There's a few reasons why:

• Massive UGC networks (YouTube, TikTok, IG) have the best content and recommendation algorithms

• Messaging apps (iMessage, WhatsApp, Discord) are good enough

• Long-term retention is really hard when you're competing against the entire internet for consumer attention

Some of the most successful consumer apps of the past 24 months (in terms of social impact and value capture for the core team) have internalized the market reality and taken a different approach.

They're building "ephemeral apps".

Ephemeral apps have a few properties:

• Lean team (~3 people)

• Monetize from day one (usually through subscriptions and microtransactions)

• Have a strong viral loop

• Only meant to last 6 to 12 months

• Feel like a casual free-to-play mobile game

A couple examples of ephemeral apps are Gas and NGL. In web3, examples include Stealcam (created by @tryfriendtech) and Dookey Dash (by Yuga Labs)

Contrast this w/ the previous era of consumer social products which were all about "persistent apps". They raised a ton of money, hired a bunch of people, and doubled down on one core product experience. This approach can still work, but it's more difficult than ever.

Another opportunity is a product studio that specializes in building ephemeral apps for a specific niche.

Potential playbook:

• Build a community through niche-specific content and a group chat

• Launch ephemeral apps that solve problems for the community and generate revenue

• Create a membership model that provides access to apps, content, and experiences across the ecosystem (through subscriptions, NFTs, fungible tokens, loyalty points, etc.)

• Build a strong developer ecosystem that's incentivized to launch apps and plugins for the community

I'm currently in the early stages of building out this model with a team of designers, engineers, and marketers so if you have any thoughts or want to collaborate, feel free to reach out 👀

In the world of consumer products, it's important to think in terms of a consumer’s time. How much free time do they have? What do they do during that time? No matter what you’re building, your potential customers are probably on TikTok, Twitter, YouTube, Netflix, etc. Those are your real competitors.

The so-called "attention war" isn't about having more features than other products in your market. It’s about competing with the entire internet for consumers' time and attention.

Nowadays, one way to fight the attention war is to start with a distribution strategy, and then build a product. Justin Kan famously said: “First time founders are obsessed with product. Second time founders are obsessed with distribution.”

What do we mean by distribution? Develop an audience. Create interactive experiences for deeper engagement. Build viral loops to help the brand grow.

Teams that start with this approach are “distribution-first products”. There’s three core pillars to distribution-first products: content, community engagement, and virality.

Content

Content marketing has long been a popular distribution channel. Traditionally, it focused on blog posts to improve SEO and rank higher in Google search results for relevant keywords. However, modern content marketing looks a bit different. Today, social networks like TikTok and Twitter are the go-to platforms for initial distribution.

Building an audience on social networks is easier said than done, but a few successful teams have figured it out. They typically:

• Focus on a niche. Becoming an authority in a specific area makes it easier to attract a loyal following and establish credibility. Examples of web3 niches include NFT trading, gaming, and DeFi.

• Share a mix of entertaining and educational content. This approach keeps audiences engaged, informed, and entertained, increasing the likelihood of content being shared and reaching new users. Frank DeGods and 9gagceo are two of my favorite founders to follow on Twitter because they understand crypto culture (i.e., memes and shitposts) but also share insightful content on what it’s like building a top NFT project.

• Be consistent. Feed algorithms tend to prioritize creators that consistently share content. On TikTok and Twitter that means posting multiple times a day. Of course, that’s not super practical for most busy people. But if you’re looking to get prioritized in the feed, you should at least be publishing high quality content multiple times a week. You never know what content is going to pop off so the best strategy is to keep publishing.

Community Engagement

In the age of social media, engaging with consumers is essential for building strong relationships and fostering brand loyalty. In the world of web3, there are several ways to drive community engagement:

• Twitter Spaces. Hosting discussions on Twitter Spaces can broaden reach and increase awareness of the brand. I’ve seen some teams host a weekly show with guests, while other teams are more casual and host Spaces late at night or just for big announcements.

• Discord voice chats. This is a more intimate setting for in-depth discussions, granular project updates, and alpha. Discord is ideal for nurturing a strong community that genuinely cares about the project. Chat channels can get extremely messy but curated voice calls are a great way to build deeper relationships within the community.

• IRL events. In-person events can create deep connections between community members and forge lasting, emotional memories. However, they don’t scale given they’re limited by physical proximity and can be expensive to run on a consistent basis.

Virality

Web3 projects are known for going viral (everyone likes free money). But the tactics (whitelist giveaways, drop your ENS, ponzi airdrops, etc.) usually attract low-value community members like airdrop farmers and bots. Here are few other options for helping your project develop sustainable viral loops:

• Drops. Successful drops in the past have included free NFT mints, web-based mini games, collabs, meme contests, and Discord activations, to name just a few. These drops are usually time-limited events where community members can participate for the chance to earn exclusive rewards. To go deeper into specific tactics and strategies, study how game developers approach live ops.

• Influencer marketing. Instead of resorting to low-effort influencer marketing by paying people to shill your project for a few seconds, find influencers who genuinely believe in the project and will share it organically. Have them on a Twitter Space, collab on an NFT drop together, allowlist their biggest supporters for your project. Learn from influencer collectives like Barstool Sports, FazeClan, and 100Thieves to understand how to drive deep collaboration between influencers and products.

• Study viral mechanics from other industries. Studying massive content creators like Mr. Beast, streetwear brands like Supreme, and meme accounts on Twitter can help spark your creativity and inspire ideas for your next viral campaign.

Closing Thoughts

When building a consumer product, consider these key questions:

• Where does our target market hang out online?

• What's our content strategy for reaching potential customers?

• How will we engage the community?

• What viral loops will drive growth?

By adopting a distribution-first mindset and addressing these questions, builders can better position their products to win the attention war and succeed in a world that often doesn’t give a shit.

I’m building a new type of NFT project + web3 brand with a few awesome viral marketers, designers, and engineers, and will be launching this summer. We have open roles across design and engineering so feel free to DM me on Twitter if you’re interested :)

Take Slack as an example. Its journey from a gaming company to a multi-billion dollar messaging platform is often cited as an example of a great team pivoting from a tough market to one they could capitalize on. However, this is mostly selection bias and overlooks the thousands of teams that never managed to pivot successfully. The truth is, startups are really really hard, but founders can increase their odds of success by betting on a great market from the start.

Here are a few reasons why market selection is so important:

1. If you have a great market but a mediocre team or product, you still have a chance to succeed. Twitters’ infamous fail whale era is an example of a broken product gaining insane traction. In 2013, Mark Zuckerberg famously said: “Twitter is such a mess - it’s as if they drove a clown car into a gold mine and fell in.” However, even the best team and product will struggle in a weak market. And of course, the ideal scenario is to be firing on all cylinders with a great team, product, and market. That’s where magic happens.

2. When you commit to a market, you're basically investing 6 to 12 months of runway into it. First, it takes a few months to ship a v1. Then, you usually take another few months to see whether you can get enough customers. By now, most teams are reluctant to pivot to a different market or customer because they don’t want to waste months of work and knowledge.

3. The team you hire is usually based on the market you’re focused on. This makes it harder to pivot to a new market that may require different skill sets or expertise.

Despite these challenges, the best teams are able to adapt their products or pivot to new markets when necessary. While the "move fast and break things" mantra encourages shipping quickly and often, early teams should be extremely thoughtful about the market they're entering. The consequences of this decision will reverberate through every aspect of the startup.

Unfortunately, there’s no magic formula for selecting a great market. Many of the best startups create their own markets by discovering secrets hidden in plain sight. To identify a promising market, founders usually either possess deep domain expertise or approach a space with fresh perspective.

Ultimately, choosing the right market significantly impacts your startup's trajectory, so it's worth giving this decision the time and attention it deserves instead of rushing into a v1 too early.

It’s easy for people to dismiss products that don’t solve a rational problem. That’s why many social apps and NFT projects are dismissed as mere toys.

But the reality is that most people are very bored and very lonely. This is one of the most important problems of our generation. For many of the most popular products in our lives, entertainment is the killer feature.

Take a moment to consider the role of entertainment in our lives. Music, video games, TikTok, and Netflix all provide us with essential escapes from the monotony of daily life. As someone who's lived in San Francisco for a few years, I've seen countless people pour their lives into consumer apps focused on summarizing books, habit tracking, and note-taking. But the harsh reality is that the average person doesn't give a single shit about these things. After a long and stressful day at work, most people just want to be entertained.

Entertainment is a killer feature.

It's evident in the success of platforms like TikTok and YouTube, as well as through the popularity of meme accounts, video games, the GameStop phenomenon fueled by r/wallstreetbets, and the rise of $DOGE and Elon's entertaining Twitter persona. More often than not, shitposts get 10x more likes and engagement than a meticulously researched thread.

People crave entertainment as a reprieve from their mundane, often lonely lives. This presents a massive opportunity to build new types of entertainment experiences.

When discussing the benefits of NFTs, most people focus on the technology. Things like ownership, programmability, composability, etc. But these are all just technical features of the NFT / ERC721 standard. What I find much more compelling is the culture that has emerged around NFTs.

NFT culture is all about entertainment.

Because of this, I believe the real power of NFTs is that they’ve enabled a new way to start and scale an internet-native brand through entertainment.

The NFT brand playbook includes:

• Growing virally through memes, shitposts, and authentic engagement on Twitter

• Establishing a core group of passionate fans that are incentivized to help the community grow

• Building deep relationships with community members through synchronous experiences like Discord chat, Twitter Spaces, townhalls, IRL events, and more

• Providing massive amounts of value for your community before asking for anything in return

• Allowing community members to express themselves and gain status through PFPs

• Creating fun game-like experiences that foster emotional memories and friendships

The key to success in today's consumer market is to build a brand centered around entertainment. DeGods, Memeland, and DigiDaigaku are some of my favorite NFT-native brands that have applied this entertainment-first playbook over the past year.

Over the next few years, I believe we’ll see many more NFT-native brands. Not because of any technical features, but because NFT culture is all about entertainment and that’s the best way to build a passionate community of superfans.

Entertainment is a killer feature – and it's time to embrace it.

I’m building a new type of NFT project + web3 brand with a few awesome viral marketers, designers, engineers, and game designers, and will be launching this summer. We have open roles across design and engineering so feel free to DM me on Twitter if you’re interested :)

Many people, myself included, believe games are the most likely catalyst. But what exactly is a “game”? To many people, games are developed using an engine like Unity or Unreal and accessed via a console, PC, or mobile phone.

However, the proliferation of mobile phones and new tech has started blurring the line between games and consumer apps.

Web3 gives us new tools to turn consumer apps into economic games. For example:

• The $BLUR airdrop, loyalty score system, and tiered mystery boxes clearly introduced game design elements to NFT marketplaces.

• The Serum airdrop for Bored Ape holders was used to craft Mutant Apes with random rarity. Yuga also has a fungible token, $APE coin, which can be staked to earn yield and used as in-game currency for mini games like Dookey Dash.

• Sound.xyz has leaderboards to show top songs, artists, and collectors based on ETH volume.

However, applying game design principles to your consumer app is much more nuanced than just adding XP, badges, currencies, exclusive rewards, and leaderboards. Game design is really about system design. It’s about understanding a combination of consumer psychology, marketing, product design, economy design, monetization, technology, and more to develop a system with a sustainable business model and compelling consumer experience.

Over the past few months I’ve been building a web3 consumer brand and have been obsessively following some of the top web3 game designers to understand how they’re thinking about the space. Their views have heavily influenced how I’m approaching things so I figured I’d share here.

Here are the four major trends I believe will influence the next-generation of web3 games and consumer products:

1. NFTs are a next-generation pre-registration tool

2. Founding influencers are a core marketing channel

3. NFT “Factories” are the next evolution in web3 economy design

4. NFTs are a better way to monetize whales

Trend #1: NFTs are a next-generation pre-registration tool

In November 2022, Goddess of Victory: Nikke had one of the most successful launches in mobile gaming history. In just its first month, it reached $100M in revenue. That’s pretty insane.

Their core onboarding strategy was a pre-registration system where players could earn rewards based on how many people created an account and signed up for email updates before the game launched.

In a world of ATT and rising customer acquisition costs, pre-registration systems are a key lever for bootstrapping initial demand for a game, product, or brand. Nikke offered a combination of in-game currency and exclusive characters as rewards for reaching certain registration milestones.

The next obvious step is giving people valuable NFTs for pre-registering. We’re starting to see some early models through products like PreMint, FreeNFT, and Mirror. The key will be designing a system where all registrants get a reward, and a lucky few (based on how many others they refer and how engaged they are within the community) receive an airdrop of extremely rare NFTs that are valuable in-game assets and instantly tradeable for thousands of dollars.

I’ve heard stories from veteran game designers saying that back in 2009 they used to run banner ads on websites and offer raffle spots for an iPod giveaway to people that downloaded their apps. Pre-registrations with NFT giveaways are the exact same thing except now you can either use the NFT in the game or sell it for thousands of dollars. Pretty funny how we’re actually just applying old patterns but with upgraded tech.

Trend #2: Founding influencers are a core marketing channel

Another way web3 game studios are innovating on customer acquisition is through influencer marketing. In the past, influencer marketing was about paying a Twitch streamer or YouTuber to shill your game. This kinda worked but not really. Consumers are less likely to try products that are obviously paid promotions versus something an influencer supports organically.

Meanwhile, top web3 games and consumer brands are taking a different approach. They have a founding influencer that understands crypto culture and memes, knows how to shitpost, engages on Twitter Spaces, and can consistently entertain an audience of degenerate Twitter followers.

Frank DeGods is probably the best example, followed by Gabe, Igor, 9gag, wab, Sash, Luca, and Dayton. They all have their own unique style but they’ve all grown to over 100k followers through a combination of memes and actively engaging with their audience. Many of them also used whitelist giveaways (trend #1) to accelerate their growth over the past couple months.

Trend #3: NFT “Factories” are the next evolution in web3 economy design

The first era of web3 economy design was about token-first models. Examples include games like Axie and Illuvium. In these ecosystems, the core asset for value capture is a fungible token.

The second era of web3 economy design was about NFT-first models with a token. Examples include games and brands like Wolf Game, EtherOrcs, and Yuga Labs / BAYC.

Today, many top game designers are moving away from fungible tokens entirely, because they’ve realized it’s really damn hard to balance a virtual economy with a freely tradable token. Let alone all of the regulatory risk that comes with launching a token.

Instead, top game designers are starting to use what they call an “NFT Factory” model. With this approach, they launch a FREE Genesis NFT collection with a relatively low supply (500 to 2k), and these NFTs become the most powerful assets in the ecosystem. Over time, the game developers airdrop other less powerful and higher supply NFT collections to the Genesis holders. This turns the Genesis collection into a “factory” that mints other NFTs in the ecosystem.

Genesis holders can then choose to hold or sell their airdropped NFTs. Selling gives them some liquidity without fully exiting the ecosystem, while also onboarding new members at lower price points.

The tricky part with the NFT Factory model is determining the rate at which you airdrop new collections. DigiDaigaku probably airdropped too many collections which flooded the market and caused prices to fall over 50% the past few months.

As a general rule of thumb, game designers are saying that launching about 5 collections over 12 months is a good pace. There’s still a lot to figure out with the NFT Factory model but it seems like a promising innovation within web3 economy design.

Trend #4: NFTs are a better way to monetize whales

The common narrative for web3 gaming is that we need to create a fun game, add some NFTs and tokens to the economy, and then we’ll onboard the masses. But most top game designers have a different view. Instead of trying to get grandmothers in Ohio to buy ETH and download a wallet, their goal is to onboard just the ~10% of players that spend a meaningful amount of money on games.

Most game designers are planning to release two versions of their game. One version that’s web2 friendly on mobile, PC, or web. And another version that’s crypto-native and web-only. Most people will just play the web2 friendly version and not even know about the crypto-native version. However, both ecosystems will be interoperable so whales and crypto-natives can collect rare NFTs and trade them while still being part of a lively web2 friendly ecosystem.

In traditional free-to-play games, players that spend over $1,000 per year on a game are deemed whales. At the high end, there’s people that spend $10k, $50k, or even $1M.

Performance marketers in the gaming industry pay billions of dollars every year to get these whales to download their game and spend a lot of money in it. Performance marketing is not about spending $3 to acquire a user that spends $4. It’s about spending $300 across 100 users with the hope that a few of them spend $1,000. These marketers are fishing for whales, not minnows.

The crazy thing is that crypto already has tens of thousands of people willing to spend $1,000 (or just ~0.6 ETH!) on a game. Web3 game devs and web3 consumer product builders should be focused on monetizing this segment and onboarding others like them, while interoperating with a web2 friendly ecosystem.

Closing thoughts

There’s a lot to learn from previous generations of web3 games and consumer products. Studying the latest trends has helped me think through where the future could be going and hopefully it’s helpful to you as well.

I’m building a new type of NFT project + web3 brand with a few awesome viral marketers, designers, engineers, and game designers, and will be launching this summer. We have open roles across design and engineering so feel free to DM me on Twitter if you’re interested :)

But the biggest problem most infrastructure teams face is that there aren’t enough consumer teams building great apps on top.

Five years ago (!), Dani Grant and Nick Grossman of USV observed this phenomena in their post “The Myth of the Infrastructure Phase”:

“A common narrative in the web3 community is that we are in an infrastructure phase and the right thing to be working on right now is building out that infrastructure: better base chains, better interchain interoperability, better clients, wallets and browsers. The rationale is: first we need tools that make it easy to build and use apps that run on blockchains, and once we have those tools, then we can get started building those apps.

But when we talk to founders who are building infrastructure, we keep hearing that the biggest challenge for them is to get developers to build apps on top.”

The common view is that new computing platforms start with a discrete infrastructure phase, followed by an ecosystem of apps. However, the reality is that new computing platforms start with killer apps that inform the type of infrastructure that needs to be built. This then kicks off the “apps <> infrastructure cycle”.

I believe this framework explains the current tension between web3 consumer products and infrastructure. We need way more teams building at the consumer layer to help inform what infrastructure needs to be built and actually have people use it. Sure, better onboarding and cheaper transaction fees will enable new consumer products. But the existing infrastructure we have today should be enough to build compelling products and experiences.

For example, traditional consumer brands have shown it’s possible to build for millions of people through experiments like Reddit Collectibles and Nike .SWOOSH. Meanwhile, SoRare and Immortal Game have gained traction by taking existing products (fantasy sports and chess) and layering in web3 elements to offer a unique value prop (ownership of in-game assets).

But the reality is that over the last few years, the fastest growing web3 consumer products were primarily driven by speculation. This includes exchanges, NFT marketplaces, wallets, games, and NFT projects. However, this phase is over (due to rising interest rates and other macro forces). Speculation isn’t always a bad thing. In fact, it’s usually needed to help generate the interest and investment required to invest in new technologies.

But the future of web3 consumer will require building compelling products and experiences (radical idea, I know). Over time, most people won’t be aware that they’re interacting with blockchains or tokens. They may just refer to the web3 elements as digital collectibles, points, badges, membership cards, or any number of other more consumer-friendly terms.

For example, here are a few products and experiences I’m excited about over the next couple years:

• Games with millions of players collecting and trading in-game assets that are NFTs

• Web3 brands and creators building communities with millions of NFT holders

• Web3 IP proliferating culture through media and entertainment

• Community-owned record labels that produce the next generation of top artists

• Web2 brands building fun, novel, and game-like experiences powered by NFTs

• Physical items with NFC chips that can be scanned to unlock digital experiences

New infrastructure will definitely help make these experiences simpler, more scalable, and cost effective. But the future of web3 depends on great teams building the products and experiences that consumers will ultimately come to know and love.

I’m building a new type of NFT project + web3 brand with a few awesome people and will be launching this summer. We have open roles across design and engineering so feel free to DM me on Twitter if you’re interested :)

Ever since I was a teenager I’ve appreciated the power of the internet. I used to run a viral meme account on Facebook and learned to code primarily through online tutorials. These experiences taught me that the internet is an equalizing force for people with passion, determination, and creativity. Every product we love was created by a team of people that had a vision and executed on it relentlessly. I wanted to learn from the best and brightest so after graduation I moved to San Francisco and have spent the last four years building products alongside amazing people at Instacart, Dharma, and Mirror.

Patrick's New Thing - Patrick's Subscriber NFT | OpenSea

These NFTs are for early supporters of something new - @patrickxrivera

https://opensea.io

Most recently, I’ve become interested in the convergence of gaming, online communities, and social experiences. I’m in the early stages of a new project in this area and would love to have you follow along the journey.

By subscribing to me on Mirror, you’ll receive email updates about upcoming launches, new milestones, and general thoughts on building a new project in today’s environment. You’ll also receive a free NFT which could come with some exclusive perks in the future 👀

Thanks for following along and I’m excited to share more over the next few months!

Jordi Hays

@jordihays

Pedal to the metal

49

9:36 PM • Mar 17, 2022

brian flynn

@Flynnjamm

everyone at ETHDenver is either an investor or working on DAO tooling

no in between

389

6:48 PM • Feb 17, 2022

But there are definitely some challenges.

Jess 🌱

@thattallguy

We need more DAOs, not more DAO tools ...

675

2:00 PM • Mar 2, 2022

This post shares some thoughts on DAO tooling based on my experience as a member of multiple DAOs, building DAO tooling at Mirror, and working closely with DAO operators over the past year.

First, let’s look at some of the challenges.

“DAOs” aren’t a market

Saying you’re building DAO tooling is like saying you’re building tools for corporations. It doesn’t really mean anything. There are protocol DAOs, social DAOs, NFT collector DAOs, service DAOs, grant DAOs, and more.

So the first step in building DAO tooling is to clearly define the target audience.

DAOs needs vary

Most DAOs share the same core components:

• Funding mechanism to bootstrap a treasury and issue membership. Usually a crowdfund, NFT drop, or token sale.

• A multi-sig to store assets and authorize transactions. Usually a Gnosis Safe (if building on Ethereum).

• Group chat so members can communicate. Usually Discord or Telegram.

• Governance process to make strategic decisions like how to diversify the treasury, compensation plan, org structure, etc.

• DAO operations teams to handle contributor onboarding, payroll, treasury management, marketing / comms, etc.

But depending on the type of DAO you’re building for, they’ll most likely prioritize completely different feature sets which impacts the product roadmap. A few examples:

• Protocol DAOs. Prioritize security and transparency. For key activities like governance, protocol DAOs tend to prefer on-chain protocols instead of UIs that just write to a database. Protocol DAOs have treasuries worth tens of millions, and some in the hundreds of millions. Because these are decentralized organizations, redistributing these funds for investments, compensation, grants, etc. requires the security, transparency, and automation of smart contracts. Building for protocol DAOs requires a highly technical team that’s comfortable shipping production code in adversarial and risky environments.

• Social DAOs. Prioritize active communication between members. Love it or hate it, Discord is currently the tool of choice for social DAOs. However, many DAO tooling projects are trying to build “web3-native Discord” by starting with token gated chat functionality. I doubt a project can differentiate enough by starting with token gated chat features since Discord already does this pretty well and has strong network effects. Instead, I think projects should focus on building a useful single-player tool for DAO members (i.e., a feed of on-chain activity, NFT drop tooling, custom governance product, contributor directory, project updates via a feed and email, etc.), use the single-player tool to aggregate a critical mass of DAO members, and then layer in social features like messaging, social graphs, and notifications to build a network that could eventually rival Discord.

• NFT collector DAOs. Prioritize mechanisms for adding funds to their treasury, governance tooling for investment decisions and easily coordinating to allocate funds. Most NFT collector DAOs on Ethereum use Gnosis multi-sigs to secure their crypto assets. An area of opportunity is building a social app to ease coordination between collectors and also implement abstractions on top of Gnosis multi-sigs to automate how funds are distributed. For example, it’d be cool if community members voted on a governance proposal to sweep the Squiggles floor if it reaches 5 ETH and if the proposal passes, the tool queues up a transaction that’s automatically submitted if the criteria is met within a specified time period. The Gnosis SafeSnap module makes this easier to execute. As we’ve seen with financial flash mobs like Constitution DAO, Mirror crowdfunds, and PartyBid, there’s a fast growing market of people interested in collective ownership over blockchain-based assets, they just need tooling that meets their specific needs.

It’s challenging to build a generic DAO tool because different DAOs prioritize different features. So narrow the focus, become the dominant solution for a specific use case, then expand from there.

For some inspiration, here’s a great overview of the current DAO tooling landscape for specific use cases.

There’s no clear business models (yet)

If your DAO tool is a protocol (i.e., smart contracts deployed to a blockchain network), the obvious business model is an on-chain transaction fee. But most DAO tools are just UIs that write to a database. For the latter, there aren’t clear business models yet.

You could integrate Stripe and take a fiat transaction fee but many DAOs aren’t incorporated and don’t have a bank account which could limit your potential market size. The other downside of a fiat transaction fee is that you don’t generate on-chain revenue which will limit your ability to eventually deploy a protocol, launch a token, and give ownership to community members. This is a long-term risk that will be difficult to integrate if you don’t start with the right technical and cultural foundation.

Although there aren’t any best practices yet, there are a few potential ways that DAO tools could monetize such as a monthly fee in USDC, an NFT subscription, or a utility token.

I think the lack of clear business models for DAO tools is a near-term concern that will eventually be solved. Especially as more activity and computation moves to L2s and low-transaction fee blockchains which will enable new creative ways for projects to monetize on-chain.

Everyone is competing over the same handful of legitimate DAOs

Although many people can agree that DAOs have long-term potential, the reality today is…

There just aren’t that many legit DAOs out there yet. Most DAOs are just for the lolz and don’t care about becoming long-term projects. When a new DAO tool launches, you usually see the same three to five DAO logos presented as customers on the landing page. I also think this is mostly a near-term concern that will eventually be solved as it becomes easier to start, manage, and scale DAOs.

Regardless, if you’re building a DAO tool today, you should think deeply about your go-to-market strategy. This could include having a well-known DAO operator on the founding team, taking investment from high profile DAOs and DAO operators, building biz dev partnerships, issuing token incentives, etc.

Once you’ve acquired the initial set of target DAOs and built a product that keeps them highly engaged and retained, it probably makes sense to focus on features that make it easier to start the type of DAO you’re focused on so you can expand your market instead of just increasing revenue from a limited set of customers.

Although there are challenges with building DAO tooling, I still think there’s tons of opportunity if you’re thoughtful. Here’s some high-level guiding principles based on what I’ve seen work:

Start with services

When every DAO tool is competing over the same handful of DAOs, you need a distribution advantage. One of my favorite approaches is to start by providing services to different DAOs so you can develop expertise in a specific domain, build relationships with core teams, and eventually productize your service. A great example is Llama DAO.

They started off as a small team submitting governance proposals on treasury management for top DAOs like Uniswap, AAVE, Gitcoin, and FWB. Pretty soon, they became the go-to experts in treasury management. They also built a community of high-quality contributors, grew deep relationships with all the top protocol DAOs, and are now productizing their services through their own protocol. In the services phase, engage in DAO governance forums, contribute to working groups, apply for grants, execute bounties, submit pull requests, build Dune dashboards, publish proposals. Do whatever it takes to start developing relationships and expertise to inform how you productize your services.

And pls don’t be this type of DAO tooling founder.

Irene Zhao

@Irenezhao_

Never ask:
A woman her age
A man his salary
A DAO tooling founder which DAOs they have been involved in

904

6:21 AM • Mar 10, 2022

Dominate a niche

As seen earlier, DAOs needs vary. Depending on the type of DAO you’re targeting, they’ll have different requirements across protocol, interface, feature set, marketing, biz dev, and more. Instead of building a mediocre product for a wide initial market, build the default product for a very specific domain. To do so, think about your positioning vertically and horizontally.

Vertical focus would be a specific type of DAO (e.g., protocol DAO, social DAO, NFT collector DAO, etc.). Horizontal focus would be a specific tool for different types of DAOs (e.g., governance, treasury management, payroll, contributor onboarding, etc.)

To start, I’d build something at the intersection of one vertical focus and one horizontal focus (i.e., governance for protocol DAOs or contributor onboarding for social DAOs). Consider this your strategic starting point. Your first milestone is to become the default product in this market. If your DAO tool is a networked product (e.g., social app, marketplace, collaboration tool), focus on liquidity over scale early on.

In this context, liquidity refers to the quality of experience a user has when engaging with the product. In networked products, liquidity usually depends on the number of other relevant users engaging with the product. For example, if you’re building a DAO social app, the quality of experience is determined by whether people engage with the content you post and whether there is enough interesting content to engage with. Collaboration tools are similar.

A recent example is how Clubhouse started off with just one audio room where everyone was a designated speaker and consisted primarily of Silicon Valley founders, operators, and investors. Every time someone opened the app, a Slack notification was sent to the Clubhouse founders and one of them would rush to open the app and greet them in the audio room. As more people joined, there would usually be at least a few relevant people in the audio room to chat with. This created liquidity and ensured most people had a good experience when using the app. Over time, Clubhouse created separate roles for speakers and listeners, allowed people to create their own rooms, and expanded to other networks outside of Silicon Valley. Many networked products start off with this constrained approach to drive liquidity (e.g., Facebook and Tinder with college students, Amazon with books, Uber and AirBnB expanding on a city by city basis, etc.).

Most networked products don’t need massive scale early on, they just need a minimum viable network for a specific market so the initial users have a great experience. So think about your strategic starting point, liquidity, what drives it, and how you can measure it before scaling.

D’Arcy Coolican

@DCoolican

DAO tooling should feel more like a multiplayer game than enterprise SaaS

103

2:48 PM • Mar 4, 2022

From there, you can expand by providing adjacent tooling and / or distributing to different types of DAOs.

Focus on retention and biz dev

Once you’ve defined your initial market and what drives liquidity, you can start thinking more deeply about product and distribution.

On the product side, you should be laser focused on improving existing features and adding new features that keep your initial set of users and DAOs engaging with the product on a recurring basis. If they continue using your product, great! How engaged are they? How does it compare to other products? If not, are they using another product? Why? Do they need a new feature? Are existing features not working? Are they using any product for this use case? If not, maybe this isn’t a core problem for them. Observe customer behavior, gather feedback, and understand the broader market. Also, think about your product’s hierarchy of engagement and build engagement loops so each time a user engages, it leads to a) further engagement in the future and b) more engagement from other users.

Many times, engagement loops are driven by social features like follow graphs, a feed, profile pages, notifications, etc. which are scalable ways to keep users coming back on a recurring basis.

Here’s an example of a social engagement loop.

And a more detailed look.

Once you’ve mapped out your core engagement loops, identify which steps you want to prioritize, iterate, and layer in other engagement loops to strengthen your network. It’s also important to think about how you can build these features in a way that optimizes for composability across the web3 ecosystem. For example, storing content on a decentralized storage protocol and encoding social graph relationships as NFTs. Building in this way allows you to create a protocol that other projects can integrate with for their own use cases which helps the ecosystem and drives growth for your protocol.

On the distribution side, onboarding a DAO is more like enterprise sales than bottoms-up adoption. This is because most DAO tools today are coordination tools. Whether it’s for governance, compensation, communication, transaction management, etc. the tool usually needs buy-in from a specific working group or a few core team members before it can be adopted. Because of this, start by targeting two or three top DAOs in your defined market. Get in touch with the decision makers. Work closely with them. If you solve their needs and make them happy customers, they’ll refer the next batch of DAOs and you’ll be off and running. Remember, liquidity over scale early on.

Grow the market

At a super high level, there are two ways to grow a DAO tool:

• Increase the average revenue per DAO

• Increase your number of DAO customers

You can increase average revenue per customer by increasing prices / take rate, offering more features, and driving more engagement. But given the limited number of DAOs in the market today, you’ll probably run into an upper limit pretty early if you don’t build a system to onboard and retain DAOs at scale.

Early on, you can rely on relatively manual biz dev efforts. Over time, you’ll need to invest in more scalable strategies like token incentives, developer tools (e.g., SDK, API, documentation, subgraphs, etc.), grant programs, and ecosystem investments. Each of these growth strategies probably deserves their own post which I’ll save for another day. In web3, one of the best growth strategies is launching a well-executed DAO which we’ll cover in the next section.

Become a DAO

One of the novel affordances of web3, blockchains, and cryptoeconomic networks is that they enable new internet-native org structures. That’s basically what a DAO is.

The best DAO tools will become protocol DAOs. The purpose of a protocol DAO is to create a self-sustaining protocol (shoutout G for this definition). Another good description of this end state is a Hyperstructure.

Elements of a self-sustaining protocol DAO include:

• A smart contract-based protocol with a value capture mechanism (e.g., a transaction fee)

• A token representing governance rights and equity in the protocol

• A governance process for making updates to the protocol

• A developer ecosystem building valuable product / protocol integrations

• Community initiatives to keep DAO members engaged and activate new members (e.g., working groups, community calls, onboarding sessions, IRL events, hackathons, etc.)

I recommend studying protocol DAOs like Yearn, Uniswap, Curve, AAVE, Compound, and Index Coop to get an understanding of how this works in practice. Read their docs, use the protocol through a UI, go deep into the governance forum, check out their GitHub, hangout in Discord, join a working group, apply for a grant, execute a bounty. Take note of the common patterns across these DAOs and understand the frameworks they use to make strategic decisions (going deep into the governance forum helps a lot with this). A lot of these projects followed the progressive decentralization playbook to become DAOs.

Web3 is about decentralizing power and giving ownership to a broader set of stakeholders. Becoming a DAO is the best way to do this. In a future post, I’ll share case studies on how top projects evolved into protocol DAOs.

Although there’s definitely some challenges with building DAO tooling today, there’s still quite a bit of opportunity if you narrow the focus, become the dominant solution for a specific use case, and expand from there. Take your time identifying gaps in the market, focus on liquidity over scale early on, and progressively decentralize.

It’s that easy 😛

2022 will be all about Community DAOs.

Coop 💿

@Cooopahtroopa

First it was DeFi.

Then it was NFTs.

Next is DAOs.

Plan accordingly.

1,645

7:52 PM • Aug 25, 2021

Community DAOs = DeFi infrastructure + NFT business models + Creative Humans

Crypto isn’t just a technology, it’s an internet-native economy. Revenue is tracked in ETH. Key decisions are made with community governance. Transactions are enforced on-chain through smart contracts. Treasuries are controlled via multi-sigs. And value is captured with tokens.

DAOs are the native corporate structure of these crypto economies.

Instead of being incorporated in Delaware or the Cayman Islands, DAOs are incorporated in Discord servers and blockchains. DAOs provide an internet-native way of pooling capital, making collective decisions, and capturing value.

The org structure of DAOs looks like modern day cooperatives, but over the next decade I believe their scale and impact will rival some of the world’s largest public companies.

These days, it seems like there’s a DAO for pretty much everything; Collecting NFTs. Socializing. Building software. E sports. Musicians. Media. Education. Funding public goods.

But what makes a “DAO” a DAO?

joseph.eth

@josephdelong

Let's find out who you really are...

798

10:34 AM • Aug 31, 2021

Although the purpose, scale, and sophistication of DAOs can vary, most include the same core components:

• Group chat. DAOs usually start off with someone saying “wouldn’t it be cool if…” and then adding a few frens to a Telegram group or Discord server.

• Treasury. The most common type of Community DAO collects blue-chip NFTs and stores them in a multi-sig. As we’ve seen with Party Bid, people love aping into NFTs with their frens. It’s an experience. Community DAOs can also bootstrap their treasury through a tokenized crowdfund. This enables the DAO to fill their treasury with ETH to spend on operations and growth.

• Token. As word gets out about how much fun your Community DAO is having, people start blowing up your DM’s begging you to let them in. At this point, many Community DAOs issue an ERC-20 token as a way to gate membership. Depending on the exclusivity of the Community DAO, membership can cost anywhere from a few dollars worth of ETH to a few mil.

• Governance. Community DAOs with valuable treasuries and hundreds of members need a way to make collective decisions. Usually, rough consensus is reached in the group chat (with emojis, ofc) and the governance vote is just a formality. But it’s fun to see who voted, how much voting power they have, and what they voted for. Also, most Community DAOs empower small, focused teams of 5 to 10 members to own specific workstreams instead of requiring a governance proposal for every smol decision.

• On-chain cash flow. This is the most nascent component of Community DAOs but also the most interesting. On-chain cash flow turns a fun group chat with your frens into a sustainable business. So far, the most common way to generate on-chain cash flow has been through NFT drops.

So, are these Community DAOs actually working?

Over the past few months, DAOs like Fingerprints and Flamingo have amassed five and six figure NFT collections.

Aaron Wright

@awrigh01

The first billion dollar NFT DAO will be @FLAMINGODAO

270

7:38 PM • Aug 28, 2021

DAOs like Bright Moments have sold millions worth of NFTs in minutes.

CryptoCitizens

@crypto_citizens

Update on today's #GTNY sale @viamirror:
- Sale started at 11:10 PST
- We sold 200 GTNY to 160 wallets in 27 minutes.
- Due to high demand, the site was having difficulty staying up.
- The remaining 800 GTNY will be distributed soon, stay tuned!

34

1:47 PM • Aug 17, 2021

Rabbithole, Seed Club, Forefront, and FWB are becoming the premier on-ramps for the next wave of active contributors in crypto.

Jess 🌱

@thattallguy

Social DAOs that win will focus on these 3 things:

1. Belonging (brand/ network / community)
2. Capital ($ / humans to do cool shit)
3. Reach (distribution of ideas)

125

10:17 AM • Aug 3, 2021

Some DAOs like NounsDAO just leave you thinking WTF.

Yossi Hasson

@yossihasson

Imagine this: a startup launches & starts to generate $500k in sales p/day. Every sale makes that customer an owner & voting shareholder. 100% of the revenue generated goes to improving the product. In 1 yr u have 365 investors with $150m on the balance sheet. That is @nounsdao

261

3:51 AM • Aug 26, 2021

And don’t even get me started on Loot…

John Palmer

@john_c_palmer

Really think we’re in a different era now. There was Before Loot and now there’s After Loot. Punk moment all over again.

568

2:30 AM • Aug 31, 2021

Multiple top tier VC funds have invested in these DAOs and I think they’ll end up becoming some of the best performers in their portfolios over the next decade.

Fingerprints

@FingerprintsDAO

Fingerprints welcomes the funds who joined our community on our recent raise

@a16z
@usv
@variantfund
@divdotvc
@ConsenSysMesh
@TheLAOOfficial
@pixelvault_

This raises two questions:

Why would DAOs take funds as members?

Why would funds seek to become members?

1/

492

3:53 PM • Sep 1, 2021

In the rest of this post, we’ll take a closer look at Community DAOs - how DAOs can become sustainable businesses, what the risks are, and what they may look like in the future.

Growing Community DAOs

Unlike traditional startups, the initial purpose of most Community DAOs isn’t to maximize shareholder value. It’s about the vibes. People want to be surrounded by like minded individuals, make collective decisions, and move the community’s purpose forward.

But given the growth of the broader crypto market, many of these Community DAOs are finding themselves sitting on treasuries worth millions and ERC-20 tokens with $100M+ market caps. In just the past few months, they’ve gone from group chats to real businesses.

One of the keys to growing these Community DAOs will be recurring on-chain cash flow. There’s other important factors like community engagement, governance, tokenomics, etc. but generating on-chain cash flow gives Community DAOs capital to reward contributors, hire full time staff, and grow their treasury.

Back in college, I studied Finance and one of the most boring things we learned was how to analyze a balance sheet. Turns out, it’s actually kinda useful.

There’s two types of assets on a Community DAO’s balance sheet:

1. Equity (Blue-chip NFTs, Community DAO tokens, Crypto protocol tokens)

2. Cash (ETH, USDC, DAI)*

*Technically ETH could be considered equity in the Ethereum network but for simplicity, let’s classify ETH as cash on the balance sheet since it’s the primary medium of exchange for DAOs

So what can Community DAOs do with the cash and equity on their balance sheets? For many, crypto feels like a massively multiplayer online game.

Jess 🌱

@thattallguy

Crypto is an arcade for adults.

Done right, the experiences we create are more like games than they are work.

138

6:07 PM • Aug 29, 2021

For Community DAOs, the game is to increase the value of the treasury while maintaining the strong vibes that got the community going in the first place.

Graeme

@strangechances

More specifically, blockchains are gaming platforms. Because every dApp is in some way a game - umpired by the rules of the contract and rewarded with tokens.

52

9:16 PM • Aug 16, 2021

There’s a few ways Community DAOs can put themselves in a position to win this game:

• Collect blue-chip NFTs

• Earn membership fees

• Release NFT drops

• Launch a tokenized NFT gallery

• Build a media company

• Sell SaaS tools

• Invest in tokens (in DeFi protocols, NFT protocols, and other DAOs)

Let’s take a closer look at each.

Collecting Blue-Chip NFTs

This is the most common way Community DAOs get started.

A group of frens want to collect blue-chips like Punks, Autoglyphs, DEAFBEEF, Fidenzas, Ringers, etc. but don’t want to put all the capital up themselves. Instead, they pool their funds to purchase a portfolio of blue-chips.

However, in practice, storing these NFTs in a vault is illiquid. It doesn’t directly generate revenue. As a result, some of these DAOs issue ERC-20 tokens as a way to let people speculate on the value of the underlying NFTs, earn trading fees, and decide when to sell. PleasrDAO, one of the largest NFT Collector DAOs, recently announced a similar liquidity strategy for their 1 of 1 Doge NFT.

Bloomberg

@business

Fans of the original Doge meme that sold as a NFT for about $4 million in June will have their chance to own a piece of the image

bloomberg.com

Doge NFT Rides Into Fractional Ownership With $DOG Tokens

Fans of the original Doge meme that sold as a non-fungible token for about $4 million in June will have their chance to own a piece of the image that’s best known as the face of Dogecoin.

35

10:15 AM • Aug 31, 2021

This kinda ends up being like storing gold in a vault and issuing paper certificates against it (sound familiar?). You can redeem your paper certificate for the underlying asset but you need to trust that the asset will be available and worth something when you want to redeem. But instead of gold and paper certificates we have blue-chip NFTs and ERC-20 tokens.

To be fair, some of these vaults are extremely valuable and have a damn good chance of being worth billions some day. So maybe instead of being like storing gold in a vault, maybe it’s more like owning equity in iconic internet culture and some of the most valuable IP in the world. But the reality is that in the near term, these vaults alone don’t generate recurring on-chain cash flow.

Instead of near-term cash flow, these blue-chip NFTs serve as a focal point (or as crypto people would say: “schelling point”) for top collectors, artists, founders, investors, and operators to get involved in the community.

As we’ll see in the next few sections, the most valuable aspect of these vaults stuffed with blue-chip NFTs is that they attract human capital that converts illiquid jpegs into cash on the balance sheet.

Membership Fees

Idk about you, but the terms “follower” and “subscriber” feel weird to me. They imply a unilateral relationship. I follow you. You subscribe to me.

But the terms “member” and “owner” hit different.

We are members.

We are owners.

In web3, membership and ownership are encapsulated in tokens. Balances are stored on the blockchain. And your assets are controlled by your private key.

If the vibes are off in the community or you need liquidity after getting rekt by yet another degenerate yield farm, you can sell your tokens on an AMM or head over to the #otc channel in Discord to negotiate a fair rate. No questions asked.

But as the Community DAO increases the value of the treasury and demand for membership increases, the value of the underlying membership token increases.

If you were an early member of the community or earned a large allocation through your contributions, this can turn into meaningful wealth.

However, membership tokens aren’t just about “nUmBeR gO uP”. At a deeper level, the token is a coordination mechanism to help online communities create, capture, and redistribute value.

And because token holders are also community members, they don’t need to fire up an Excel spreadsheet and make resource allocation decisions based on a DCF analysis. Unless they want to.

Instead, Community DAOs invest in whatever they want. Sometimes that’s donating to charities. Other times that’s popping bottles in Paris.

NFT drops

This is the most common way Community DAOs generate on-chain cash flow. Some of these drops post serious numbers. This past weekend, Bored Ape Yacht Club sold $92M worth of Mutant Ape NFTs in one hour.

Steven

@Dogetoshi

Bored Ape Yacht Club just made $92 million in an hour.

611

8:36 PM • Aug 28, 2021

richerd.eth

@richerd

Yesterday @BoredApeYC sold +$100M worth of NFTs. and also airdropped +$100M in value to their community.

The market cap for #BAYC well exceeds that of most traditional media companies. If you are looking at what the future of web3 media media companies looks like, this is it.

259

10:18 AM • Aug 29, 2021

Another one of my favorite drops recently was a collab between Arihz (an anonymous Brazilian computer scientist / NFT artist) and FingerprintsDAO (one of the leading collector DAOs for smart contracts as art). The drop was called Avid Lines and in the first 30 days, it’s done almost $10M in trading volume.

Avid Lines

@AvidLines

Avid Lines has hit over 3k in ETH volume in the first 30 days! Some of the highest daily volume came in the last 48 hours.

20

12:08 PM • Aug 24, 2021

More importantly, the drop was a great example of how to remix NFT IP in a fun and interesting way. It was a derivative of Autoglyphs, which is the most valuable collection in the FingerprintsDAO treasury.

Here’s how it worked:

• Minters chose an Autoglyph to use as the base input for the generative algorithm

• Autoglyph holders could whitelist their Autoglyphs to receive 10% of primary sales for mints that used their Autoglyph as the base input

• The generative algorithm combined the base Autoglyph input with Arihz’s randomization code and the output was a remix called Avid Lines (and they’re fvcking beautiful)

Luiz Ramalho

@luizgram

Autoglyphs are about to become income-generating assets.

The first artistic collab of @FingerprintsDAO with Arihz, the creator of @framergence and @pulsquares uses Glyphs as generators and shares revenue with the owners.

Why is this relevant?
1/

Avid Lines

@AvidLines

Avid Lines has minted its genesis piece, generated from Autoglyph #433

Autoglyph owners may now whitelist their pieces (signature only, no transfer required)

Learn more: avidlines.art
Public mint begins: July 28, 2021 @ 11AM CT/4PM UTC

73

2:56 PM • Jul 21, 2021

Some of the most popular NFT drops are derivative projects that take blue-chip NFT IP and remix them in a way that’s fun, game-like, and visually appealing. These derivative projects are interesting because they take illiquid jpegs stored in a vault and turn them into productive assets. Some Autoglyph holders earned $40k worth of ETH by simply calling a whitelist function on a smart contract.

As DAOs look for new ways to increase the value of the NFTs in their treasury, we’ll continue seeing more derivative drops like these that enhance the value of the core IP while also turning NFTs into productive assets.

Tokenized NFT Gallery

Most Community DAOs don’t have their own tokenized NFT gallery yet. But in the near future I think it’ll become one of the most popular ways for Community DAOs to generate on-chain cash flow.

The basic idea is:

• Members use the Community DAO token to vote on which artists / drops can mint on their site

• Multiple drop mechanisms are supported (reserve auctions, dutch auctions, editions, raffles, airdrops, generative, etc.) by letting devs register smart contracts with the DAO’s NFT gallery registry

• Revenue from primary and secondary sales is shared between the artist, dev team, and DAO treasury

• Artists, collectors, dev teams, and other contributors receive Community DAO tokens

• Token holders get access to members-only features like exclusive drops, NFT badges, discounts, physical prints, merch, and more

This allows Community DAOs to build their own NFT marketplaces while rewarding token holders, artists, collectors, and devs with a mix of cash and equity. The curation abilities of top Community DAOs will eventually turn these NFT galleries into incubators for emerging artists.

For example, if you’re a generative artist and FingerprintsDAO votes you into the their gallery, it’s basically like being a fashion designer and getting your latest clothing line in Vogue. This creates a reflexive feedback loop where the top Community DAOs build status by curating high-quality NFT collections and then help the next generation of artists get distribution while earning fees.

It’s kinda like CAA or a record label for internet culture. But now the agents are fans, builders, and creatives.

Owned Media

Building media properties isn’t as sexy as a tokenized NFT gallery, but they work. Start a podcast and / or newsletter, find some sponsors, and boom. There ya go.

The top Community DAOs should have a pretty easy time finding sponsors given their community is filled with progressive individuals with cash to spend on random stuff like digital pet rocks.

Logan Paul

@LoganPaul

I literally left dinner last night to snag these.

$60k and $95k. The first rock NFT on Ethereum @weliketherocks; actually came before the Ether rock. I know it’s ridiculous but it’s digital history and I think they’re pretty cool

5,549

8:08 AM • Aug 27, 2021

Club Top Shot is one of my favorite examples of a media company being built around an NFT collection.

The Club 🍾

@ClubTopShot

gm

Audio of last night's Club is live:

- Vegas trip recap
- Best Club bball player
- Is @nbatopshot undervalued?
- NFT markets pumpin

Check it out
podcasts.apple.com/us/podcast/nft…

6

8:16 AM • Aug 25, 2021

UTA, one of the premier Hollywood talent agencies, recently signed Larva Labs (creator of CryptoPunks, Autoglyphs, and Meebits) and will represent them across film, TV, video games, publishing, and licensing. Imagine Kevin Hart being the voiceover for a CryptoPunk or Meebit in a Netflix show lmfao. I’d watch that in a heartbeat.

SaaS Tools

Most Community DAOs go through the following cycle pretty much every week:

• A problem surfaces that needs to be solved

• Somebody does research on the existing tools

• Turns out none of the tools do exactly what the community needs

• *Ugh*

FWB is one of the most active DAOs in building custom tooling for their community. When they needed a way to token-gate IRL events, they built it. When they needed a dashboard to highlight key information about the community, they built it (and it’s vibey af).

A key thing FWB got right early on was seeding the community with high-quality members. Then, token-gating membership was a kind of “proof-of-work” to ensure that only the most committed people would join the community and renew each season. This created a positive feedback loop where talented people get in, those people started building and shipping products, more talented people got interested and joined, more problems surfaced, and more problems got solved.

As Community DAOs become aggregators for top talent in crypto, we’ll see more custom tooling built to serve the broader community. And similar to how YC startups usually get initial distribution from other startups in their batch, Community DAOs will get their initial distribution from the other DAOs and projects their community is involved with.

Tokens (DeFi protocols, NFT protocols, and other DAOs)

It’s been interesting to see DAOs align incentives by investing in each other. A few months ago FWB and WHALE did a token swap where the stake in $FWB was valued at $100k. Today, that stake is worth $1.5M.

Given the amount of human capital inside these DAOs, most crypto protocols will probably have a few DAOs on their cap table as strategic investors helping with distribution, connections, and domain expertise. As the crypto market grows, these DAO-to-DAO stakes could end up being very, very large. These stakes will also create a new type of mutual alignment at a level we haven’t seen before in the competitive world of business.

Risks

Like any investable asset, Community DAOs live along a risk-reward spectrum.

Some of the main risks of Community DAOs include:

• Bad OpSec. A DAO’s assets (NFTs, ETH, and ERC-20s) are stored in a smart contract that lives on the blockchain. Usually, the contract is a multi-sig wallet controlled by a trusted group of community members. To withdraw assets, a threshold needs to be reached where multiple people sign a transaction with their crypto wallet to authorize it. This prevents one of the signers from going rogue and rugging the community. Or in case one signer loses access to their private key, there should be enough redundancy in the system that transactions can still be signed and submitted. Ideally, we remove the need for any trusted parties and integrate governance with trustless transaction execution through something like SafeSnap. But in practice, most communities will require some level of trust in a select group of community members to ensure assets are stored and managed securely.

• Potential ETH / NFT crash. Are NFTs in a bubble? Probably. The recent run up in prices mimics the boom and bust nature of most technology cycles. If ETH prices crash, Community DAOs will have less cash on the balance sheet and will need to mark down the book value of their NFT assets. It’s a real risk. Many DAOs implement treasury diversification strategies with the help of domain experts like Llama to ensure they’re able to weather a bear market. DAOs can convert ETH to stables like USDC or DAI to protect against ETH volatility. The best DAOs will have recurring on-chain cash flow and efficient cost structures that enable them to weather a bear market.

• Lack of community engagement. People are the heartbeat of any community. DAO or otherwise. The best Community DAOs have a mission that goes much deeper than “nUmBeR gO uP”. Collective action towards this mission is what keeps the core contributors and active community members coming back every day. But when people get distracted by token prices, or the core team loses interest, culture deteriorates. The magic of these Community DAOs are the people. The Discord mods that stay up all night answering questions. The volunteers that write documentation to help new members. A lot of the most valuable work in communities goes unnoticed and unrewarded. Community members need intrinsic motivation to drive the community forward. Otherwise, the community will slowly devolve into just another inactive group chat.

• Poorly designed tokenomics. The two biggest risks with tokenomics are: 1) the core team not having a large enough stake to keep them incentivized and 2) adversarial whales accumulating too many tokens and using them to manipulate the network through governance and / or negative price action. We’re still in the early stages of understanding best practices for Community DAO tokenomics. Many communities bring on experts like Fire Eyez, Delphi Digital, and Gauntlet to help develop a robust token strategy.

Future of Community DAOs

Here’s a few predictions on the future of Community DAOs:

• There will be many billion dollar Community DAOs. This probably isn’t controversial amongst crypto-natives but if you take a moment to think about it, it’s pretty wild. Online communities live across Discord servers, Telegram chats, Twitter DM’s, FB groups, Patreon, etc. A DAO structure gives these online communities the ability to coordinate capital, make collective decisions, and capture value with an internet-native currency. The canonical example of a community that could’ve used this functionality is r/wallstreetbets during the GME short squeeze. Aside from just investing, I think there will be billion dollar community DAOs across gaming, publishing, music, education, art, software development, and more.

• Community tokens > Social tokens. For the past couple years, social tokens were a hot topic when discussing the future of crypto-native consumer apps. The thought went, “wouldn’t it be cool if you could invest in people the same way you can invest in stocks?” Bitclout’s initial traction was a sign that there’s demand for this type of product. But social tokens focused on one person can lead to burnout, mental health issues, and regulatory risk. So instead of social tokens focused on individual people, I think community tokens focused on the collective efforts of groups of people will become the dominant model. Investing in the Mr. Beast token is boring. Being a member in the Mr. Beast community is fun. Social tokens feel like a top-down approach. A creator and their management team retains full control over creative decisions and IP. But as we’re seeing with BAYC and Loot, bottoms-up decentralized communities with the right incentives have the potential to create much more value than a centrally coordinated effort. In the previous era, open source projects like Android and Linux didn’t have a native business model. But now ERC-20 tokens and NFTs give open source software a business model. And not just open source software, but also open source IP. To me, social tokens imply a top-down centrally coordinated effort whereas community tokens imply a bottoms-up decentralized community with full access to the underlying IP. The latter is much more crypto-native and paves the way for a level of combinatorial creativity that we haven’t really seen before.

• Service DAOs will play a key role in scaling Community DAOs. In crypto, there’s a whole new set of specialized skills needed to build a successful project. Things like tokenomics, treasury management, community management, onboarding, governance, smart contract development, data science, protocol security, OpSec, etc. Because there aren’t many experts in these areas yet, we’re already seeing crypto-native agencies (i.e., “Service DAOs”) that aggregate the best talent for a specialized skill and provide services to other DAOs. There’s Llama for treasury management, Fire Eyez for tokenomics, and Vector for designing crypto apps. Service DAOs combine the flexibility of freelancing with the upside of startups. Most get paid in a combination of ETH and ERC20-tokens so there’s skin-in-the-game and aligned incentives. As these Service DAOs build out their processes, hire more talent, and build software to automate their services, it’ll be much easier for Community DAOs to solve some of their toughest problems and help them scale.

Closing Thoughts

Community DAOs are the next evolution in online communities. It’s like if subreddits had a shared bank account, a token, and governance mechanisms. They’ll become the new social networks. And the best way to learn is by actively contributing.

Here’s what I usually share with friends interested in contributing to Community DAOs:

• Join 3 to 5 Discord servers to get a sense of the different vibes

• Introduce yourself in the #introductions channel and read the other intros to get an understanding of who’s in the community

• Find two or three channels that are most relevant to you and check them multiple times a day. Ask questions. Answer questions. Offer encouragement.

• Read the governance forum to understand what the top priorities are for the community and how they make decisions

• Attend voice chats to build relationships with the most active contributors

• Now, after this initial research phase, choose the top one or two Community DAOs you vibe with and double down on them

• Find a committee you can help with and work on a project. As you get more comfortable, take on a leadership role

• Try to get rewarded with the Community DAO’s token to align incentives and truly become an owner in the community

• Iterate and repeat

The DAO maestro himself Coopahtroopa recently published an article with a bunch of DAOs you can contribute to as well as a list of people to follow.

Coop 💿

@Cooopahtroopa

Who to follow to learn about DAOs:

@thattallguy
@cdixon
@owocki
@alexxzzhang
@packyM
@patrickxrivera
@_kinjalbshah
@gaby_goldberg
@jarroddicker
@pet3rpan_
@gregisenberg
@jessewldn
@spencernoon
@ljin18
@blakeir
@carlosecgomes

Continued

659

1:02 PM • Aug 30, 2021

The demand for talent in the space far exceeds supply so if you’re at all interested, don’t hesitate to jump in and start contributing.

Until next time ✌️

Shoutout to Coopahtroopa, Elena, Chase, Dame, Nir, Li, Jarrod, and Louis for their feedback on this post. And to the Mirror team for many conversations on Community DAOs.

Feel free to DM me on Twitter with any questions, comments, or memes @patrickxrivera.

My name is Patrick Rivera and I've spent the past few years building consumer apps in crypto / web3 as a growth engineer. I’m currently building a new type of NFT project and web3 brand that’s launching this summer.

Previously, I was a growth engineer at Mirror, Instacart, and Dharma (before it was acquired by OpenSea).

I also write about the intersection of crypto and culture.

Here are some of my most popular posts:

• A Presentation on Crypto Fundamentals and NFTs

• Come for the Creator, Stay for the Economy

• Thoughts on DAO Tooling

• Community DAOs

• Designing Internet-Native Economies: A Guide to Crypto Tokens (A16Z Future)

• How Crypto Projects Like Loot are Rewriting the Playbook for Building Communities (Means of Creation podcast)

• The Next Crypto Cycle - Web3, DAOs, and NFTs (The Deep End podcast by On Deck)

• Lifecycle of Web3 Communities (On the Other Side podcast by Chase Chapman with accompanying slides here)

• Tips for Creators Getting Into Crypto

• Crypto-native Newsletter Businesses

If you want to get in touch, say hi on Twitter or email me at patrick.x.rivera@gmail.com.

One approach is to build a single-player tool that gets people to use the product. Over time, as more people use the single-player tool, you then add social features such as likes, comments, follows, etc. to plant the seeds for a defensible network.

Today, with the rise of creator-focused platforms, this mantra is evolving into: "come for the creator, stay for the network." Creator-focused platforms realize that wherever the creator goes, the audience and attention follows. As a result, platforms bootstrap their network by attracting top creators.

The go-to-market strategy can generally be summarized as:

1. Attract top creators with compelling features and / or a bag 💰

2. Creators bring their audience

3. Add features to retain the creator and their audience long-term

It's no secret that creator-focused platforms like Instagram, TikTok, Snap, Spotify, OnlyFans, Substack, and Triller (lol) are offering massive bags to attract top creators and their audiences.

But there's a few issues with this model:

• It's hard to make a sustainable living unless you're a top creator

• Creator payouts are determined by opaque processes

• Content and social graphs are rarely portable across platforms

In my job at Mirror, I think a lot about how to build products that put more power back in the hands of creators and their audiences. But we aren't a "company", in the traditional sense. Instead, we're building a creator-focused protocol. We work with creators to understand their needs, write smart contracts, deploy them to the Ethereum network, create interfaces to access these smart contracts, and have the goal of developing a new type of network to help creators solve their problems.

Decentralized protocols aren't social networks. They're cryptoeconomic networks.

Instead of "come for the creator, stay for the network", I think the mantra of creator-focused protocols will be more like "come for the creator, stay for the economy."

Here's the difference.

A social network is:

• Owned by shareholders (which skews towards finance firms, executives, board directors, and early employees)

• Governed by shareholders (in practice, governance is usually controlled by the board, CEO, and sometimes activist investors)

• Most code is private

• Data is secured by the company's engineering team

• The network becomes global over time

A cryptoeconomic network is:

• Owned by the community

• Governed by the community

• Open source

• Secured through distributed consensus, cryptography, and public / private key pairs

• Global from day one

Are cryptoeconomic networks perfect? Hell no.

But the point is, creator-focused protocols will be more like internet-native economies than traditional social networks. No more rigid hierarhcies, top-down product development, opaque payment schemes, taxation without representation, or walled gardens.

Creator-focused protocols will have community-led decision committees, native protocol tokens for governance, value capture, and utility, decentralized grant programs, universal creator income, an open developer ecosystem, pseudonymous collectives, degen investment clubs, protocol politicians, and more.

A couple years ago this may have sounded like another one of those idealistic crypto narratives that would never actually work in practice. But it's already happening. Since 2018, DeFi protocols like Uniswap, Compound, and AAVE have earned billion dollar treasuries, launched protocol tokens, and started experimenting with community-led initiatives like grant programs.

Over the next few years, I think creator-focused protocols will reach a similar scale.

But to get there, it usually takes an iterative approach. Similar to how social networks start off looking like toys but eventually evolve into something serious, protocols also need to go through their own natural selection process.

I think successful creator-focused protocols will go through three phases:

• Phase 1: Creator Mode

• Phase 2: Org. Mode

• Phase 3: A Protocol Economy

Here's a high level overview of each phase.

With decentralized protocols, "come for the creator, stay for the network" becomes "come for the creator, stay for the economy". Creators will have ownership stakes in the internet economies they're building. They'll be incentivized to hype up other creators. To invest in the community. To direct traffic. To provide support. Fans, curators, and community leaders will do the same.

But how do we get there?

In the rest of this post, I'll sketch out some rough thoughts on the milestones for each phase. To start, let's look at the first phase - Creator Mode.

Phase One: Creator Mode

In creator mode, the goal is to:

"Help creators generate on-chain revenue by selling crypto-native products."

Helping creators generate on-chain revenue is a good first step for a few reasons:

• Convinces creators that it's worth spending more time using crypto protocols

• Gets a creator's audience to download a wallet and on-ramp to ETH

• Provides a foundation for future on-chain experiments

In terms of deciding what to build, I like Li Jin's framework for creator lifecycles. There are four stages:

1. Create something

2. Build audience

3. Monetize

4. Manage and grow business

Today, crypto's killer feature for creators is monetizing through NFTs. Over time, I think crypto will get better at other stages like helping creator's build their audience through token rewards and enabling new content formats. But for now, as a creator-focused protocol, your best bet is to help creators monetize (given all the interest, activity, and novel use cases around NFTs).

At Mirror, we've built tools focused on the first and third stages of the creator lifecycle: create something and monetize.

Our founder / CEO, Denis, realized that all creative work has a story to tell and that long form writing was one of the best ways to do so. As a result, the team has spent the past few months building a crypto-native publishing stack for creators to tell their stories. Here are a few components:

• Decentralized identity using ENS. When you sign up for Mirror, you also register an ENS domain using your key. This ENS domain is basically a self-custodied Twitter username and Cash App handle. It's your social identity and economic identity. Soon, we're adding the ability to accept tips to an ENS domain and route funds to other ENS domains on Mirror.

• Decentralized storage using Arweave. All posts on Mirror are signed by your key and stored as a digest on Arweave. We plan on building a tool where people can click a button to export all their posts on Mirror to easily migrate to another publishing tool if they ever choose to.

• Markdown editor. Still in the early stages but the long-term vision is to have a Notion-like block based editor. You'll be able to embed crypto-native versions of crowdfunds, auctions, and global payments right in your post as easily as you can embed an image.

At Mirror, we also realized that creative work needs capital to sustain itself. Given that, we've also built a suite of smart contracts and a web app to help creators fund and monetize their work. A few examples include:

• Tokenized crowdfunds. Raise ETH from anybody in the world with an Ethereum wallet. One author recently raised $50k for an upcoming novel. The crowdfund is tokenized by issuing an ERC20 token to anyone that contributes ETH to the crowdfund. The crowdfund creator can then tie revenue from NFT sales back to the crowdfund contract and token holders can redeem their tokens for a portion of the sales. This has been called a Patronage + Ownership model. Why subscribe when you can invest? For more technical details, check this out.

• Reserve auctions. There are many ways to sell NFTs but reserve auctions are quickly becoming the best price discovery mechanism. Plus they're a lot of fun. As the NFT seller, you set a minimum price and the auction duration. Once the minimum bid is hit, it kicks off a clock based on the duration set by the seller. If a bid come in within the last 15 minutes, the clock is reset to 15 minutes. Mario from The Generalist recently teamed up with Jack Butcher of Visualize Value to auction an NFT that sold for ~$45k.

• Revenue splits. In web2, if you reference someone in your essay by linking out to their Twitter profile or Substack, you're rewarding them with attention. It's then up to the other person to convert that attention into cash. But what if you could financially reward anybody in the world, directly? At Mirror, we recently deployed a revenue split contract that allows you to split sales with any Ethereum address. Packy from Not Boring recently used this feature to split $5k in NFT sales with 16 contributors.

Building a protocol during the Creator Mode phase is hard because you don't have much information. Also, crypto is notoriously difficult to use. Creators are used to slick onboarding flows. Not signing messages through Metamask, paying gas fees, and waiting five minutes for a transaction to be confirmed on-chain.

But we view every experiment as a chance to learn something new about the market and incorporate it back into product development. Here are a few principles we've used to guide us during this initial phase:

• Launch features with a specific use case in mind and then generalize it. So far, our go-to-market strategy at Mirror has relied on partnering with creators on a very specific experiment they want to run. It usually starts with them asking us if doing a certain thing is possible. We go back and forth and scope out a reasonable solution that can be implemented in a couple weeks while still accomplishing their goals. We then implement the feature, reflect on learnings, and continue working with creators to iterate on the experience until we're confident to release it to all of our members. Crypto is so new that most creators aren't sure how to use it to accomplish their goals. These experiments serve as a form of documentation for creators to understand what's possible.

• Optimize smart contracts for security, mechanism design, composability, and gas efficiency. As an engineer building a crypto protocol, one of the first things you'll realize is that writing smart contracts is a whole different game from any other type of programming. If you're a decent software engineer, you can learn how to write a basic smart contract pretty quickly. But it takes years to build secure, composable, gas-efficient smart contracts that unlock useful functionality. By far the #1 competitive advantage a protocol can have is a team of world-class smart contract engineers. I think it's really hard to build a truly innovative protocol without one. Although I'm nowhere near world-class myself, I've been fortunate to work with some world-class smart contract engineers at Dharma and Mirror. I've noticed the four areas they're great at are: security, mechanism design, composability, and gas efficiency. Don't settle until you find a smart contract engineer that's great at these skills.

• Use guarded launches to limit downside risk. Our crowdfunds have a funding limit of 25 ETH (~$55k today). Although we take an extreme amount of precaution before deploying contracts to mainnet, there's always a non-zero risk of vulnerabilities. Having safeguards like funding limits ensures people don't yolo their life savings into a random crowdfund and get rekt because of a vulnerability in a contract. No bueno.

Over the past few months, we've learned a lot about what creators want and how crypto can help them build stronger communities. One of the most common pieces of feedback we've received is that creators want to build sustainable recurring-revenue businesses using crypto-native tools. At the same time, they want to ensure their community has a chance to share in the upside.

This leads us to the next phase: Org. Mode.

Phase Two: Org. Mode

In org. mode, the goal is to:

"Help creators and communities build sustainable crypto-native businesses."

Creator mode is about selling crypto-native products. Org. mode is about building crypto-native communities and businesses.

It's kinda like the difference between being an independent artist vs. being signed to a record label. As an independent artist, you're responsible for production, distribution, publishing on streaming platforms, booking live concerts, selling merch, and more. Meanwhile, once you're signed to a record label, many of the implementation details are abstracted away so you can focus more time on creative work. The record label plugs you into a system that makes it easier to produce, distribute, monetize, and grow. For creator-focused protocols, I think the transition from Creator Mode to Org. Mode will look similar (minus the shitty record deals).

But what's the business model for creators? One approach is to connect value to an ERC20 token. Today, most revenue generated on creator-focused protocols goes to an EOA (e.g., an individual's wallet). It's then up to the individual to redistribute the funds themselves, if at all.

However, Org. Mode is about building a crypto-native community with a sustainable business. We can take inspiration from DeFi protocols to understand how to design such a system.

Here's the basic mechanism:

• Issue an ERC20 token. Distribution methods could include a crowdsale, a "fair launch", airdrop to anyone that meets specified criteria, a liquidity mining scheme for active participants, or any combination of the above.

• Develop on-chain revenue streams. For DeFi protocols, this is usually a transaction fee. For creators and communities, this could include selling 1 of 1 / fractionalized / open edition NFTs, collecting NFTs, access to a community, digital land, crowdfunds, consulting services, programmable subscriptions, etc.

• Funnel on-chain revenue to a treasury contract. Sales generated by the community flow to an on-chain treasury contract. The treasury is controlled by a multi-sig wallet which submits transactions based on community governance.

• Redistribute funds through community governance. If the community is optimizing for long-term growth, they may vote for a "buy back and build" strategy where the treasury buys back tokens on the open market and uses them to fund community growth initiatives. Alternatively, the community could optimize for short-term liquidity by offering dividends to token holders.

Most creators / communities in crypto aren't as sophisticated as DeFi protocols because the tooling doesn't exist yet. At best, they may stitch together a bunch of disparate tools. Yet, there's still a lot to desire.

In web2, there's a mature stack for building communities and businesses. Tooling for stuff like:

• Financing

• Payment processing

• Monetization

• Marketing automation

• Product analytics

In web3, there's an additional set of tools that still need to be refined:

• Multi-sig capabilities

• On-chain analytics

• Governance

• Treasury management

• Token rewards programs

Shopify makes it easy for anyone to start, manage, and scale an e-commerce store. For creator-focused protocols, Org. Mode is about making it easy for creators to start, manage, and scale a crypto-native community or business.

As a creator-focused protocol, I think it's useful to hone in on a particular use case, provide the tooling it needs to be successful, and expand from there. For Mirror, a few examples could include:

• Publication DAOs. Most newsletter products today are optimized for single player mode. One writer. This provides benefits like autonomy and more financial upside (if you're already established). But single player mode also has downsides like a higher workload and the challenge of coming up with consistent growth strategies. A Publication DAO could share the workload, help writers gain distribution, and equitably share financial upside through transparent revenue splits. Here's a detailed example of what a Publication DAO could look like.

• Investment clubs. As we've seen with r/wallstreetbets and $DOGE, people love investing together. It's part entertainment. Part collective action. Part fuck it I'm gonna ape. Over the past few months in crypto, investment clubs have emerged to coordinate and curate valuable NFT collections. PleasrDAO is a decentralized investment club that was formed over Twitter to purchase an NFT by pplpleasr. Recently, PleasrDAO got into an epic bidding war for Edward Snowden's first NFT and they won with a final bid of 2,224 ETH (~$4.7M today). Investment clubs have also been called curators and I believe they'll be some of the most important stakeholders in the emerging crypto economy. In the past, curators like Vogue, Hypebeast, and TechCrunch decided what was cool and what wasn't. Soon, decentralized curators like PleasrDAO, $WHALE, SeedClub, $FWB, and Flamingo DAO will specialize in nice verticals and invest in the highest potential creators, communities, and projects.

• Decentralized grant programs. Pretty much every creator-focused platform in web2 has a creator grant program. TikTok, Snap, OnlyFans, Substack, etc. In web2, these programs are a clever way to acquire top creators, get their audience to join your platform, and retain them over time. But the issue is that these grant programs are opaque and cash-based with little to no equity. I think web3 grant programs will look very different. DeFi protocols like Uniswap, Compound, and AAVE have started piloting their own grant programs and I'm excited to watch them evolve. For a creator-focused protocol, a grant program could work like this: creators apply for the grant on a public forum, community members contribute ETH to a pool and receive ERC20 tokens, contributors stake their ERC20s to vote on which creators should receive funding, after a certain time period the top x creators share the pool and are rewarded with protocol tokens so they have skin in the game. There's a lot that needs to be figured out here but the general idea is to make the process more transparent and to give creators more ownership over their work. These days it seems like every top creator is starting their own VC fund. In web3, I could see this model evolve where top creators start grant programs and allow their community to decide how the funds should be allocated.

Over the past year, creator-focused protocols have been iterating on Creator Mode. I think the next couple years are going to be about transitioning to building tools that enable Org. Mode.

Looking even further ahead, what's after Org. Mode? As your protocol builds tools to help creators and communities start, manage, and scale crypto-native businesses, it becomes time to think about how to decentralize the protocol itself. This brings us to the final boss-level phase: A Protocol Economy.

Phase Three: A Protocol Economy

In the Protocol Economy phase, the goal is to:

"Build a community owned and operated protocol with minimal involvement from the initial development team. Ongoing development is driven by community-led committees with active participation from creators, curators, collectors, and a developer ecosystem."

A Protocol Economy is what separates web3 protocols from web2 companies. One of my favorite protocols to study is Yearn. Insiders describe it as a multicellular organism, not a corporation. There's no board of directors. No CEO. No VCs. No HR department. Instead, it started as a solo open source project and evolved into a "collective of contributors".

But, does it actually work? Only time will tell, but so far they've coordinated to make really difficult decisions without blowing up the community. For example, community members recently voted to increase the protocol's (previously sacred) token supply cap to fund protocol development. They've also proposed one of the most sophisticated decentralized governance systems in all of crypto. (I highly recommend reading this and this to get a sense of their culture). Today, their protocol token $YFI has a $1.4B market cap. Not bad for what started off as a one-person open source project ten months ago.

Although Yearn was a fully decentralized protocol from day one, there's a lot we can learn even if we take a phased approach like the one outlined so far. DeFi protocols like Uniswap and Compound took the phased approach but have began progressively decentralizing over the past few months. They've incorporated best practices from projects like Yearn and developed their own learnings while transitioning to the Protocol Economy phase.

Here's a few key elements creator-focused protocols may want to consider during this phase:

• A protocol token. Protocol tokens tend to serve two main functions: currency and

Cryptonetwork Governance as Capital - Placeholder

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capital. When a protocol token serves as currency, it's primarily used for consumption, has a short-term focus, high velocity, and is a medium of exchange / unit of account. When a protocol token serves as capital, it's used as a tool to govern, has a long-term focus, low velocity, and is a store of value (source). Sometimes, a protocol token switches from one function to another through community governance. For example, Yearn's protocol token, $YFI, was originally viewed as currency. $YFI holders received dividends and many community members were obsessed with the price action. However, some community members realized those funds may be better spent by paying core contributors to improve the protocol. As a result, the community voted to increase the token supply cap and diverted more of the treasury to core contributors instead of speculative token holders. With this change, the protocol token went from currency to capital. In a protocol economy, the token can be about more than just "number go up". It can be an instrument for change throughout the protocol. Currency and capital. For creator-focused protocols, this capital can be used to share more of the upside with creators. This could align incentives and generate more long-term growth for the protocol. You could end up seeing deals structured similar to a startup employee's compensation package. There could be token lockup periods and vesting schedules. Frankly, I think platforms should reward top creators the same way they reward top employees.

• Third party developer ecosystem. In a Protocol Economy, the initial development team can't unilaterally change the protocol. Instead, the protocol will need to set up a ✨ thriving ✨ developer ecosystem with a suite of tools. These include: audited / well-tested smart contracts, documentation describing the entire system, subgraphs to query on-chain data, SDK's for integrating smart contracts, grant programs to fund new projects, bug bounties to improve the protocol, and clear avenues for technical support. One key difference between web2 and web3 is that on-chain data is public. As a result, you could see creator-focused protocols having tens or hundreds of different frontend clients built by third party teams. These clients would use the logic and data from the protocol's smart contracts but could also compose them with other protocol's smart contracts to create something entirely new. It's like if the content and algorithms on Instagram, TikTok, Twitter, YouTube, etc. were publicly accessible. You could compose and remix functionality in crazy ways. There could be an app that's exclusively focused on helping creators finance new projects based on their on-chain revenue. Or maybe there's a marketplace to help facilitate collabs across different protocols. Lot's of crazy stuff can happen here.

• Community-led committees. By committee, I don't mean those useless committees inside big companies that just meet so they can have free pizza every month. I'm talking about small, focused teams with clear KPI's, domain expertise, and skin in the game. Again, Yearn seems to be leading the way here. Over the past few months, they've noticed a few teams emerge organically. Teams for operations, development, budget control, and big brain energy, to name a few. As a result, community members proposed creating formal "yTeams". Each yTeam is empowered to make decisions regarding their domain. Whether it's how to spend the budget, defining the development roadmap, or coming up with new yield farming schemes. Who would've thought that decentralized protocols would choose to have so much structure? It reminds me of one of my favorite quotes from Vitalik: "To me, the goal of crypto was never to remove the need for all trust. Rather, the goal of crypto is to give people access to cryptographic and economic building blocks that give people more choice in whom to trust". Community-led committees are chosen by their peers and are a vital force in pushing the protocol forward.

• Community benefit programs. One of the most common arguments against web2 creator-focused platforms is that they take more than they give. To a certain degree, their take rates could be viewed as a form of taxation without representation. Of course, web2 platforms provide key services like distribution, tools for content creation, payment processing, etc. But the key question is, are they taking more than they give? And who should decide? In web3, the decision is in the hands of the community. In DeFi protocol economies, the most common community benefit program is a grant program. Top protocols allocate around $1M a quarter to projects they deem beneficial to the ecosystem. For creator-focused protocols, I think there's a number of creator-specific community benefit programs that could be interesting. Stuff like universal creator income, insurance for smart contract risk, automated wealth management services, p2p zero-interest loans, etc. etc. This is the area I'm most excited to see evolve. I'm confident that communities for creator-focused protocols are going to come up with some insanely creative collective bargaining schemes to ensure they're able to not just succeed as individuals, but to succeed as a squad.

A Protocol Economy is the boss-level phase for creator-focused protocols. But it's also the phase that's radically different from existing platforms. As creators and communities become key contributors to protocol economies, I believe crypto will go from looking like a toy to being recognized as the generation defining movement that it has the potential to be.

Closing Thoughts

Although we walked through the three phases - Creator Mode, Org. Mode, and Protocol Economy - in a specific order, it's still important to have the end-state in mind from the earliest days of protocol development. Who you hire. Who you attract as the first customers and community members. What your website copy says. Early decisions impact your ability to move through the other phases.

So, how might "come for the creator, stay for the economy" end up looking in practice?

In a few years, I imagine people flocking to a creator-focused protocol because one of their favorite creators recently joined. As they build a reputation on the protocol, they may qualify to apply for a monthly stipend from the treasury to quit their job and become a full-time content creator. Or maybe they want to deposit their crypto into the community's automated wealth management system. Or maybe they raise an investment fund from the protocol treasury based on their reputation as a curator. In mature creator-focused protocols, I believe there will be emergent opportunities like these for creators, curators, community leaders, developers, protocol politicians, and passive consumers alike.

They come for the creator, but stay for the economy.

At a superficial level, they're bound by the protocol token. On a deeper level, they're bound by the desire to succeed together. The heart and soul of these economies isn't an invisible hand driven solely by self-interest. Nope. Instead, it's the feathered dinosaur that's a community leader on a mission "to cohere & align collective intelligence". It's the bunny that ships code like his life depends on it. It's the bag holders that donated 10% of their earnings back to the protocol to fund future development.

It's a new type of economy.

Shoutout to Denis, Graeme, and Jon-Kyle for discussions that led to these thoughts.

One of my favorite parts of the week is speaking with creators about how they can use crypto to build stronger communities.

In the future, I think crypto will be a core part of every creator’s business. Kinda like how tech products rely on AI to remain competitive today.

But we’re still really damn early. So, what is crypto actually good for, right now? In this post, we'll cover a framework I share with creators on how to think about the crypto landscape.

By the way, when I say "creators", I'm referring to “anyone doing non-commoditized work supported by digital platforms”. This includes writers, social media influencers, digital artists, musicians, podcasters, and online teachers, among others.

Alright, now let's take a look at some tips for creators looking to experiment with crypto.

Tip #1: First, focus on creator market fit

Creators are their own mini startups. They're responsible for focusing on a niche, understanding what customers want, creating something that people love, and finding sustainable ways to grow.

In startups, the concept “product market fit” is widely regarded as the key to sustainable growth. Product market fit creates a positive feedback loop between happy customers, new customers, and profits.

The equivalent to product market fit for creators is creator market fit.

Before focusing on growth, creators should prioritize finding creator market fit because it will serve as the foundation for a sustainable career. Once a creator gets to creator market fit, then it may make sense to start experimenting with crypto to accelerate grow.

Crypto is a powerful tool for growth. Crypto is NOT a replacement for creator market fit.

Tip #2: Start off using crypto as a monetization tool

Once a creator feels like they have creator market fit, it's time to think about how they can use crypto to build a sustainable business.

Crypto can help creators in four main areas:

• Financing: "Help me raise money for projects."

• Acquisition: "Help me get more community members."

• Engagement: "Help my existing community members get more involved."

• Monetization: "Help me make money."

So, as a bright-eyed and bushy-tailed creator ready to jump down the crypto rabbit hole, where do you start? Well, crypto isn't like signing up for a new SaaS product. Instead, crypto is more like building a mini economy.

Economies have currencies, laws, governance, goods and services, markets, citizens, etc.

Crypto gives creators the tools to build their own economies with each of these components. But like any good startup, creators should smart small and iterate.

Out of all the ways crypto can help creators, I think focusing on crypto as a monetization tool is the best place to start for a few reasons:

• Focusing on monetization empowers creators to produce on-chain goods. Goods and services are the core engine for productive economies because it creates resources to reinvest in growth. One issue I see with many creator tokens is that they launch a token but don't produce any on-chain goods. Most of their revenue is off-chain so that’s where their focus ends up.

• On-chain goods convince community members to download a crypto wallet, buy ETH, and pay the creator on-chain. Convincing community members to download a crypto wallet and buy ETH is one of the biggest barriers for creators experimenting with crypto. I think it's much easier to persuade your community to go through the mindfvck of learning crypto if they're able to buy a cool NFT at the end.

• On-chain cash flow provides a solid foundation for other experiments. As you sell more digital goods, you begin to accrue an on-chain treasury. This treasury can then be used to fund experiments like a decentralized investment fund, rewards programs for token holders, collaborations with other crypto-native creators, etc. These experiments then create a positive feedback loop which makes the treasury more valuable and provides more resources for future projects.

Additionally, creators can view crypto-native monetization as just one part of their product portfolio.

Web2 is great at monetizing artificial scarcity through paywalls for stuff like content, courses, and communities. Web2 is also great at monetizing attention through ads. But as we’ve seen, ad platforms heavily favor large creators and optimize for certain engagement metrics that aren’t always in the best interest of people consuming the content. Sponsorships are another option but they may require a large audience and a bunch of boring administrative work.

NFTs provide a new monetization channel for creators that complements existing channels. Instead of monetizing access or attention, NFTs monetize ownership.

Through math, computer science, and cryptography, digital goods that live on a blockchain can have a single owner. That’s basically what NFTs are. Digital goods that live on a blockchain and have an owner. The wider implication is that NFTs make the internet ownable. As a result, superfans are willing to buy NFTs from their favorite creators because for the first time in history, they can truly own a digital good. It’s like having a Nike shoe in your closet. As long as you buy it legally, Nike can’t bust down your door and take the shoe. It’s yours. Similarly, NFTs now provide a digitally-native form of property rights.

As scalability solutions reduce transaction fees and more infrastructure is built out, I believe NFTs will evolve to provide many other benefits beyond just ownership.

Eventually, creators will come up with crypto-native business models like programmable subscriptions, prediction markets, token reward programs, investing in other creators, etc.

In the meantime, here are a few ways creators can monetize with NFTs today.

1 of 1 NFTs

For this model to work, you need just one true fan. But that leads to the main downside of this model. There’s only one owner. As a result, it's hard to create a community around these NFTs because only one person owns it. This model also prices out consumers who aren't willing to ape their entire life savings on an NFT.

Limited supply NFT drops w/ collector rewards

This model is still very underexplored. I think 3LAU is the best example of doing it right. With this model, you release a few NFTs and offer rewards to anybody that bids. This creates more of a community since multiple people can get involved while also retaining some scarcity. I think this model works best when releasing a large creative project like an album, a book, film, etc. because it can be made into an extravagant digital experience with a positive feedback loop between the value of the project and the NFTs.

Fractionalized NFTs

I think this will become the dominant model at some point. There are many variations but the general idea is to take one NFT and allow people to buy fungible tokens that represent the NFT. Token holders can speculate on the value of the NFT by trading their tokens or they can hold onto the NFT for access to exclusive rewards or just to flex. The main benefit is that this model enables many people to own a piece of your NFT. This can sow the seeds for a well-incentivized community. The design space here is pretty wide so I'm sure we'll see all sorts of experimentation in the coming months.

We're still in the early days but it's worth taking the time to experiment with different monetization models yourself to understand which is right for the type of community you want to build.

Once you've started generating on-chain cash flow through NFTs, the next step is community governance.

Increase community engagement and retention through decentralized governance

Decentralized governance is another killer feature of cryptonetworks. Today, the relationship between creators and their communities is mostly one-way. The creator publishes content and their community consumes it. Maybe there are some chat groups but that‘s about it.

I believe cryptonetworks will usher in a new era of co-creation. Creators will involve their communities in key decisions like how to allocate funds, who to onboard, what types of projects they should work on, etc. This type of co-creation drives retention which can lead to stronger communities over the long-term.

Here's a few ways creators can involve their community in key decisions today.

Community-driven capital allocation

Once a creator starts generating on-chain revenue, they can redistribute funds with the help of their community. One option is to create an investment fund where community members earn tokens which they use to vote on which digital assets the fund should purchase. Digital assets could include NFTs, NBA Top Shot moments, plots of land in Decentraland, or tokens for a DeFi protocol. One example of a decentralized investment fund is FlamingoDAO. Cooper Turley, has a great blog post explaining the potential of these decentralized investment funds.

Another option is to create a grant program where community members decide projects to fund based on their potential impact on the community. DeFi protocols like Uniswap, AAVE, and Compound all have community-driven grant programs for projects improving their core protocol.

Lastly, communities could also vote on what percentage of the treasury should go to community members. For example, $UNI holders get to vote on whether to turn on the 0.05% protocol fee switch.

Democratically add new community members

Onboarding new members to a community usually goes one of two ways. On one hand, there's an opaque process where a few people decide who gets allowed in. On the other hand, it's an open access community which can lead to trolls and fvck up the vibez.

With decentralized governance, the community can self-regulate by collectively deciding who gets onboarded.

For example, at Mirror, we onboard ten new members each week using a community-driven process called $WRITE Race. Existing Mirror writers start with 1,000 votes and prospective members start with 10 votes. Everyone has two hours to cast their votes and the top ten people each week are airdropped a $WRITE token which they can burn to get access to Mirror.

Granted, there's still a lot we could do to improve (eg give people a chance to write a short prompt on what they would use Mirror for, experiment with quadratic voting to disincentivize large votes for one person, give prospective members ways to earn more votes, turn the voting system into a prediction market to incentivize voting for people that add the most value to the Mirror protocol, create a DAO to set the voting parameters, etc.)

Regardless, $WRITE Race has turned onboarding from a centralized / permissioned process to a community-driven process.

As more tools get built for decentralized governance, I think it will become the default way communities make decisions online.

Capitalize projects through crowdfunding

Crowdfunding today is limited. You either need to live in a certain jurisdiction or be an accredited investor. I believe these limitations are good-natured and agree that we need guardrails to protect consumers from scam artists.

Yet, I also believe these limitations are preventing many talented people from gaining access to capital they could use to build something great. There needs to be some sort of middle ground. Here are a few reasons why I think creators should consider using crypto to finance creative projects.

Global and permissionless access

To contribute to a crypto-native crowdfund, all you need is an Ethereum address. No jurisdictional requirements. No minimum net worth requirements. Just a computer, an internet connection, and a crypto wallet with some ETH or ERC20 tokens.

Programmable ownership

With a crowdfund on Kickstarter or GoFundMe, you mostly just receive a warm fuzzy feeling that you contributed to something meaningful. Granted, that’s super important! Unfortunately, many people would rather spend their funds on other assets that generate some sort of return. Whether that be financial or pro-social.

With crowdfunds on Ethereum, instead of just receiving a warm fuzzy feeling or a bumper sticker, contributors can receive an ERC20 token. This token can then be programmed to include all sorts of benefits. These could include access to an online community, governance rights on how the funds should be allocated, royalties on the assets generated from the crowdfund, or maybe even a cool badge you can display in your crypto wallet or virtual merchandise you can wear in a video game.

The main takeaway is that cryptonetworks provide a new era of programmable ownership which can be used as a tool for better incentive alignment around capital formation.

Economic graphs

Web 1.0 was about information links (web pages). Web 2.0 was about social links (likes, follows, shares). Web 3.0 is about economic links (tokens you earn, investments you make, assets you own). (source) One of the coolest products that I think will emerge is a “crypto-native Crunchbase for creators”. For example, if you go to Instacart’s page on Crunchbase, you can see their total funding amount, the number of investors, who the investors are, how much they’ve allocated, and a bunch of other information.

With crypto-native crowdfunding, we could see something similar emerge for any creative project. As the next generation of social products get built on crypto rails, I believe creators will use some sort of decentralized crowdfunding to finance their projects. If so, you could see the entire cap table for the next Mr. Beast or Cardi B and build products around those economic graphs.

Yet, decentralized crowdfunding comes with risks since there’s no centralized party to regulate. To limit the risk of scams, I think we could develop something like an on-chain KYC process. To contribute to a crowdfund, you would need to submit your public key and be limited to contributing only a certain percentage of your net worth.

To raise funds, you would start off with a low funding cap (say $10k) and be required to build credibility within the system through certain metrics before being able to raise larger amounts.

So far, we’ve covered how crypto can help creators with monetization, engagement, and financing. Now let's take a look at how crypto can help with acquiring new community members.

Drive acquisition through token rewards

To drive customer acquisition, DeFi protocols employ a tactic known as "liquidity mining". This is just a fancy way of saying “rewards program”. But, instead of providing cash incentives, protocols incentivize customers with their protocol token.

For creators, I prefer calling this a "token rewards" program since it's a bit more intuitive. Token rewards are so powerful that an entirely new field of study called cryptoeconomics was developed to understand it better.

One kinda scary definition of cryptoeconomics is: "programming human behavior through the careful design of incentives." (source)

This is powerful stuff. In web2, we've seen what types of shitshows can happen online when incentives aren't crafted carefully. It’s important to educate ourselves on the mechanics of incentive design so we can consciously create new systems that reward positive sum behavior.

Here's one framework that can help creators think through designing a token rewards program:

1. Identify your community’s goal. Is it to develop deeper social connections? Improve at a skill? Find a better job? Make money?

2. Choose a reward mechanism. In cryptonetworks, this is usually a programmable token.

3. Choose a positive sum reward that benefits the network. This can include votes in decentralized governance. Access to exclusive experiences. Or even financial rewards.

(If you’d like to go deeper on this subject, check out Token Engineering 101).

Crypto gives us powerful tools for human coordination. Creators can use these tools to ensure their communities correct the mistakes that social networks made in the previous era of the web.

Final Thoughts

Crypto is one of the most fascinating technologies in the world. Over the past decade, it has evolved from a cute little science experiment, to something that might actually be kinda important. Over the next decade, I strongly believe it will become an integral part of our lives.

But as a creator trying to make a living today, it's important to be practical.

First, focus on getting to creator market fit. That will serve as the foundation for a sustainable career as a creator. Then, slowly start experimenting with all this crazy crypto stuff. At a high-level, crypto can help creators with financing, acquisition, engagement, and monetization.

On a tactical level, one option is to start by generating on-chain cash flows through NFTs. Creators can experiment with 1 of 1 NFTs, fractionalization, and limited release drops with tiered rewards. Another option is to create a system of community-driven governance to help improve engagement and retention. Creators can also try to crowdfund for a creative project and give contributors programmable ownership. Creators can even design a token rewards program for incentivizing positive sum behavior within their community.

Whether you've been in crypto for a decade or just downloaded Metamask last week, we're all still trying to figure this stuff out. But that's what makes it so damn fun.

Over the past year, I saw a few failed projects try to do something similar so I was immediately skeptical. But after speaking with the team and learning about recent developments in the space, I’m now convinced that a protocol for crypto-native newsletter businesses is a really interesting opportunity.

I’m so convinced that I decided to join the Mirror team to help build this future.

Crypto provides new tools for financing, monetization, and growth, These tools can enable more creators to succeed as independents. This is what excites me most about the space. Many of these ideas can be applied not just to newsletter businesses, but any media business on the internet.

In the rest of this post, we’ll explore:

• Problems with existing tools

• How crypto can help

• Hard problems

• Potential product roadmap

Leggo.

Problems with existing tools

Leaving the corporate world to go independent seems to be the hot new thing. But after speaking with newsletter writers and media execs, the same problems seem to crop up.

Problem #1: It’s risky to get started as an independent writer

Most independent writers rely on savings until they start generating significant cash flow. As a result, this limits the number of people that can take the plunge to go independent.

Problem #2: Writers are limited to just a few monetization channels

The two main monetization channels for newsletter writers are: subscriptions and ads. Subscriptions are great because they provide recurring revenue but it usually takes a bit of time to build enough trust for people to pay for a subscription. Subscriptions also suffer from what I call “the paywall paradox”.

If you put your best content behind a paywall, it’ll be harder to acquire new subscribers. But if you make your best content free, it’ll be harder to retain subscribers.

Meanwhile, ads allow you to monetize publicly accessible content. However, it’s a pain in the ass to constantly go through the cycle of sourcing ad partners, closing deals, and managing the relationship.

Problem #3: Sustainable growth is hard

I love reading newsletters but I’ve found myself subscribing and unsubscribing to paid newsletters pretty frequently these days. There’s only a finite amount of time I have to read newsletters each month and I inevitably end up paying for a few that I never actually read.

I try to support writers even if I’m not reading their work but I wonder how many independent newsletters will end up being successful as more get started over time. I think bundling newsletters is a potential antidote to newsletter fatigue which we’ll cover in a bit.

Problem #4: Risk of burnout

Writing is hard. Writing every week is really hard. Writing something so good every week that people are willing to pay you is really fucking hard.

There needs to be better ways of helping writers collaborate so they can share the workload, make a sustainable living and feel like they’re being their best creative selves.

How crypto can help

Contrary to what many crypto people will lead you to believe, crypto can't solve all of the world's problems. But it's pretty good at a few things.

Here are some ways crypto can enable new models for newsletter businesses.

Reduce the risk of going independent through a global permissionless crowdfund

Crowdfunding has existed on the internet for a while now. But the main issue is that it can be restrictive. Many times, crowdfunding platforms limit who can contribute based on where you live geographically or whether you’re an accredited investor.

Crypto enables global permissionless crowdfunds. As long as you have an Ethereum address and some ETH, you can participate. This opens up the opportunity for people all over the world to raise money for any creative project.

This past summer, Stir had a cool drop where creators could spin up a landing page and build an email list of supporters before going independent. But what's the crypto-native version of this?

With crypto, creators can spin up a landing page that allows supporters to send ETH and ERC20 tokens to an escrow contract in return for a newsletter token. Once the creator is ready to go independent, the funds could be streamed to the creator and backers could reduce fraud risk by periodically voting to ensure the creator is hitting certain milestones. Early contributors can also share in the upside by receiving dividends in proportion to how many newsletter tokens they hold.

In crypto, bits are money. As a result, we can develop clever systems for reducing risk and aligning incentives between creators and their communities.

Monetize through NFTs

I’m surprised I got this far without mentioning NFTs 🥴 Beyond the hype, I believe NFTs are a key primitive for helping creators unlock value.

NFTs turn any digital media file (eg essays, songs, art, podcasts, etc.) into an economic asset that can be monetized directly. Instead of being limited to subscriptions or ad revenue, you can monetize each individual essay by minting it as an NFT and selling it to your superfans as a collectible. This enables digital media to be monetized without a paywall or ads.

We’re still super duper early, but I think this gets really interesting when tools are built to turn essays into their own IP universe.

Imagine you want to do an in-depth profile on Drake. You could raise money through a crowdfund, commission an artist to create digital art pieces that reflect themes in the report, mint them as NFTs and sell them as collectibles. You could also auction off access to exclusive communities and discussions.

The takeaway here is that NFTs open up an entirely new design space for monetization that we’ve still barely explored.

Accelerate growth through community ownership

By using crypto rails, you can issue tokens to your community to align incentives and supercharge growth. I think the coolest thing you could do with a newsletter token is give token holders a percentage of future earnings in the form of on-chain dividends. As revenue accrues to an on-chain treasury for the newsletter, token holders can periodically receive payouts.

Token holders can also participate in governance decisions like what topic a writer should cover next, what media formats they should expand to, and what writers should be added to the bundle.

Similar to NFTs, the design space for newsletter tokens is still underexplored. Yet, I believe crypto's ability to align communities through economic incentives will help creators develop new models for acquisition, engagement, and retention.

Easily create bundles / collectives through standard smart contracts

Only the most talented writers will be able to build a sustainable business as a one-person show. I think the majority of writers will end up joining some sort of bundle or collective. Collectives are a great way for writers to increase distribution, optimize willingness to pay, and reduce burnout risk.

We’re still early, but crypto provides powerful tools for building shared collectives around creative work. If you want to create a newsletter bundle in web2, you’ll probably need to build a complex stack for tracking analytics, executing revenue share agreements, a CMS, a branded website, and more.

If you squint, these newsletter bundles start to look more like SaaS businesses than writer collectives. Talented techies can make this work, but most writers can’t. Cryptonetworks natively provide tools that make these types of collectives much easier to start, scale, and govern.

Things like royalty payments and rev shares will eventually become standard smart contracts that anybody can plug into. The best part is that you don’t need to trust that the collective will compensate you fairly. As long as you use a standard smart contract, you can be pretty confident that you’ll get paid based on a deterministic set of rules.

Once we build these standard smart contracts, I believe it’ll eventually become the default way for creative work to be produced, shared, and owned on the internet.

Hard problems

To reiterate, this stuff is still quite speculative. We have ideas about how this could work in theory, but still need to prove them out. Here are some of the hardest problems today with building crypto-native newsletter businesses.

Onboarding sucks

Before you can participate in a cryptonetwork like Ethereum, you need to install a smart wallet and turn fiat into ETH. It’s not rocket science, but it’s also not anything like signing up with an email and password. You also need to overcome the mental hurdle of trusting these decentralized systems. (“What do you mean it’s not FDIC insured?”)

High gas fees

High gas fees price out large swathes of the population from buying ETH and minting NFTs. There are a lot of really smart people working on solutions like L2 protocols, new L1 blockchains, cross-chain bridges, Ethereum 2.0, etc., so I’m pretty confident this will get solved eventually.

Writing secure, composable, and powerful smart contracts

If you’re a decent software engineer, it’s fairly easy to learn how to write smart contracts. However, it’s difficult to write secure contracts that can handle billions of dollars of volume without being exploited. The best smart contract engineers also have a deep understanding of mechanism design and domain expertise in whatever they’re building. We need more world-class engineers building these systems.

Regulatory compliance

If a newsletter token just serves as a way to access exclusive content and participate in community governance, then it probably passes the Howey Test (this determines whether a digital asset should be regulated by the SEC as a security). However, things get murky when token holders begin receiving cash flows.

I believe in the importance of securities laws to protect consumers but I also believe in the power of creators building decentralized economic networks. We need more thoughtful discussions around how to reconcile the tension between regulation and decentralization.

Product roadmap

Here are a few features and tools I’d love to see built for crypto-native media businesses in the next few months. These tools can also be abstracted in a way that they can be reused to support any sort of creative work. Whether that's a collective for musicians, digital artists, podcasters, etc.

Moar smart contracts

Crypto-native media businesses have a few components: tokenized crowdfunding, publications, ability to mint NFTs, community governance, a treasury, etc. There are some smart contracts that perform these functions but we’ll need standards and audits around these contracts so developers can compose and remix these features as they please.

Developer tools

One of the common complaints with existing newsletter products is that they don’t offer enough customization. Crypto-native newsletter products should be easy to customize like a SquareSpace site or Webflow. To do this, there needs to be easy to use tools like subgraphs and SDKs for 3rd-party developers to build their own interfaces for on-chain data.

Better writing experience

Mirror has already added the ability to include crypto-native features like crowdfunding and NFTs into essays but what are other ways we could make writing more expressive and multimedia? What does a crypto-native version of Notion look and feel like?

Build an economic social graph

In Web2, social graphs are weighted based on engagement metrics such as likes, retweets, shares, etc. In Web3, bits are money. Therefore, we can build social graphs weighted based on economic engagement. For example, what if I could go to your Mirror profile and see all the projects you contributed to, how much you contributed, how early you were, and how much money you made?

Food for thought - what would a “Crunchbase for Creators” look like using crypto rails?

Marketplaces

There really is no such thing as an independent writer. All creative work is collaborative. Maybe you have an editor, or a researcher, or a graphic designer.

So how do we build crypto-native marketplaces that allow people to easily find jobs they’re suited for and get compensated fairly?

Community-driven capital allocation

How do we build tools for people to post bounties for creative work they'd like to see, get it crowdfunded, let contributors decide who gets to perform the bounty, and allow supporters to share in the earnings?

How do we help products spin up crypto-native creator funds where the community decides who gets to receive investment? How do we help the community receive a share of the earnings produced by the selected creators?

Closing thoughts

From the outside looking in, a lot of stuff in crypto looks like overengineering.

Yet, I think we’re just starting to understand the importance of helping creators tap into a global permissionless economic network. The importance of helping creators monetize their work in new and creative ways. The importance of helping creators build economically incentivized communities.

Crypto isn’t just a new technology, it’s a new philosophy for how creative work is produced, shared, and owned on the internet. As one artist said on Clubhouse a few nights ago: “power to the fucking creators”.

Three years ago, I was about to graduate college and still had no idea what I wanted to do. I studied Finance but after a few internships, I realized I wasn’t meant to be in a cheap suit from JCPenny cranking out discounted cash flow models until midnight. At the time, a friend of mine had just finished a coding bootcamp and suggested I try learning to code.

It was my senior year so like any rational person, I decided to stop going to class so I could code all day (sorry mom). Over the next few months I picked up web development, built full-stack apps, and did so many Leetcode problems that you’d think it was a form of capital punishment.

Once I graduated, I bought a one-way ticket to San Francisco and stayed on a cozy air mattress in my friend’s living room. Over the next few months, I did some contract work for my friends at Career Karma and eventually landed a job as a software engineer on the growth team at Instacart.

A little over a year later, I was looking to work at an early stage startup so I got in touch with a DeFi startup called Dharma. I had no clue what DeFi was but it was using this crypto thing I vaguely remembered hearing about a while back. After speaking with the team about their vision for a decentralized bank, I was red pilled.

I joined the team but started having imposter syndrome in my first meeting. They talked about counterfactuals, meta transactions, proxy contracts, on-chain this and off-chain that. After the meeting, I had a mini dictionary worth of terms to look up on Wikipedia that night. Then we got to lunch and the entire team passionately debated token economics, incentive structures, governance mechanisms, and all this other stuff I had no clue about. I quickly realized this crypto thing wasn’t just slightly different than existing systems. It was completely different.

One of my favorite things about crypto is that it’s not just a technology. It’s a philosophy. It’s a belief system. It’s a way of viewing the world. It’s about questioning conventional systems and not caring if everyone else thinks you’re batshit crazy.

Over the next few months, I learned more about cryptonetworks and how they worked under the hood. I remember the “aha moment” when I wrote my first smart contract. With just a few lines of code and a private key, I was able to transfer an internet-native currency anywhere in the world in seconds.

I didn’t have to sign up for Stripe. I didn’t have to use the Plaid API to connect a bank account. I didn’t have to check if TransferWise supported payments for a specific country. There was no centralized party. Just a peer-to-peer cryptonetwork called Ethereum. It was pretty damn mindblowing.

After the first few weeks at Dharma, I was confident that DeFi and crypto were the future. But I also got the itch to work on some of my own ideas. I wanted to build software for creative people. Writers. Artists. Musicians. Online teachers. I strongly believe our world depends on these types of people having the tools they need to serve their communities as best they can.

Frankly, I also thought it would take a couple years before the crypto industry had the infrastructure in place for a mainstream consumer app to be built.

So I ended up leaving Dharma to take some time off and explore a few startup ideas. But a couple months ago I read a manifesto by Zora that changed how I thought about crypto.

It described a world where crypto could be used to give any digital media file (eg an image, a song, an essay, digital art, etc.) property rights. It explained how cryptonetworks could turn digital media into liquid financial assets, secured through cryptography, and programmable through smart contracts.

Although the individual ideas weren’t new, they were combined and articulated in a way that just made sense. And not just to me.

Digital artists, athletes, social media influencers, tech executives, media executives, and journalists that never took the crypto weirdos seriously, seem to be taking notice.

But let’s be real. Is this latest NFT craze a bubble? Probz. Yet, is there at least a kernel of value in the idea of ownership over creative work? I think so.

So where do we go from here?

Well, there’s been a lot of talk about high transaction fees and lack of scalability in these systems. Although I do think these problems should and will get fixed, a lack of technical scalability is kinda the point.

Cryptonetworks trade off technical scalability for social scalability.

Facebook is technically scalable because it’s a social network that processes millions of transactions per second. Meanwhile, Bitcoin is socially scalable because it’s a trillion dollar economic network without a centralized authority.

Crypto isn’t just a technological revolution. It’s also a revolution in capital formation and human coordination. How creative projects are funded. How groups of people are incentivized. How organizations are structured.

Years from now, when I’m old and senile, I believe we’ll look back at this period as an Internet Renaissance of sorts.

A time where we dared to fight back against systems that have been designed for centuries to elevate certain groups and keep others disenfranchised.

Who knows though. Maybe all this crypto stuff really is just an intellectual ideal that’ll never work in practice. Regardless, I think it’s at least worth trying.