Sector: web3

Blockchain Network: Ethereum

Token: ETH | ERC-20

Product Status: Hypothetical Concept

Traction: One web3 firm has formally announced a plan to implement SBTs thus far

Takeaway: Soulbound tokens are a pragmatic use of technology, but it’s important to consider the potential pitfalls and ethical dilemmas associated with them. Starlight Kitchen is actively weighing the pros and cons of implementing soulbound tokens at a broad scale. 

Introductory Perspective

Social credit systems can be defined as a tool through which individuals are assigned a personal score - similar to a credit score - that fluctuates based on their actions, interactions with others, and their overall contribution to society, or lack thereof. Essentially, the closer a person’s character aligns with established social norms and expectations, the more privileges they’re afforded. Currently, China is the only country that has a social credit system. China’s social credit system takes nearly everything about a person into account - from their driving habits to their willingness to volunteer and help others - by capturing vast amounts of highly personal information. The goal of a social credit system is simple: incentivize people to be the best, most trustworthy citizens possible in an effort to assist people in quickly making informed judgements about others; and from a business perspective, social credit systems should make it easier for companies to hire fantastic employees. In reality, China’s social credit system limits upward social mobility and opens the floor for individuals to face ostracization and discrimination.

Abstract

Soulbound tokens, or SBTs, are non-transferable NFTs intended to visibly prove that the person behind an online profile or digital avatar is exactly who they say they are. More specifically, SBTs will be used to validate credentials, life experiences, memberships, and personal achievements in an anonymous manner that still enables people to establish trust and credibility with one another. Establishing trust and credibility while maintaining anonymity on the Internet is of growing importance as peoples’ dependence on the Internet for both professional activities and personal socialization continues to increase; although the notion that peoples’ entire life stories may effectively be on display for other people to see feels like something out of a dystopian future and presents a plethora of ethical dilemmas that must be discussed and addressed before widespread adoption takes place.

Problem

As it stands today, the Internet serves as an enabler for the facilitation of anonymous interaction; it’s generally easy for digital citizens to hide behind non-revealing usernames, fake profiles, and the screen that sits in front of them. In some cases, the anonymity afforded by the Internet is essential: it’s important for informal whistle-blowers to have a platform that enables them to speak freely without fear of being terminated by their employers; in countries with harsh censorship laws, it’s imperative for righteous people to have a means of anonymously spreading valuable information that would otherwise be inaccessible; and it’s important for at-risk-of-harm LGBTQ+ individuals to be able to safely interact with each other online without revealing their true identities. However, the anonymity afforded by the Internet to its users presents new and emerging challenges as society becomes increasingly dependent on the global network for both work and socialization. In its current state, there isn’t an established system in place that [1] enables users to remain anonymous and [2] also enables them to establish trust and credibility with each other. 

Solution

Thanks to the transparency and anonymity afforded by the public blockchains on which they will reside, soulbound tokens can help guarantee that digital citizens may remain anonymous while showing others that they’re exactly who they say they are through the tokenization and publication of life experiences, credentials, achievements, and memberships on the blockchain. 

Product

Public blockchains allow anyone with Internet access and a web browser to quickly and easily use a block explorer that reveals what other people are doing with digital assets and tokenized data. A crucial element at play is that there’s no KYC that goes into setting up decentralized wallets, making them completely anonymous to everyone but the wallet holders themselves. Rather than using names or any other legal identifiers to tie on-chain activity to individuals, web3 wallets simply come with an associated randomly generated address, also known as a public key. By design, anyone can glance inside of anyone else’s web3 wallet by entering a public key into the search bar of a block explorer, without ever finding out who actually owns the wallet and the stored digital assets and tokenized data therein. Therefore, if applied correctly, blockchain technology can be used to establish credibility and trust between parties and across networks. 

An important caveat to keep in mind is that soulbound tokens cannot be transferred, purchased, or sold. While it seems impractical, this feature ensures that people cannot use SBTs to generate false personas. Therefore, every SBT starts with the soul itself. Souls are custodial wallets managed by the organizations, firms, and agencies that wish to distribute soulbound tokens. For example, school districts could have souls through which they’ll be able to airdrop tokenized high school diplomas to graduates. 

A common misconception pertaining to SBTs is that once received in a digital wallet, the holder cannot do anything to hide it or make it go away. While certain SBTs like college diplomas will surely be kept on display in wallets indefinitely, the aforementioned misconception is nothing but a misconception. Humans undergo change throughout the course of their lives and to reflect that understanding, soulbound token holders will likely have two options to demonstrate real-world personal change or growth in their digital avatars and online profiles: [1] soulbound token holders may reach out to the custodian that originally airdropped the SBT to have it removed or [2] soulbound token holders will likely have an option to select SBTs they wish to keep hidden from the public.

Use Cases

Because soulbound tokens will be used to afford digital citizens with both the anonymity and credibility they desire, the list of use cases is extensive and spans far beyond the following:

Tokenized Credentials

• High School Diplomas 

• University Diplomas 

• Professional Certifications

• Security Clearances 

• Operating Licenses

• Employment History

Tokenized Memberships

• Proof of Citizenship 

• Religious Affiliation 

• Professional Organization Affiliation

• Political Party Affiliation

• Employment Status

• Gym Passes

Tokenized Life Experiences

• Airline Tickets

• Concert Tickets

• Play and Movie Tickets

• Sporting Event Tickets

• Amusement Park Tickets

• ‘First-Timer’ Badges

• Marathon/Triathlon Bibs

• Ski Lift Passes

Tokenized Achievements

• Boy/Girl Scout Badges

• Honors | Distinctions | Awards

• Employment Promotions

• High School Diplomas

• University Diplomas

• Professional Certifications

• Olympic Medals

• Milestone Peloton Rides

Ethical Dilemmas

The widespread adoption of soulbound tokens could easily result in the emergence of a global social credit system, where individuals are judged solely by the contents of their digital souls. While the predominant use of soulbound tokens to validate that people are exactly who they say they are would likely mitigate ongoing social issues such as discrimination against individuals for their race, gender, or sexual orientation would likely be resolved, other forms of discrimination would likely take their place. On one hand, some suggest that discrimination based on personal characteristics - the unchangeable physical and psychological traits that are genetically inherited - is the worst form of discrimination and therefore, an anonymous, virtual reality in which the only things that matter are life experiences, credentials, and organization affiliations would be far superior to the current state of society. On the other hand, an anonymous, virtual reality in which the only things that matter are life experiences, credentials, and organization affiliations would easily give way to discrimination rooted in unfair, situational discrepancies. For example, if a person is judged by the amount of international flights they’ve taken, the amount of concerts they’ve been to, and the amount of professional organizations they belong to, an unfair playing field is created that heavily leans in favor of affluent individuals. Moreover, it would create an even more competitive and expensive life; if people are all of a sudden judged by the amount of ‘cool’ real-world experiences they have under their belt, those $600 Coachella tickets are going to soar to $6,000, the price of international travel will skyrocket, and life will devolve into a constant attempt to one-up the other person. And that’s just the tip of the iceberg. 

On the flip side, soulbound tokens may have tremendously positive side effects. ‘Cancel culture’ is a major societal plague, as it falsely invalidates the idea that people are capable of change, while effectively eliminating any chance one has at experiencing upward social mobility.  However, if everyone’s life experiences, organizational affiliations, and credentials are made public, nobody would be at risk of being ‘canceled’ because everyone would be at risk of being canceled for at least one thing. In essence, most people would have a poor mark somewhere in their digital soul, and soulbound tokens would simply prove the point that absolutely nobody is perfect, so nobody should judge anyone. Moreover, the trend of virtue signaling as a means of flexing one’s moral correctness would likely disappear with the widespread adoption of SBTs because true character could be reflected by the soulbound tokens stored in holders’ wallets. That being said, this raises an important question: should people have their entire life story and moral compass on display for others to see, even if it’s completely anonymous? Another potential outcome caused by the widespread implementation of soulbound tokens is that they would allow people to truly find similar people on the Internet. Online communities are growing in size, and soulbound tokens have the power to ensure that private communities can admit members that actually share a subset of traits. Then again, dependence on soulbound tokens as a means of identifying similar people on the Internet would inevitably lead to newfound levels of ostracization and discrimination.

Given that one use case for soulbound tokens is their ability to reflect membership in organizations, think about the following [grim] scenario: A young, vulnerable man is indoctrinated by a group of white supremacists and upon his initiation, he receives a soulbound token signifying his involvement and membership. In theory, tying a soulbound token to his online profile or digital avatar would actually present the benefit of most Internet users automatically knowing to distance themselves from the young man, but it would also present an issue in the sense that other white supremacists around the world could easily find him and join forces to spread more hate. Two years later, the young man has a complete change of heart, undergoes tremendous personal growth, and reaches a point in which he recognizes that his beliefs have changed for the better. Is it fair for him to still have an SBT reflecting his ties to the white supremacy agenda even if his past beliefs have changed for good? In a pragmatic sense, that’s akin to him visiting a tattoo laser removal specialist to have a swastika tattoo removed from his forehead and being turned away at the door. It’s theorized that soulbound tokens can either [1] be removed from wallets if the wallet holder reaches out to the custodial soul that issued the token or [2] holders will have the ability to hide them from public view in their wallets. That being said, a potentially dangerous situation is created for the young man if he reaches out to the white supremacy organization he once associated with and asks to have the SBT removed from his wallet. Sure, he could still hide the soulbound token from public view, but it will still live in his wallet forever. One could argue that the young man should have to always know the SBT exists in his wallet to remind him of his previously held, misguided beliefs. However, is it fair to the young man - one that put in the time and effort to change for the better - to have to see the SBT that may remind him of his dark past? Such a case could wreak havoc on his mental health. 

Key Takeaway

As mentioned above, the anonymity afforded by the Internet to its users presents new and emerging challenges as society becomes increasingly dependent on the Internet for both work and socialization. In its current state, there isn’t an established system in place that enables users to remain anonymous while also enabling them to establish trust and credibility with others. Soulbound tokens may very well be the answer, but only time will tell, for they’re only an idea at the moment. Widespread adoption of soulbound tokens will not happen overnight; their proliferation will likely go unnoticed until at least 2024 during the next anticipated cryptocurrency market bull run. That being said, for those that have sidelined cash or stablecoins and are willing to engage in a sufficient amount of personal due diligence, it may be worthwhile to keep an eye out for investment opportunities related to SBTs and capitalize on the first-mover advantage.

Finally, it’s incredibly important to remain cognizant of the ethical dilemmas associated with soulbound tokens. They’ll likely exist for good reason, yes, but potential stakeholders - every digital citizen - must understand the potential ramifications associated with tokenizing highly personal, identifying information and pushing it onto the blockchain for everyone to see. And sure, anonymity is a guarantee in the sense that rather than being attached to legal names, SBTs will be attached to randomly generated wallet addresses, but over time, SBT holders are bound to be recognized by their wallet addresses and online profiles or digital avatars, defeating the argument that SBTs will create a completely anonymous yet transparent environment. 

One Last Thought

The rate of widespread soulbound token adoption will likely depend on the overall performance of the cryptocurrency market; whereas the level of implementation - the quantity of tokenized data points per soulbound token holder - will likely depend on society’s reaction to the associated ethical dilemmas that arise, and how people choose to navigate them. 

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Sean Eisenstein

Managing Partner | Starlight Kitchen

Sectors: Knowledge Exchange | web3 | Social Media

Blockchain Network: Polygon

Token: EPI | ERC-20

Token Status: Minted

Key Tokenomics: Staking Pool | Smart Contract-based Distribution | 1 Billion Tokens | Fixed Supply

Interfacing Wallet: MetaMask

Status: Product is Live in Beta | Product Alpha Goes Live on Polygon Testnet in June 2022

Traction: 2,153 Twitter Followers | 2,877 Discord Community Members | Established Network of Ambassadors

Team: 7 Employees

User Geography: [Based on Web Traffic] India | Indonesia | Nigeria | Bangladesh | United States | Canada

Takeaway: Intended product aligns with Starlight Kitchen’s innovation theories and investment philosophy pertaining to the web3 space

Abstract

Epist, a web3 development undergoing a strategic buildout on the Polygon L2 blockchain network, is designing a knowledge economy that is both decentralized and incentivized. The social knowledge exchange utilizes existing smart contract technology and the transparency afforded by the L2 blockchain’s architecture in a manner that aims to disrupt the growing global knowledge exchange economy.

Introduction

Inspired by the idea that everyone is an expert in something, the founders of Epist identified the need for a better knowledge sharing platform - one that appropriately incentivizes the exchange of knowledge - unlike existing web2 platforms. The company name itself is derived from the word, ‘epistemology,’ which loosely translates to ‘the study of human knowledge.’ Humans have been exchanging knowledge with one another for hundreds-of-thousands of years, as demonstrated by the geographic spread of similar technologies that were developed at similar times. The latest and greatest addition to the human toolbox, the Internet, was originally intended to facilitate the exchange of knowledge between scientists in real time from every corner of the globe in a coordinated effort to exponentially increase the rate at which scientific advancements are made. Needless to say, the Internet evolved [or devolved, depending on how you frame it] into far more [or less] than was ever intended; and the exchange of practical, accurate information is therefore difficult to facilitate and moderate. Accordingly, Epist aims to restore a piece of the Internet that was largely lost to the rise of the dot-com and the monetization of the Internet by centralized entities.

Problem

The Internet was originally created as a vehicle through which individuals around the world could exchange information and knowledge in real time. Unfortunately, the monetization of the Internet by centralized platforms has created a virtual realm in which the exchange of information online is often the last thing people want to partake in. Through interviews with regular Internet users, the team at Epist discovered that people are unsatisfied with the current state of knowledge sharing due to misaligned incentive structures, an excess of spam content on platforms, and a lack of user trust in self-proclaimed experts. 

Wikipedia, for example, was designed to be an online encyclopedia that covers every facet of every subject, existing as a modern-day Library of Alexandria. Unfortunately, its contributors don’t have any incentive to contribute content. Wikipedia claims that, “It is your choice to contribute a little, to contribute a lot, not to contribute, or to contribute short-lived vandalism instead.” Because Wikipedia relies on un-vetted volunteers to contribute their knowledge to the platform, it is frowned upon and often completely unacceptable to cite Wikipedia articles as sources in academic settings, regardless of how accurate they may be. 

Reddit, for example, was designed as a social media platform on which users could interact with one another by sharing relevant information in the form of text, videos, images, links, infographics, and more. Moreover, inherent to Reddit is a voting system on which users can up-vote and down-vote other users’ posts to ensure the best ones are found at the top of a longer thread of content related to a subject. The voting system on Reddit is designed so that users can earn Karma tokens when their posts are up-voted by enough people. Unfortunately, Karma tokens can only be used on the Reddit platform and have no monetary value within and outside of the platform itself. Additionally, the monetization of Reddit’s platform by its shareholders has transformed the knowledge-sharing vehicle into a cancerous and often toxic environment with online bulletin boards that are riddled with spam posts, irrelevant information, X-rated content, and personal anecdotes that often spark conversations completely unrelated to the original topic of intrigue. 

Quora, for example, was designed to be an online Q&A platform through which anyone can ask a question and hopefully receive a relevant, factual answer. Like Wikipedia and Reddit, knowledge contributors on Quora do not have to undergo any sort of vetting process. Moreover, the monetization of the platform, due to its centralized ownership, has created a Q&A vehicle that is littered with advertisements. Additionally, because Quora lacks an incentive mechanism for users to share knowledge with one another, it is reasonable to assume that there exists an abundance of valuable information that isn’t being shared with other people. 

The problems with the aforementioned knowledge sharing platforms on the web2 layer of the Internet have created an environment in which finding accurate, relevant, and reliable information can feel like a burden. While Google searches can return billions of search results in a fraction of a second, they still require digging through walls of text or lengthy videos. Similarly, while credible search engines like Google Scholar exist for good reason, most Google Scholar searches return entire PDFs of information written in academic text that hinder accessibility and usability for lay-people in search of a simple answer. With all of this in mind, the need for a better online knowledge sharing process is abundantly obvious.

Solution

The solution to the aforementioned problems is easy to recognize, yet seemingly impossible to pull off if past performance is indicative of future success [sometimes it is and sometimes it is not]. To better facilitate and incentivize the transmission and exchange of knowledge between parties in an online setting, a special kind of platform is needed:

• One that is free from the reigns of centralized ownership

• One that appropriately incentivizes knowledge transmission and diffusion

• One that appropriately incentivizes participation among users

• One that has a built-in vetting mechanism to ensure those with questions can obtain answers from verified experts on the subject matter at hand

Product

Epist is a self-described Answer-to-Earn [A2E], verifiable knowledge economy that is guided by the underlying belief that everyone is an expert in something. Epist aims to address the previously discussed problems associated with existing web2 knowledge exchanges by incorporating various tactics used by other social knowledge exchange platforms and assigning tangible, IRL value and utility to them, as mentioned in the previous ‘Solution’ section. Epist’s platform works as follows:

I. Anyone with a question, a MetaMask wallet, and EPI tokens is welcome to type out a question and post it on the Epist platform in hopes of receiving an answer from a qualified party

II. To incentivize qualified individuals to come forward and share their knowledge with the question-asker, the question asker must:

A. Attach a bounty to their question by staking EPI tokens in a smart contract on the Polygon blockchain network

B. Set an expiry time for the question they’re asking

• The expiry time will likely vary on a question-by-question basis, as some question-askers may want or need answers sooner than others

• Staking EPI tokens and setting the expiry time sets the smart contract in motion

C. Once the question-asker signs the transaction via a signature prompt from their attached MetaMask wallet, the countdown against the expiry time begins and the floor is opened for knowledge-contributors to come forward and compete to answer the question at hand

III. As knowledge-contributors post answers to the question in hopes of being awarded the posted bounty staked in the smart contract set in motion by the question-asker in step II, other Epist users are encouraged to come forward and interact with the knowledge contributions [answers] by up-voting and down-voting posted answers in a manner they see fit

• Those who voted for the answer that ultimately receives the bounty will automatically receive a small percentage of the sum of the bounty itself via the smart contract set in motion by the question-asker in step II

IV: At the time of expiry, the question-asker from step II is prompted to close out their question by choosing the best answer to award via a transaction-approval request from their MetaMask wallet

• The voting incentivization [Epist refers to it as ‘Voter Rewards’] is designed to assist question-askers in choosing the best answer to their posted question

• Presumably, the best answer will have the most up-votes, which shows the question-asker that they should choose that answer to reward with the bounty

V: When the transaction is confirmed through MetaMask, the smart contract automatically distributes its staked EPI tokens in the following manner:

• Majority of the bounty is sent to the wallet held by the selected knowledge-contributor

• A small % of the bounty is evenly distributed to the wallets held by users that interacted with the answer that was selected by the question-asker [Voting Rewards]

• A small % of the bounty is proportionally distributed to the wallet addresses connected to Epist’s on-platform staking pool

  • The on-platform staking pool is similar to other DeFi protocols

  • The on-platform staking pool enables staked EPI tokens to [potentially] accrue interest over time

• A small % of the bounty is sent to Epist’s custodial, multi-signature wallet that is used to fund platform maintenance and marketing endeavors

An important caveat with Epist’s platform for users to keep in mind, is that should a question remain unanswered at the time of smart contract expiry, the question-asker ought to take it as a sign that they need to raise their initial bounty. Based on market dynamics, the idea that there is a right price for everything, and the tendency for people to gate-keep perceptually advantageous knowledge, users should also be aware that a question dependent on the transmission of niche local information, such as, “Which donut shop in Costa Mesa, California has the best-tasting gluten-free donuts?” will likely require a higher bounty than a more general question like, “What is the current CDC guideline for quarantining upon exposure to the COVID-19 virus?”

Presumably, once the team at Epist has more data to work with, they’ll have the ability to add a feature that supplies question-askers with AI-generated bounty-size suggestions to minimize the amount of questions that go unanswered.

Tokenomics

From a tokenomics standpoint, the EPI token comes with a fixed supply of one billion tokens, meaning that the EPI token contract on the Polygon blockchain network simply does not allow for the creation of any more tokens. All one billion tokens are minted, though they’re currently held in Epist’s custodial multi-signature wallet until the team enacts a distribution strategy, which is still in the works. To incentivize users and investors to hold their EPI tokens, in an underlying effort to maintain the price level of the tokens, Epist has an on-platform staking protocol in which token holders may stake their EPI tokens to earn reflections from the bounties raised [staked in the smart contracts] by question-askers, as mentioned in the above Product section of this report. Over time, the rate of staking returns is anticipated to slowly decline as the platform gains more token holders that choose to stake their EPI tokens; although investors and users should note that the staking protocol serves as an important tool to incentivize token holding during the platform’s formative years.

A growing trend amongst web3 projects is the utilization of X-to-Earn incentive mechanisms that reward users for their time spent engaging with content. Axie Infinity, for example, is revolutionizing the gaming industry by incorporating a Play-to-Earn [P2E] incentive mechanism that, quite literally, pays its users for playing the game. Importantly, unlike most existing X-to-Earn incentive mechanisms [including Axie Infinity] whose platforms have recently imploded, Epist’s A2E incentive mechanism comes with IRL utility: it incentivizes users to exchange real-world, usable information and knowledge. Therefore, one can argue that Epist’s A2E platform serves as a functional bridge between the real and digital worlds.

TAM | SAM | SOM

Total Addressable Market [TAM]

Given that Epist is a web3 platform that requires its user-base to be comfortable with the use of cryptocurrency tokens as an incentive mechanism, Epist’s TAM consists of every single person that holds cryptocurrency. Recently-collected data indicates that the number of global cryptocurrency holders is estimated to sit around 300 million individuals. While the number of cryptocurrency holders fluctuates - especially in times of market turmoil brought forth by macro environmental drivers and price-cycle events which are currently being experienced - the general trend indicates that the number of cryptocurrency holders is on the rise. Thus, investors should keep in mind that Epist’s total addressable market continues to grow in size, though it currently sits at 300 million users.

Serviceable Addressable Market [SAM]

Despite Epist’s TAM approximating at 300 million users - as that’s how many people around the world are estimated to hold cryptocurrency at the moment - Epist’s platform currently [only] interfaces with MetaMask wallets. At the time of publication, an estimated 30 million MetaMask wallets are in custody. That being said, given what is known about cryptocurrency holders and their tendency to hold custody over multiple wallets, the number of individual MetaMask wallet custodians is expected to be substantially lower than the 30 million wallets boasted by Consensys [MetaMask’s parent company]. Taking that assumption into account, it’s fair to estimate that there are roughly 18 million individual MetaMask users, each being a custodian over an average of 1.66 wallets. Therefore, according to the aforementioned assumption and estimate, Epist’s serviceable addressable market is anticipated to sit at 18 million users, or a mere 6% of the social knowledge exchange’s TAM.

Investors, though, are urged to keep two things in mind:

I. The number of MetaMask wallet holders continues to climb at increasing rates and the hot-wallet’s user-base continues to grow in correlation with the rate at which cryptocurrency adoption takes place on a global scale

II. Conversations with Epist’s founding team indicate that the A2E social knowledge exchange will be adopting connectivity with more hot-wallets down the road

Therefore, Epist’s SAM should continue to grow in size.

Serviceable Obtainable Market [SOM]

While Epist’s SAM is 18 million people [and growing] the platform’s SOM is a smaller portion of that figure. Quora and Reddit - the two leading web2 social knowledge exchanges that Epist aims to dethrone - boast 300 million and 453 million users, respectively. To obtain a reasonable figure, one should assume that the SOM consists of the sum of the amount of overlapping Quora and Reddit users that also have MetaMask wallets. Though this figure is nearly impossible to determine based on available data [there isn’t any], conservative estimates place the SOM user-base at 2,450,000 individuals, or 13.6% of the platform’s estimated SAM.

Similar to the previous SAM subsection of this report, investors are urged to keep two things in mind:

I. The number of MetaMask wallet holders continues to climb at increasing rates and the hot-wallet’s user-base continues to grow in correlation with the rate at which cryptocurrency adoption takes place on a global scale

II. Conversations with Epist’s founding team indicate that the A2E social knowledge exchange will be adopting connectivity with more hot-wallets down the road

Therefore, Epist’s SOM should continue to grow in size.

Industry Overview

Epist has its feet in three different industries:

I. Knowledge Exchange

II. web3

III. Social Media

Accordingly, this section provides separate overviews of said industries:

Knowledge Exchange

The knowledge exchange industry comprises universities, libraries, research institutes, vehicles to facilitate the exchange of information, and far more. Given the vast quantity of interconnected industry segments within, it is nearly impossible to assign it a quantified dollar value/market capitalization. That being said, from an epistemological perspective, the exchange of knowledge amongst humans is the ultimate driving force behind human innovation, and is therefore both priceless and immortal; it’s only human to demand answers to questions and engage in life-long learning, after all.

Given that Epist is an online social knowledge exchange platform, it should be noted that similar platforms like Reddit and Quora boast 753 million combined users [of which there is destined to be overlap], which appropriately demonstrates peoples’ dependence on the exchange of knowledge online to learn new things. When YouTube, Wikipedia, and Khan Academy are accounted for as well, nearly every single Internet user engages in some form of online knowledge exchange on a regular basis. To say the least, the knowledge exchange industry dominates our global society, and as populations continue to grow over time, so too will said industry.

web3

The web3 industry, which includes cryptocurrency, blockchain, decentralized finance [DeFi], and non-fungible tokens [NFTs] is currently undergoing a massive price-cycle event that is driven by both micro and macro environmental drivers. In the span of roughly seven months, historic monetary outflows have deteriorated the overall market capitalization for the web3 industry from nearly three trillion USD to a meager 1.27 trillion USD, denoting a 42.33% ‘haircut’ in less than a year. In 2021, the cryptocurrency market experienced an impressive bull run that saw retail investors pouring money into highly speculative digital assets with little-to-no understanding of the products they were investing in. When the inflows of money began to dry up, as money is an incredibly finite resource, investors saw seemingly exponential growth charts flatten out, which undoubtedly played a role in this generation’s version of the original dot-com crash that took place at the turn of the millennium.

Contrary to popular belief, price-cycle events like this are good for the web3 industry. By design, the emergence of no-code, L2 web3 platforms make it very easy for anyone with an Internet connection to launch their own web3 project. Unfortunately, the low barrier to entry resulted in the creation of thousands of projects, tokens, coins, and NFTs that simply had no business existing. Price-cycle events like what is currently happening serve as catalysts for the dissolution of foundationless projects, which helps refocus the investor spotlight on fundamentally-sound projects like Epist. That being said, massive price-cycle events function as double-edged swords: sure, they help rid the market of fundamentally-poor, foundationless projects; but they also scare many viable investors away from the space for an indefinite period of time. It’s impossible to determine when the web3 industry will rebound from its current 1.27 trillion USD market valuation, though its underlying purpose is proven and the technology is here to stay.

Social Media

The social media industry is still rapidly growing, despite its behemoth size. Existing platforms like Instagram, TikTok, and Twitter are constantly adapting to not only meet consumer demands, but to also show/tell consumers what they [the consumers] want before they [the consumers] even know it themselves. The global social media market is anticipated to grow from its current 159 billion USD market capitalization [EOY 2021] to a 223 billion USD valuation by EOY 2022 at a CAGR of nearly 40% that is anticipated to sustain through 2028, at a minimum. To say the least, social media is a mainstay in modern societies and as more developing nations enter new human development indexes [HDIs], that fact will only be reinforced.

On the flip-side, the social media industry has long been under fire for its seemingly unethical use of customer information. As the saying goes, “if something is free for the consumer, then the consumer is the product being sold.” Existing web2 social media platforms are centralized entities that consistently put profits over people with the sole goal of increasing shareholder wealth. These platforms generally have two revenue streams:

I. The sale of customer data to third parties

II. The sale of highly-targeted advertisements on their platforms

This means that consumers don’t own any of their data and often have said data used against them. Social media users have, for a while now, been demanding change to no avail. Perhaps decentralized social media platforms that are community-owned-and-governed [i.e. web3 social media platforms] are the end-all-be-all to the issues with the current platforms used by billions of people around the world.

Key Industry Players

Knowledge Exchange

• Reddit - online community-based open forum

• Quora - online Q&A portal

• Wikipedia - online modern-day Library of Alexandria

• Khan Academy - every college student’s best friend

• Quizlet - every college student’s other best friend

web3

• Layer 1 [L1]

  • Bitcoin - the legacy cryptocurrency

  • Ethereum - the gold standard for smart contracts

  • Avalanche - attempting to dethrone Ethereum

  • Solana - like Avalanche but missing some features

  • Binance Smart Chain - works like a charm every single time

• Layer 2 [L2]

  • Polygon - Ethereum sidechain that drastically reduces transaction fees

  • Chainlink - an Ethereum dApp for smart contracts used by many major corporations

  • Ethereum Name Service - web3 domains [i.e. starlightkitchen.eth]

  • Aave - DeFi at its finest

  • Yearn Finance - DeFi that utilizes proprietary AMMs to the fullest extent

Social Media

• Facebook - your grandma probably uses it

• TikTok - two-billion+ downloads and counting

• Twitter - Elon Musk’s public town square

• Discord - powerful tool for community building and remote collaboration

• LinkedIn - widely-used professional networking platform

• YouTube - the most popular social media platform in the world

• Reddit - online community-based open forum

• Snapchat - one of the earliest adopters of AR

Risks

Upon conducting careful and thorough due diligence, Starlight Kitchen determined that Epist faces four main risks:

I. Epist could have trouble attracting users to its platform…

Epist’s biggest risk is an inability to attract users to its social knowledge exchange platform. Given that Epist’s platform is currently under development and still in the beta phase of testing [the team at Epist indicates that their Alpha product goes live on the Polygon testnet later this month] it’s impossible to know with any certainty whether the intended product will gain traction [users] with its main launch. Market research conducted by the team at Epist indicates that demand for a better social knowledge exchange exists. Time will tell if a platform like Epist is the answer consumers are looking for

II: Epist could face an inability to attract experts to its platform…

Epist’s business model partially depends on the accumulation of contributions from experts, and a failure to populate the site with qualified individuals that can answer questions could defeat its underlying purpose

III: Epist could experience difficulty onboarding users…

At the moment, web3 platforms/applications require a heightened level of fluency with computer programs, which is a huge barrier to entry for many people. Moreover, very few people [in the grand scheme] actually understand how web3 works and why it’s an important addition to the existing Internet infrastructure. Therefore, Epist may experience lagging growth rates compared to initial projections as a result

IV: Epist could experience difficulty engaging in fundraising activities…

As discussed, the cryptocurrency market is in shambles compared to where it was less than a year ago. While it can be assumed that this is just another price-cycle event, traditional investors may distance themselves from web3 investments until the industry is more solidified and long-standing key players are identified

Mitigations

I. If Epist has trouble attracting users to its platform…

The social knowledge exchange and its team members are advised to utilize grassroots marketing campaigns and advertisements on relevant platforms [i.e. coinmarketcap.com, etc]. Grassroots marketing campaigns are a valuable tool for reaching the users that matter most. Hiring popular FinTech/web3-centric TikTok creators to post sponsored videos showing them using the platform is a proven way to attract users from the aforementioned SOM. Other methods like sponsoring university blockchain/cryptocurrency organizations, events in the space [hackathons, etc], and posting appropriately-tagged YouTube videos demonstrating how the platform works are other proven methods for generating user attraction to the platform.

II. If Epist faces an inability to attract experts to its platform…

The firm has a few options to reverse the trend. One option is to seek out professors at universities and pay them to use the platform. The goal here is to show the professors the importance of a tool like Epist, as it pertains to the contribution of accurate and credible information to the human knowledge base. If paid professors agree with the cause and inform their colleagues about the platform, more experts will surely follow. Another option available to Epist is to form partnerships with universities and research institutes, and design a special section of Epist - perhaps a subscription-based, reader-paid extension/layer - on which experts can publish academic/research based publications and earn royalties when paying-readers view or engage with said content.

III. If Epist experiences difficulty onboarding users…

The founding team at Epist is advised to make educational videos with accompanied transcripts that walk new users through common areas of struggle in a step-by-step manner. The goal of the educational content is to assist those who struggle with the basics of web3 usership, such as transferring cryptocurrency, swapping/exchanging cryptocurrency tokens, setting up a hot-wallet, and more, in an effort to enable them to use the social knowledge exchange. Onboarding the next generation of web3 users is typically the biggest challenge for early-stage web3 companies, so taking steps to ensure that every potential user is comfortable with the technology in use is paramount. Moreover, Epist is advised to continuously improve its user interface and user experience over time, in an effort to make the platform increasingly easier to use. The threshold for platform usability should be a middle-aged suburban mom…if she can use it, so can anyone from the target demographic.

IV. If Epist experiences difficulty engaging in fundraising activities…

The team is encouraged to reach back out to us at Starlight Kitchen, as we have connections with institutional investors that are eager to break into the web3 space. Fortunately for Epist, a plethora of cash was injected into the global economy during the formative months of the COVID-19 pandemic, and given the expectation of economic turmoil in the coming months, a large chunk of that cash is sidelined and awaiting investment. Needless to say, plenty of dry powder exists among institutional investment firms [we’re talking about tens of billions of dollars here] and it’s largely up for grabs by fundamentally-sound web3 startups like Epist.

Traction

Thus far, the team at Epist has reached several important milestones:

I. Epist has a growing community of followers and community members with regards to their social media presence on Twitter and Discord

II. The team at Epist sourced and recruited developers and community managers as key contributors

III. The team at Epist is finished developing their smart contracts and web app MVP

IV. The Epist platform is currently undergoing beta testing on the Mumbai Polygon testnet

V. From a marketing standpoint, the team at Epist successfully launched an ongoing EPI token airdrop campaign to build its initial user base among its Twitter followers and Discord members

That being said, Epist still has a long road ahead of itself. The platform still has to:

I. Launch its alpha product on the Mumbai Polygon testnet later this month [June 2022]

II. Go live by launching its official product [English version to start] and token on the Polygon mainnet

III. Implement enhanced features including, but not limited to voting, tipping, and referral bonuses

IV. Continue its marketing endeavors by targeting cryptocurrency communities and sustaining its airdrop and rewards campaigns

V. Develop future UI/UX enhancements down the road

VI. Expand its target user segments beyond cryptocurrency/web3-centric communities

VII. Experiment with different markets such as B2B and C2C

Founders

Epist has two co-founders under the pseudonyms Rorobyte [Roro] and Deemo, who met each other in their MBA program at Stanford’s prestigious Graduate School of Business. The two business partners both have formal training in the computer science discipline, boasting an undergraduate degree in computer science from the University of Waterloo and a graduate degree in computer science from the Georgia Institute of Technology, respectively.

In terms of real-world experience, saying the business partners have plenty is an understatement. Roro revealed that he is well-versed in software investing and business strategy, having worked for a prominent SaaS ecommerce firm, a bulge-bracket investment bank, a prominent private equity firm, and a B2B-focused artificial intelligence company. Deemo, on the other hand, has a background in software engineering and growth investing, having worked for a social media platform that maintains prominence among Gen Z users, with additional time spent with a world-class investment management firm. With the aforementioned in mind, Epist users will surely find a well-designed user interface on a revolutionary platform that relies on the exchange of native cryptocurrency tokens [EPI | ERC-20], which are anticipated to be properly engineered from the start.

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Sean Eisenstein

Managing Partner I Starlight Kitchen