://twitter.com/trente/status/1523803732936654848

But if we want to build an uplifting culture of innovation, founders need to be able to fail without being shamed, ostracized and mistrusted.

That’s not to say Zagabond did the right thing (or the wrong thing, I have no opinion on the matter). But if failure keeps getting punished so harshly by Twitter mobs, founders will abstain from the NFT space because they feel like they’re either stuck with their project forever or need to endure endless abuse.

This is unsustainable. Especially in a time where it’s harder to build, we need more and better founders to take risks. Now that the market is less exuberant, we’re also seeing fewer unrealistic expectations from holders. But even though it’s a misguided assumption that NFTs go up when the team builds, people’s short-term greed won’t change.

That’s why we’ll explore 3 ways to improve the NFT market and its culture with better customer lifecycles.

On Customer Lifecycles and NFTs

If you’re reading this article, you probably understand this concept, but let’s get on the same page:

A customer lifecycle describes the intended journey a buyer takes with your company/products. This documents the process from the first time someone hears about you to them becoming a customer and eventually them ceasing to be a customer.

That last part is important. To think about when you want someone to stop being your customer. No customer relationship lasts forever. Yet nobody in the NFT space seems to think about it (with one notable exception, which we’ll get to).

How to Design Customer Lifecycles

Some products have a built-in lifecycle: Pampers doesn’t expect you to keep buying their products once your baby can go to the bathroom themselves.

But others have to design it more consciously. The best example is a freelance designer. If you want to make $10k per month, you can:

• Sell 10 logos per month at $1k

• Have 2 retainer engagements at $5k each

• Sell 4 branding kits for $2.5k each

You get the same outcome with each option. There’s no better or worse here—it’s just a choice you need to make. And it’s a choice about the customer relationship—when it begins and when it ends.

NFT holders generally expect the relationship to last as long as they hold the token. In other words, forever. And if that expectation is violated, you get called a rugger and have to endure Twitter abuse for the rest of your career.

This creates 2 problems:

1. Holders expect the founder to keep going even when the project has lost their interest or can’t support them.

2. If secondary royalties are part of the monetization strategy, you can’t rely on your holders’ whims for cash flow.

By now, I hope you’re convinced it’s worth spending time on defining your customer lifecycle—and paying attention to how it ends.

But how do you do that? Let’s start with the only example I’ve seen in the web3 industry: Proof.

How Proof got the customer lifecycle right

Proof Collective is Kevin Rose’s membership community. Holding their NFT gives you access to a private Discord, exclusive mints and deep analysis on artists and NFT projects.

It’s one of the most successful NFT projects of all time, reaching a floor price of 110+ ETH. It’s the most successful membership NFT.

But there’s a catch: It’s only valid for 3 years. After that, the utility expires and the attached image will change from the membership card to a piece of art by a well-known artist.

While an expiring membership seems counter to the web3 narrative, this is a great move for 2 reasons:

1. It ensures cash flow. If the membership was forever, the team would have to provide the utility forever, even if no money comes in from resales or follow-up projects.

2. It gives the team a way out. Had the project been a dismal failure, they could’ve provided the utility for 3 years and exited gracefully.

It’s not like the team around Kevin Rose came up with an intricate customer lifecycle. They simply limited the time you reap the benefits from holding your NFT.

So while we’re at it, let’s explore a few more ways how you can consciously design your customer lifecycle.

Clear limits

This is the most obvious. It’s what Proof did. Simply limit how long the NFT provides the utility you promised. Or limit how many times you get to take advantage of a certain thing. There’s all sorts of arbitrary limits you can set.

Build a Project People Should Exit

At its extreme, a utility NFT project is an awfully bad business. If your only income sources are

a) the initial sale and

b) secondary royalties

…and you then build the project and the community to perfection, nobody ever sells—and your cash flow is zero.

This is especially true for utility and membership NFTs. If you want to issue NFTs that grant access to your startup’s software and perfect product—why would anyone sell?

They won’t. Unless you give them a reason to.

How to Bake Selling Into Your Product

Build a product/community intended to be a part of someone’s life only temporarily.

For example, you could design your token-gated software for small teams only. That way, it serves startups, but incentivizes selling the NFT and switching providers once they grow.

(You can combine tactics here and impose a 5 people limit on your software here)

Software isn’t the only field this works in. Accelerators, incubators, education programs, etc. are all designed to release their customers. Some stick around longer than others, but these are never meant to be permanent memberships. So if you’re building a community-driven NFT project, you can bake a natural lifecycle into the project.

If you want to earn somewhat predictable secondary royalties, You’ll have to do the same.

Clear Failure Conditions

As mentioned before, projects can simply fail. But unless you know when your project has failed, your customers won’t know either. And as in any good relationship, managing expectations is key.

It might be a good idea to create clear expectations with your holders and establish what conditions would make you quit the project (or hand it to the community). There’s no virtue in working yourself to death for a project you don’t believe in anymore.

Many artists do a good job managing expectations by clarifying that there’s no roadmap, utility or price target—that you should only buy their art to own it as, well art.

Bigger projects need to manage expectations too. And when they do, founders have more freedom to build what they want to build–because they know they get a do-over.

Wrapping up: Carefully Design Your Customer Relationships

As we’ve seen in this article, you might ruin your reputation if you quit an NFT project that attracted the wrong people by setting the wrong expectations. And if you don’t quit? You’ll be stuck working on something that’s not working.

The answer to that isn’t hoping people will get wise to how NFTs really work. They won’t. Instead, you need to carefully design your customer lifecycle.

You can do this a few ways:

• Impose limits: Limit access after a certain amount of time/uses.

• Start with the product: Create utility that has clear exit/entry points and makes people sell organically.

• Clarify when the project has officially failed and what you’ll do when it has done so.

I hope this article was useful and has helped you avoid falling out with your community.

Did you learn something in this article? Please retweet this to share it with others :)

If you liked this article, please follow me on Twitter to see more of my writing:

I love writing. I do it every day for multiple hours. Writing for work, writing notes for myself, writing essays for myself.

But when it comes to publishing, I'm slow. I know I'm slowly dying and I'm missing out on so many things when it comes to writing: The friends I could make, the money I could make, the love I could get from people paying attention.

And yet I don't do it. There's a weird mechanic that's keeping me stuck. It makes me afraid of publishing. There's a perpetual feeling of my writing not being good enough, my articles being too obvious, too incomplete, too bold, too timid, too long, too short, too general, too specific.

That's even though I often get stellar feedback on my writing and see articles shared by people even months later. They're clearly getting value from what I published.

Yet, I recently don't feel ready to publish what I write. Now, I know imposter syndrome can be a good thing. It shows you that you care about creating quality and that you're probably further along on the Dunning-Kruger graph than the people who think they're the best, but suck.

But when it holds you back from publishing something, imposter syndrome is nasty. And why does it hold us back?

One reason, at least for me, is emotional. We reject imposter syndrome because it feels bad. It diminishes our self-esteem and is rooted in deep discomfort.

There's a saying in Buddhism: What you resist, will persist.

Resisting and rejecting imposter syndrome doesn't help. When we reject it and tell ourselves we shouldn't feel this way and find some excuse to not create, we've lost the battle.

Sure, doing something else and telling yourself you'll get to it later (spoiler: you won't) feels better in the moment, but it cripples your creativity. In the back of your mind, you'll know.

Instead of running from the emotion, we have to first accept it. We don't have to agree with it. But you have to accept that it's there first. Then you can take the next step.

I like the RAIN framework: Recognize, Accept, Investigate, Nurture.

If you're reading this, you've done the first step: You recognize imposter syndrome for what it is.

Accepting is harder:

You have to realize what imposter syndrome actually is. This could include physical sensations (Pressure in your stomach? Pain in your head?), emotions (fear, shame, guilt...) and literal thoughts ("If I publish this, she'll think I'm pretentious...").

You have to find all of these dimensions and see eye to eye with them. Then you can accept. Even if you don't believe it—tell yourself "I accept imposter syndrome" and watch the change in your emotional state. For me, it works every time.

I think it works because it turns all of these facets into an "object" called imposter syndrome and lets us stop identifying with it. When our mind is on autopilot, we accept any thought, feeling or sensation as being us. When we consciously do this work, we can see that they're not us.

More importantly, we can look at it without judgment. There's tremendous power in that—because we can now take the next step: Investigate.

This might sound complex, but it's simple. There's a Zen Koān in which Zen master Hakuin responds to everything with the question: Is that so?

This is a good guide—think about the thoughts that hold you back and ask: Is that so?

• Will she really think you're pretentious?

• Will your high school friends really laugh at you?

• Will you really get fired after posting a 6/10 blog post?

This is the simplest step because this is a simple article. But you can go deep in the investigate step—you can figure out which experiences may have ingrained these responses inside you.

By now, you've recognized, accepted and investigated your imposter syndrome. Now it's time to nurture. The term sounds a bit abstract and too much like you'd talk to a child.

The mental model I use is: If your best friend had just told you he's struggling with all of this, how would you respond?

The answer to that question is usually much different than the punishing self-talk we're all so used to.

And then tell yourself that answer. See how you feel. Enjoy the opposite of that impostor syndrome—and then go do great things.

And that's what I'm going to do right now. Because as you were reading this, I was going through the same process. And the only reason you're reading this is because I published this.

If this helped you, whatever you create will help someone else. Go create something.

On my first Shiny Object Social Club community call, I was nervous. After 55 minutes of talking about the future, I heard what I was waiting for:

"Any other questions?"

I unmuted with shaky fingers and stuttered:

"All of these projects list developers, illustrators and community managers. I have a copywriting/content marketing background. Is that not valuable in NFTs? Do I have to learn new skills?"

If you're a (copy-)writer, you may have felt the same way. It's easy to feel misplaced in web3:

NFTs and crypto have transformed the business models of artists and software engineers. Their art or (d)apps are now an asset that earns while they sleep.

None of that has happened for writers.

Sure, you can get freelance clients, earn tokens in a DAO or be employed at a web3 company. If you're exceptional, you may even make your living from a paid newsletter. Don’t get me wrong. It’s fantastic to work with great people in a space you believe in.

But none of that's groundbreaking—it's existing writing business models with crypto sprinkled on top.

What about NFTs? Have you ever heard someone say "I loved that article so much I bought it as an NFT!"? My guess is no. To find out why writers seem underserved in web3, let's figure out why nobody buys written NFTs.

Why are there no writing NFTs?

Writing NFTs don't happen consistently. Packy McCormick sold some Mirror pieces as NFTs. But even those were connected to their title images, not words. So if even one of web3’s most popular writers doesn’t sell writing NFTs, how big is the opportunity for others?

Although I'd love a golden era of written NFTs, I'm bearish in the short-term. Why? It doesn't happen in the real world.

Reason 1: Consumption time of writing

Everyone's been to an art museum, but almost nobody's been to a book museum. That's because you judge a painting in a split second: You look at it, have an emotional reaction and get an overall vibe.

Contrast that with writing: A book takes hours to finish. You bond with characters over hundreds of pages, feel for them and learn from them. That takes time.

You can't consume books immediately. Ask someone what they think of a painting and they can tell at a glance. Ask the same about a book or article and you have to be lucky they've read it to get a response besides "Sounds interesting".

How soon can you love something?

You'd only buy an NFT if you love the piece, the style or the project. Before you can love the art, you need to consume it. So you can love a piece of art in a split second, but you can only love a book after hours (less for articles, but still orders of magnitude longer than visuals).

That makes the written NFT market tiny compared to the visual art market.

That's one reason we haven't seen writing NFTs take off. The market is much smaller. But that's not all—because generative projects give visual artists so much more leverage:

Reason 2: There is no generative writing

Few people appreciate this, but generative art gives designers, painters and other visual artists gigantic leverage.

They don't have to paint each piece of work individually, they draw a few dozen things and let an algorithm create thousands of art pieces.

That's why you can get work by popular artists for relatively cheap:

Doodles weren't cheap at a minting price of 0.123ETH ($519 at the time of this writing). But Burnttoast's (the artist) 1/1 NFTs go for as much as 12,5ETH ($52,790 at the time of this writing).

Why were Doodles 101 times cheaper than the 1/1 work? Because Burnttoast didn't have to draw thousands of times, but let computers to the work.

For now, this type of leverage is impossible in writing.

You can't write 50 sentences, have a computer assign them a random order and sell people word salad.

It would be ridiculous to for me to take this article and randomize the sentence order to create 10,000 articles.

That’s why the absence of writing NFTs can be explained wit simple economics: If the best artists can create a supply of 10,000 pieces in the same time it takes the best writers to create a supply of 1, the attention for art NFTs drowns out the attention for writing.

While writing AIs exist, they can't (yet) write intricate, cohesive long-form stories humans enjoy. That sounds like a lot of FUD for writers in web3. But we'll be needed, big time. In this article, we'll explore why that's the case and how writers are gmi in web3.

An important caveat: NFTs don’t make anything more valuable. They let creators directly benefit from the value they create (the great thread linked below calls it “unlocking frozen assets”).

shoku

@sershokunin

1/24 Why do I have so much conviction on NFTs? Most of the biggest tech successes of the last 20 years have come from unlocking frozen assets, and NFTs do just that. For investors and entrepreneurs, this is a super important mental model. Some examples :

2,440

9:09 PM • Sep 19, 2021

So it’s worth asking: What makes writing valuable?

Why some writers get rich, influential and independent.

J.K. Rowling is estimated to be a billionaire. David Ogilvy, Claude Hopkins and Gary Halbert made fortunes from writing ads.

Why? Good stories have value. They're necessary for new movements, products and companies to succeed. And stories are where writers shine. Neither companies nor fictional characters thrive without stories.

Just like you've never been to a book museum, you probably haven't heard of a movie based on a painting. And you haven't seen a landing page without copy. That's because paintings and website layouts have constraints. They can't tell stories as well as a book.

To create any great media entity, visual elements and writing depend on each other.

You don’t get a movie without a script. But you also won’t get one without cameras and animations. So for any communication to be successful, you need both. As writers, we’ll contribute the stories.

And stories are valuable in two ways:

1. People enjoy stories for more than entertainment

Whether you indulge in rom-coms, read biographies to learn or dig through a technical whitepaper, you're consuming a story.

Entertainment, education and marketing are stories in different formats, each with dozens of subcategories.

• Entertainment tells stories with gaming, movies, books, TV shows and plays.

• Education tells stories with case studies, research papers and essay assignments.

• Marketing tells stories of customers, products, companies and industries.

Because stories determine the success of media entities, companies and products, they make money.

2. Stories create value for companies

If you're a copywriter, you know a product's (or company's) story makes money.

You could buy Nike Air Jordans for $150 in the store or game-worn, autographed ones for $560,000 at Sotheby's. That 3733x increase isn't because one pair is more comfy.

It's the story.

The same is true for companies: The $GME pump wasn't a subreddit agreeing to buy a stock. A story catalyzed that movement: "Rich hedge fund folks are getting richer while we're suffering, let's get revenge!" That story took Gamestop from a $1.3B market cap to a (short-lived) $22.6B. Look at their stock chart:

There are countless examples. From tiny businesses to nation states, the story you tell decides how people perceive something—and influences what they buy, hold or sell.

So whether you write fiction or non-fiction, your work creates value. But you don't need web3 for that. You could've been a screenwriter, novelist, copywriter, etc. 100 years ago.

So how does web3 help you as a writer? I think I've found a way us writers can make it in the NFT world. Let's dive in.

A new way writers can win in web3

NFTs let Visual artists transform their entire business model. 18-year old FEWOCiOUS used to sell an occasional print until he discovered NFTs and sold $27M (6400+ETH) worth of NFTs and has his own Sothebys auction:

FEWOCiOUS

@fewocious

#FEWOCiOUSxSOTHEBYS auction is the genesis piece of the FewoWorld metaverse fashion & generative character drop later this year I’m so so excited for this you can bid next week at bit.ly/3F72e9z

3,086

3:50 PM • Oct 1, 2021

A few changes enabled this dramatic shift:

• Resale royalties let artists earn while they sleep.

• Digital ownership lets liquid, affluent art collectors anywhere buy and trade art without logistics considerations.

• Discord and Twitter allow direct relationships with collectors.

• Marketplaces and crypto wallets remove necessity for an agent.

Besides the ease of collaboration, none of that is true for writers. But it could. Here's how:

Could Fiction Writing become copywriting?

A big opportunity for NFTs is the "decentralized Disney" idea: The next Star Wars-level media franchise won't be corporate-owned, but community-owned.

Instead of a corporation owning the rights to all of Star Wars characters, the respective holders of Master Yoda, Luke Skywalker and Darth Vader could license the characters to a movie studio.

At the same time, Darth Vader's holder could license the character out to LEGO, Gucci and IKEA—without needing permission from the movie studio or anyone else.

The point is that any organization, individual or mix thereof can hold the IP rights to media franchise. That lets them license character out to anyone, collaborate with anyone, monetize them any way they want to—you get the point.

This probably won't happen with the actual, Hollywood-owned Star Wars franchise. But if NFT projects achieve that level of clout, decentralized Disney could become reality.

And the only way NFTs achieve Star Wars-level cultural significance is with captivating, compelling and convincing stories. Because stories are the thread that weave a random set of drawings together into a valuable whole.

We’re seeing early signs of this with Punks Comic, which expands Cryptopunk identities into comic form, but we’re very early here.

Sound like future talk? It's present talk:

Jenkins the Valet, the world's first decentralized celebrity?

Jenkins the Valet is signed by Hollywood talent agency CAA. What sounds like Larry The Cable Guy's little brother, is really a cartoon monkey popularized by a media company.

When Tally Labs purchased Bored Ape 1798, they called him "Jenkins the Valet" and started selling NFTs, which gave varying levels of access to a mysterious writer's room.

Those NFTs let you contribute to a crowd-written book which tells Jenkins' story. If you hold a "Writer's Room" NFT, you co-write the story.

Some tiers let you license your BAYC/MAYC for the book and earn a commission from every sale. Others let you vote on plot twists. You can see details here.

Now, you don't need a Hollywood talent agency to sell some NFTs and let holders pitch ideas. But you probably need an agency to get 10x NYT bestselling author Neil Strauss to write that book.

Jenkins The Valet 🍌

@jenkinsthevalet

When we launched the Writer’s Room, we pledged to find a NYT Bestselling Author. Well, we found a 10X NYT Bestseller.

We’re pleased to announce Neil Strauss is writing my debut novel, in collaboration with the Writer’s Room.

Join us + Neil at 11am EST for a Town Hall in Discord

528

9:45 AM • Nov 9, 2021

So an affluent blue-chip NFT community, a Hollywood talent agency, and a bestselling author convene to write a story together. The setup couldn't be much better.

If the book becomes a success, the next steps are obvious—movies, TV shows, etc. These prospects skyrocket Bored Ape 1798's value.

If you offered the floor price of an ape with similar features for Bored Ape 1798, Tally Labs would ignore you. The promise of a successful story attached to this NFT skyrocketed its value.

The idea isn't unique. NFT roadmaps are littered with (often hollow) promises of screenplays, novels, movies, video games, cartoons etc. The Bored Apes community has been incredible at this:

Bored Ape Yacht Club 🍌

@BoredApeYC

Incredible to see BAYC members taking full advantage of commercial rights to their apes.

Some highlights from today:

1,397

3:47 PM • Oct 29, 2021

But Tally Labs are first to do it without the project's creators—and to show real promise to succeed in mainstream media.

Neil Strauss is the linchpin here. Without a writer, the project falls apart. But the project doesn't have a starting point for the characters with the Bored Ape Yacht Club visuals.

In successful media franchises, words and visuals depend on each other. Static images need the writing to become a story. But words are too ambiguous to create a recognizable vision.

We wouldn't have 5 Harry Potter theme park areas in the world if the movies hadn't created a canonical visual representation of the books' stories.

So you either need a great story to visualize or a great visual to base a story on. Most NFT projects need the latter, which is a giant opportunity for writers.

In their current stage, NFTs don't have built-in stories. As Mario Gabriele pointed out here, most projects give no starting point beyond the visual.

As Mario pointed out:

Each NFT has become a kind of protagonist to its owner, but a protagonist with no defined personality, no depth. They source material is flat, which may give them broad appeal, but presents a problem for storytellers.

Even the simplest of questions are made difficult. Is CryptoPunk #7560 good or evil? Are they smart or dumb? Are they introverted or extroverted? Are they kind or cruel?

Someone will have to fill in this narrative vacuum. Will NFT makers take this on themselves? While that might preserve the project’s spirit, the skillset needed to create a compelling pfp differs considerably from constructing traditional narratives.

Writers will have to fill those gaps in narrative. And project creators/NFT holders will pay those writers or give them a cut of earnings from the story—in other words, turn their writing into an asset that keeps earning while they sleep.

If you're a writer in web3, this should inspire you as it inspired me. Now, I haven't written 10 NYT bestsellers. And you probably haven't, either (if you have, hey Neil👋🏻).

So that begs a question:

How would you get those gigs?

Expansion beyond static images currently happens through conventional channels. Jenkins the Valet signed with CAA, Larva Labs with U2's manager.

To make a Cryptopunks or Bored Ape Yacht Club movie, they'll probably find a proven screenwriter, not a volunteer in Discord. It seems antithetical to web3, but hiring a writer for a full book, screenplay or other long-form story is risky.

Establish the narrative of your fictional world is a bigger commitment than finding a freelance writer for a blog article:

A book might take years from outline to print. If the result sucks, you've burned money, lost everyone's trust and paid opportunity cost. So it doesn't matter how much you love decentralization, there's no incentive to hire a pseudonymous cartoon animal person over a proven writer. The risk is too big.

So writers in web3 face the classic college grad dilemma:

You need experience to get the gig. But to get experience, you need the gig.

The solution: Proof of work.

One of web3's advantages is permissionlessness. Nobody is stopping you from telling a story about an NFT you hold—and proving to everyone that you're great at telling stories and thus creating value with your writing.

If a story you tell gets attention, you can branch out into additional media, sell your own NFTs or collaborate with others storytellers.

This might sound crazy, but it's what Tally Labs is building with Jenkins the Valet. BAYC's cultural clout, their affluent community and Hollywood connections let them execute at light speed.

The team will expand Jenkins to TV, podcasts and movies. They're not only expanding to different media: the FAQ reveals they're talking to NFT projects beyond BAYC.

If Jenkins is successful, other companies, DAOs and individuals will replicate the model or iterate on it.

Why shouldn't you be one of them? You can start writing today, publish and build a following. You'll need more stamina and compete harder for attention.

But if you're a great storyteller, build a community and start doing the same thing, you could turn your NFT into a celebrity—and capture all the value it generates.

If you've read up to this point, you're probably excited about the idea of telling your pfp's story. And you might be wondering how to put this into practice.

3 Steps to making your NFT famous

I'm not aware of anyone actively telling stories like that. That makes it hard to recommend a step-by-step roadmap to NFT storytelling success. But here's 3 ideas based on timeless marketing principles:

1. Start with your community

“The key to failure is trying to please everyone.” -Seth Godin

Unless you have a large audience already, you probably shouldn't try to appeal to all of NFT/Crypto Twitter. Great businesses start with hyper-specific target audiences.

For NFTs, I'd start with the community of your project. That's powerful for two main reasons:

1. You get the community's vibe and can create something that resonates with them.

2. Holders have an incentive: If your storytelling makes the project itself more popular (and the NFTs more valuable), everybody benefits. That's why community members are most likely to promote and share your stuff.

That doesn't mean you hide your stories in Discord channels. It means you create for the community in public. That way, others can tag along, but you always have a core audience that loves your stuff.

2. You can do anything, but not everything

Similar to focusing on one audience at first, you should probably choose a medium as well.

Trying to draw, write, paint and animate at the same time is distracting.

And people they wouldn't know how to tell others about your project because it's so far-reaching.

3. Don't to it all yourself

The Jenkins the Valet novel may have been successful if they wrote a Bored Ape book and promoted it to the NFT community.

But they almost ensured success by involving the community and getting thousands of people to buy in. To tell your NFT's story successfully, involve your community (whether paid or for free). If someone contributed a plot twist to the story, they'll come back to see how it plays out.

Wrapping up: Web3 Writers are GMI

So there you have it: Writers can make it in web3 by telling stories for companies, protocols, DAOs or individual NFTs. As NFTs grow in value and influence, they'll expand to other media, which will require writers like us.

But we don't have to wait for clients. We can start telling our own NFT's stories permissionlessly by starting with the communities we're already in.

And now, let's make something happen! W3Wagmi.

If you found this article helpful, follow me on Twitter (below) and retweet the tweet about the article to let more web3 writers know how they can win.

iwritecopy.eth

@practicalprncpl

NFT artists make millions—writers get newsletter subscribers.

Web3 changed the game for artists, but left writers behind in the transformation.

That's why I wrote an article on why writing is valuable and how writers are gmi in crypto!

mirror.xyz/0xD785f783e24f…

12

8:03 AM • Nov 27, 2021

P.P.S.: I love writing these articles for free, especially because they’re about messages I think more people need to hear. And if you really liked this article, feel free to send me a small tip to: 0xD785f783e24f71F7FA49dc2933C17bb20954548d

But non-fungible tokens aren't image ownership technology. The point isn't even to "own" a file.

NFTs are digital ownership certificates with property rights enforced by a blockchain. These tokens point to something—which can be a JPEG. But pictures are just the first thing we certified ownership of. You could attach an NFT to any file type—or no file at all.

That might give right-click-savers a headache. They called NFTs with JPEGs worthless. Wait until they hear about NFTs without image files.

But they bring up a valid question:

What do NFTs do?

NFTs are pointers to digital assets of any type. Whatever they point to shows up in your wallet. We don’t know most of the use cases of these yet. Digital art ownership is only the first part.

6529

@punk6529

1/ What is an NFT?

Wait, what? Isn't this easy?

I am not so sure.

Let's take a look!

9,596

8:01 AM • Oct 23, 2021

That’s because non-fungibles are a new paradigm and will spawn a cambrian explosion of business models. But one thing NFTs enable is community-driven, -owned and -run organizations.

The direction of web3 businesses won’t be decided only by its employees.

Because what NFTs uniquely accomplish is turning customers into participants. They take you from the bleachers and invite you onto the playing field.

That might sound confusing. So let's use a non-crypto example to illustrate the point. You can plot financial investments on a line: The higher the potential rewards, the more you have to be involved, the more risk you take.

Conventional financial wisdom advises to buy into an index fund every month and let it compound at 8-10% per year. This is solid advice. As long as you don't panic-sell, you'll be fine.

But index funds are a spectator sport: Anyone can buy them. You cheer when it goes up and cry when it goes down. But you have zero influence. You're watching from the bleachers.

The opposite in traditional finance is venture capital:

Like professional sports, it's hard to become a VC and even harder to be a good one. As an angel investor, you directly influence portfolio companies (and therefore the outcomes of your investments). You're still watching, but you're the coach, standing on the same grass as the players.

In sports, the athletes on the field are most involved, the TV audience on the couch the least. But what if you could get up from the couch, go to the stadium, buy a jersey and start playing with your favorite team?

That’s what NFTs do. It's like a founder selling you a jersey and inviting you to play for their team.

By owning tokens, you're part of the team. You participate in the upside (when your token appreciates) and the downside (if it tanks). That dynamic exists in VC too. But NFTs are not investment vehicles, you don’t own part of the company and the creator doesn’t ask you for advice. So what are you as an NFT holder? That’s what we’ll explore in this article.

So let's assume you watched people get rich from NFTs, purchase a token, put on that jersey and you're now a player.

How do you play?

Sales, marketing, business development and others are important tasks in any organization. Community members in NFT projects take those on when they:

• Create derivative art

• Share the project on social media

• Tell others about the project

• Are active in the community

• Make memes

• etc.

That's why NFT projects don't run ads. You didn't hear about CryptoPunks from Larva Labs. Or about BAYC from Yuga Labs.

Ownership and tradability turn community members into sales reps and marketers.

Some impressive communities even develop software together. You don't sell, design and develop when you're a customer. That's what you do when you're on the team.

As a founder, that sounds amazing:

You make NFTs, people buy and the community does all the work, right? No. You have to build that community first. And that's hard.

Here's why:

Wen Marketing?

Ownership and tradability incentivize community contribution that grows the overall project. But contributing to a community is work.

And some people don't like extra work. They want to flip an NFT for multiple times their money ASAP.

If you want to find them, cmd+f in Discord for these two words: Wen marketing?

That question is really asking when others will do the work so they can make money.

They have the index fund mindset, but want VC returns.

There are BAYC minters who never shared the project. And yet they profited from the same explosion in value as BAYC's best evangelists.

It's the free rider problem:

"A free rider is a person who benefits from something without expending effort or paying for it."

(source: corporatefinanceinstitute.com)

The worst free riders contribute nothing. They don't create. Their only Discord activity is complaining about the floor price. They don't care about the community or the art.

And the worst part: You can't fix this completely and permanently.

Some free riders are inevitable. But when they take over, projects crumble.

That's because participants want to get the most out of their work. And NFT communities can help with that. Creating for a community means you don't have to build from scratch:

• If you're an artist, you've got an early audience and a format to start with.

• If you're a developer, you can build on top of the contract.

• If you're there for the vibes, you don't have to find thousands of cool people—they're already there.

Now, nobody is 100% altruistic. By contributing to the community, you want something in return.

Maybe that's token value, status in the community, attracting freelance clients, networking with smart people, whatever.

You want your contributions to benefit you and the community.

But contributing to a free rider communty is like multiplying by zero. No meme you make, bot you code or art you draw benefits anyone if nobody else cares.

So when you see a community of free riders, you contribute elsewhere. But the opposite is also true:

If the community around you is building together, that motivates you to contribute and create more value for everyone.

It's the same in sports: It doesn't matter how many people you can hand a jersey if none of them leave the bleachers and walk onto the field.

With NFTs, you get to play. But you also have to play. Because if nobody contributes, the project dies and your (and everyone else's) NFT is worthless.

This is why crypto people talk about aligning incentives: Both creators and token holders want to keep the project from collapsing and watch it flourish instead.

But that leaves us with a paradox: If creators and token holders have the same incentives, why do so few projects have engaged communities?

If I had a universal answer to that, I'd probably win a nobel prize in economics.

So instead of doing that, I'll share practical principles (hehe) for fostering an active community that creates long term value.

How to build a community that creates, builds and ships together

Stop the giveaways!

There's an arms race of giveaways in the NFT world: It started with .1 ETH giveaways, now you can win brand-new Teslas for minting a cartoon profile picture.

And if your only goal is to sell out a few thousand Fiverr illustrations, having the biggest giveaway attracts the necessary attention. But whose attention?

Does that attract short-term profit seekers (free riders) or long-term thinking builders?

Jim Collins has the concept of "First Who, Then What?" (bolding mine):

Those who build great organizations make sure they have the right people on the bus and the right people in the key seats before they figure out where to drive the bus. They always think first about who and then about what. When facing chaos and uncertainty, and you cannot possibly predict what's coming around the corner, your best "strategy" is to have a busload of people who can adapt to and perform brilliantly no matter what comes next. Great vision without great people is irrelevant.

(source: jimcollins.com/concepts/first-who-then-what.html)

The same is true for NFT communities. You can have amazing art, a great vision and talented team members; if your roadmaps attracts "wen marketing?" free riders, you'll struggle to keep your project relevant and valuable.

Excessive giveaways incentivize free rider behavior: They only require sitting on your butt and waiting for rewards.

To attract participants, artists and builders, let your roadmap reflect that you care about those people. Give them something they want.

Let’s take an example: I’m involved in the Pixelbeasts Discord. While most Discords are full of memes, shilling and complaining, this community is building an investment DAO, a podcast, a newsletter, a video game and I’m probably forgetting half of it.

Why? Look at the roadmap for Pixelbeasts:

Show potential token owners what you want builders and creators to ship things with. The way to do that is by building infrastructure.

Build infrastructure, not sculptures

Most projects build from the top down. They announce an NFT-based video game, comic book, cartoon, etc. and leave the community waiting until it's done.

Maybe the community occasionally votes on something, but that’s it. But you can do all of that by fundraising on Kickstarter.

The NFT communities I'm bullish on do the opposite: They enable the community to create.

In the Pixelbeasts Discord server, community members are building a video game. I haven't seen community-driven game development in any other project.

Why does it work in Pixelbeasts?

The creator Yohei has baked gaming mechanics into the Beasts' metadata (The traits highlighted below don't influence visual appearance). Making a game is easier that way, because some infrastructure is already there.

Infrastructure doesn’t have to be on-chain or even technical. Pixelbeasts members are also writing a rich backstory for Beastopia, the world the beasts inhabit. That backstory will make it easier to tell the story of each PFP because you can build on top of an existing narrative instead of building everything from scratch.

Another example of infrastructure is the Punkscapes Scape Builder:

Scapes

@scapes_xyz

Playing around with the upcoming scape builder tool

68

7:52 PM • Oct 27, 2021

This lets everyone add their pixel PFPs onto a given scape. This makes it easy for the community to make memes, tell stories or put your PFP on a fun backdrop.

It incentivizes sharing the scapes—and that will get more people interested in buying a scape themselves and joining the community.

If you want an active community, make it easy for participants to build.

Create incentives

Writing, coding, designing and other things costs time. For skilled people, time is money. Why make derivative NFT art when you could take on a freelance design client?

To attract people who contribute good work, you have to incentivize them.

An example I love is the Punkscapes Art-a-thon: Artists compete for a prize fund by making derivative art of the Punkscapes.

I even submitted my own piece:

iwritecopy.eth

@practicalprncpl

Punkscape #6271
[ABSTRACT]
#punkscape

13

7:09 AM • Oct 16, 2021

This attracted new artists into the community and even spawned derivative Opensea collections.

It grew the Scapes community, attracted artists and spread the word. All community-led growth, incentivized by the team. That’s what brings in the right people.

Bottom-up, community-driven building is the future of most successful NFT projects. But bottom-up initiatives can have unexpected results. What do you do about that?

Let go of control

NFT projects aren't regular businesses: If you have an active community, it builds and profits without permission. And that could include things you haven't thought about.

The artist and main dev from Punkscapes never thought about organic diptychs and triptychs, which are highly desired in the community:

Scapes

@scapes_xyz

One thing we have not talked about enough:

The "Diptych Triptych Quadtych"-Meta the community has built is absulte

147

12:06 PM • Oct 20, 2021

He loves it. But not all creators love when their project unfolds a different way than they envisioned it.

If you want to tightly control every output with a 3-year plan, better launch a "regular" startup. On the blockchain, culture and software are composable. And people will compose with your creations.

Wrapping up: Bottom-Up vs. Top-Down

Owning an NFT turns somebody from a buyer into a participant. That has advantages: Everybody participates in the upside, incentives are aligned.

But it also challenges NFT creators: Building a community that self-organizes, builds and ships without your instruction is hard.

A bottom-up environment enables community-driven initiatives. The more you enable and incentivize bottom-up creation, the more your project is gmi.

P.S.: If you enjoyed this article, please retweet the tweet below (or send it to someone who’ll love it) to tell more people about it:

iwritecopy.eth

@practicalprncpl

Why do most NFT communities suck while others create, build and ship together?

It's hard to build a good community, but it's the key to success for many web3 projects.

My new article shows you how to build one:

mirror.xyz/0xD785f783e24f…

2

5:06 AM • Oct 31, 2021

P.P.S.: If you'd like to leave a small tip, my wallet address is 0xD785f783e24f71F7FA49dc2933C17bb20954548d