The core step change that web3 enables is that you can now truly own digital assets, in a way that is as verifiable as real world assets and immutable (unchangeable), similar to clothes that you own.

Previously I could buy a digital asset (e.g. a skin in a Fortnite) but that wasn’t really mine, if Fortnite shut down I’d lose it, if Fortnite closed my account I’d lose it. Moreover, I could only use the skin on Fortnite, so I only own it in Fortnite world – in web3 if I own an asset, I own it and can use it on any platform on which it can connect.

Similarly, I can now own digital assets associated with brands and do with them what I like, they are “composable”.

Why Digital Assets are better for identifying community than physical

1. Digital assets do not deteriorate in the same way as physical assets

2. It is easier to show origins of digital assets than physical as you can trace origins and more easily weed out fakes

3. Lower barriers to movement and composability – easier to transfer ownership online than via physical mail systems, and easier to build things (e.g. communities, utility) on top of digital assets than physical

Core web3 value levers for brands

1. Revenue from NFT Sales and/or royalties

2. Organic marketing through the web3 brand community

3. Increased closeness with a more vocal/active and therefore a more engaged community - leading to a better product and more revenue for the business

   1. NFT community is also financially tied into the success of the brand through value accretion for the NFTs that they own, but do not eat into the brand’s profits

Web3 Activation Strategy

We split Web3 activation strategy into 4 levels. At each level the amount of autonomy and decentralization that the community has increases. Brands have the power to halt this progress at any of these 4 stages. Every step that the brand takes across this chain also helps to build out the brand’s web3 social graph, which will enable them to better understand their core community.

1. NFTs for activation

   1. Launching an NFT collection through:

      1. i. An initial sale; or

      2. ii. Using work to earn and other creative activation tools to release the NFTs

   2. Core objectives are to:

      1. i. Bring non-web3-native members your current brand community into web3

      2. ii. Activate the web3 native members of your brand’s community

      3. iii. Leverage web3 opportunity/PR to activate for your brand

2. Brand NFT community forms and acts as both:

   1. A closer voice for the brand

      1. i. Brand now have an active web3 community and a mechanism for you to listen to them

      2. ii. Community is incentivized for brand to do well as they are tied into the upside as value will also accrue to the NFT/token

   2. b. Organic marketing tool:

      1. i. Community activity will provide coverage for your brand

      2. ii. Brand token holders can all be identified on chain, and can form a home in a token-gated channel like discord; through which they can co-ordinate/work together with a joint purpose

      3. iii. Community can leverage a treasury to fund activities that the community think of as good

3. Decentralized Autonomous Organization (DAO) formation:

   1. a. Community expands and usually launches a fungible token.

   2. b. Side web3 ecosystem (DAO) built beside the business and owned by the community, leveraging more interesting:

      1. i. Tokenomics (e.g., staking, burn mechanism, LPs)

      2. ii. Incentive design

      3. iii. Token utility

   3. c. DAO is built through leveraging the brand’s existing community and shares the brand’s purpose. DAO does not absorb the profits of the existing business and instead benefits the business through the three core web3 value levers

4. Company owned by the DAO

   1. a. Same as above, but now the brand is in effect sold to the community

   2. b. Most likely happens if the DAO reaches a sufficient value to acquire the brand at more than an IPO value

New attempts continue to take place, with Purdue university introducing their new student financing options tied to income share, and upstart institutions like Make and Lambda school financing new students through income share agreements, which are then sold as securities to investors. Lambda has recently come under scrutiny for violating California Consumer Financial Protection Law.

However, I believe the fundamentals, particularly for education are strong enough to make take-up at some point an inevitability.

Money now is more valuable to people than money later

a.    Incomes generally increase with age, disposable incomes are highest in the latter years of work when incomes are highest and cost of living is lowest

b.    Happiness achieved per incremental dollar is also much higher for those on lower incomes and caps off at a certain point ~$75,000

c.     Return on investment in education and early career development is high – both for intrinsic skill sets learned, as well as network, signalling and other value

d.    Experiences generally generate more happiness than things, and certain experiences are less easily attainable with age for obvious health reasons

Societal benefit

If the investment is skewed towards education and training - the outcomes also include a more skilled and educated workforce. If applied correctly this should correspond to proportionate increases in innovation, and therefore overall improvements in living standards.

Competition for returns ever-growing

Financial institutions are incentivised to find new ways of generating those returns – Friedman and Kuznets (1945) posed that return on investment for human capital was higher than for physical capital

Invest in everything economy growing

As securitisation becomes easier, the ability to invest in different things also becomes easier, from whisky, to art, to music masters

People invest more than they give to charity

Americans donated a total $449.64bn in 2019, 69% of which was from individuals, in comparison, the US stock market had $37.7T invested in it in 2019. Investment that improves prospects for the investee is better if it improves their overall outcomes.

Student debt crisis growing

The actual student debt burden stands above car and credit card debt at $1.6T in 2019 and it is growing at 7% per year, expected to exceed $2T in 2021 and $3T by 2030.

There is an additional mental and physical health burden that has long-term negative impacts on the economy and workforce productivity, not to mention happiness

Additional benefit to human capital investment

The best investors are those who are either super active or completely passive. Investees will benefit from network access, mentorship, and other decision-making advice, all of which should positively contribute to their earning potential and impact on society

Some fields cannot access debt

Fields such as the creator economy have large groups of people who cannot easily access debt, despite having large amounts of name recognition and decently sized fan bases. Income share agreements can allow people in these high risk and unstable fields to stabilise their incomes and also leverage their fan bases.

This stabilisation can even be done through schemes like pooled income, for example where everyone in the BRIT school class of 2021 can agree to pool 10% of their income, allowing the entire class to try to take more risk in an industry where revenue is concentrated around the 1%. If the class produces an Adele, then the whole class benefits. The rest of the class is the incentivised to help eachother too succeed whilst also having the stability of multiple salaries.

Assuming that these sorts of income share agreements are going to scale, it’s vital that Governing bodies begin to set ground rules for them.

As always, please do reach out with comments and feedback or feel free to email or message me on LinkedIn or any socials.