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Fresh off the press:
▹ Week's Top Signal
▹ Adjectives by Forefront
▹ Eric Hu on Web3 Infrastructure
▹ Social Web3 by Zee Prime
▹ The Music NFTs "Debate"
▹ FWB x Opensea Collab
▹ ... much more
Plus: Market Pill, What else is Poppin'
Let’s get into it.
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This week, Tornado Cash – the Ethereum-based mixing service – was sanctioned by the U.S. government. The service enables customers to conceal the source of their crypto funds when participating in a transaction in exchange for a fee, enabling private transactions on an otherwise public blockchain. The U.S. Treasury noted that over $7B of funds had been “laundered” through TC, although they failed to differentiate between crimes and otherwise legitimate use-cases of TC for legal privacy purposes.
Then things got worse: Alexey Pertsev, a TC developer, was arrested by Dutch authorities. The Github repo of one of the founders was suspended. ETH addresses associated with TC were blocked from frontends of popular DeFi protocols like Aave. And USDC associated with TC was frozen, highlighting the pitfalls of centralized entities managing stablecoins.
Many folks in the ecosystem are outraged, calling on regulators to respect code as free speech and emphasize a right to privacy for all internet citizens. However, the sanction of code rather than individuals comes as quite a surprise to virtually everybody involved.
The situation highlights the need for more truly decentralized infrastructure. The fact that users could be so easily blocked from DeFi frontends and other web3 apps simply because someone sent them funds from Tornado Cash against their will is outrageous, yet it has happened to multiple prominent figures in the space.
TAKE NOTE
Regulators are only getting more aggressive in their pursuit of crypto, and aren’t doing so in the most thoughtful way. Builders in the space must continue to prioritize decentralization and users must understand how to call protocols without going through centralized frontends if they want to continue to use apps throughout the ecosystem. Tornado Cash sanctions are likely only the beginning.
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Introducing Adjectives: describing the nounsDAO ecosystem. ⌐◨-◨ Forefront is getting Nounish. The core primitive of tokenized communities is projects. We’ve been working on ways to have Terminal bring more transparency to project creation, funding, and evaluation. Introducing Adjectives: describing the Nouns DAO ecosystem. Adjectives takes our Terminal.co product as its foundation, and adds features like a member directory, retroactive proposal rating, and proposal metadata. We’re excited to continue to build at the frontier of tokenized communities. If you’re a Nouns holder, head over to the link above and go rate proposals!
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A Framework for Web3 Infrastructure. This piece from Eric Hu is extremely timely given the recent Tornado Cash sanctions. Eric lays out the argument for why web3 infrastructure is so important, a prerequisite for significant adoption and development of the new internet. His framework breaks down infrastructure into three major sections: data infrastructure (APIs, oracles, storage, etc.), value and liquidity infrastructure (wallets, exchanges, custodians, etc.), and interplayers between the two (miners, stakers, analytics, etc.). His conclusion is that while the framework is fairly clear, we aren’t “there” yet – there’s a long way to go before innovation catches up to the dreams of a truly new, decentralized internet. But the rate of development over the last few years has been remarkable, and while critics are right to challenge much of our optimism, that optimism is built on a belief that we will build the infrastructure we need for the ecosystem to succeed.
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Building Market Microstructure for NFTs. Meltem Demirors opens this essay by defining “market microstructure”: “the nitty gritty detail of how exchange works in a particular market.” The NFT market is broken down into a five step lifecycle: price discovery, execution, clearing, settlement, and reconciliation. Microstructures are then analyzed on each of these dimensions. For example, NFT price discovery today is simply price aggregation – the sophistication of discovery found in other markets has yet to make its way over to NFTs. There is no scalable concept of “appraisal.” The most interesting part of this essay is Meltem’s response to the argument that NFT financialization is bad for the culture: “All inefficient markets become more efficient as information asymmetry goes down and market structure is improved. The argument that cultural capital is somehow immune to this pattern is willfully ignorant at best.” Fantastic piece.
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How Social Tokens Can Transform Book Publishing. In this piece for the FF Journal, Allen Taylor makes the case for how social tokens can be used to disrupt the book publishing industry. He outlines three case studies. The first is single-author fanbases, where the author can use tokens to create special access for their audience. The second is royalty splits for collaborating authors. And finally, Allen talks about how social tokens might be used to reward other authors and readers. All in all, social tokens in the forms that Allen describes them have taken a back seat to other innovations in the space given the difficulty and lack of best practices around building a utility token economy. However, there are very clear use cases that will almost certainly make a comeback as more creators enter the space.
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Social Web3. At Forefront, we talk a lot about tokenized communities as “web3 social” – but what does that really mean? While web2 social is centered around the platform, web3 social is centered around the address, our unique personal identifiers. Wallet addresses can point to all sorts of things, allowing us to create new and unique “edges” in our social graph that were previously unavailable or illegible to us on web2 platforms. “Relevance” in a web3 social graph is determined by what the community chooses to value, not by a centralized blue checkmark. This means that each tokenized community will develop their own forms of reputation, and portability will be less of a technical problem and more of a social one.
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Framework on DAO Community Health. This analysis from RnDAO seeks to answer five key questions about community health, including what it is, how we evaluate it, and how we measure it. The piece is truly comprehensive in its aggregation of many different perspectives and answers. For example, the definition of community health can be viewed both by its resilience and adaptability or by its ability to build healthy relationships between its members. Evaluating health, then, is not only a question of community engagement, but also shared norms and sense of belonging outside of community spaces. This universal identification with the community is extremely important. This piece takes a very necessary and academic lens to the problem of DAO community health, and is a must-read for anyone building or contributing to DAOs.
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Opensea x FWB Collab. Opensea partnered with FWB to feature works from the community on its homepage this week. Opensea paid $100k to commission the art, with works from Andrew Benson, Ayaka Ohira, Case Simmons, Ezra Miller, Niall Ashley, Nic Hamilton, Petra Cortright, Sarah Zucker, Tyler Givens, and Vivian Fu. Musicians. The works were also displayed at FWB Fest this past weekend, where the community met up in California for a series of talks, performances, conversations, and more. FWB continues to show why it is one of the premier web cultural communities, and their partnership with Opensea is simply another example.
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On August 16th, we are hosting the first NFT Financialization hackathon to surface the next generation of protocols that enhance the productivity, utility, and financial use cases of NFTs. Sponsors include NFTfi, NFT Bank, Ronin, NFT Perp, and Sudoswap. $25k+ in prizes & up to $34k in bounties. Macro Hackathons is an initiative by 1kx and Macro DAO to drive experimentation in emerging web3 verticals. Read the full announcement and register here!
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Market data on the last 7 days. Last updated Aug 15, 2022
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Updates from the DAO
— This week, we launched Adjectives: describing the Nouns DAO ecosystem. If you’re a Nouns holder or are interested in the community, definitely check it out!
— The FF Journal published a piece on how Social Tokens Can Transform Book Publishing. Great work from Allen Taylor!
— The FF Journal also released a formal Request for Essays. If you’re interested in writing about things like community design, DAO UX, cultural production in tokenized communities, and more, definitely check it out and submit a piece.
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Firelight
— Forefront’s Web3 Creator Residency has come to a close. Thank you for making this last two months an absolutely magical experience for the participating creators and the community at large. This week’s synthesis can be found here.
— The final week of the W3CR brought us completed generative NFT ready to be minted, a plan to launch a DAO for ecological stewardship, and an artist with a stronger sense of his own identity. It symbolized the end of a cycle and the birth of several new ones, both for the creators as artists and the residency itself as a way of driving the creator economy forward.
— Nico discussed Maslow’s hierarchy of needs and explained why it is a poor framework for understanding how to create human flourishing in the conditions explored in Agartha.
— Kabuki summarized the last four weeks of his residency as a meditative creative process – characterized by an intense devotion to self-imposed guidelines, rules, and detail – which led to the successful completion of his collection, and an intensity which makes itself apparent in his final work.
— D3MO built on Nico’s exploration, exploring how each of the biomes of this universe are interconnected. “There’s so much in our world that we don’t pay attention to,” he said when discussing the deep sea, one of the three biomes he’s completed for his collection so far.
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◎ Check out FF Signal for more headlines
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