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Fresh off the press:
▹ Week's Top Signal
▹ Platformless Quests via FF Journal
▹ Alana Levin on Governance Tokens
▹ NFT Licenses Thesis by Galaxy Team
▹ Fei Protocol <> TribeDAO Exit Plan
▹ Music NFTs Debate
▹ ... much more
Plus: Market Pill, What else is Poppin'
Let’s get into it.
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This week on crypto Twitter, we saw a pretty intense debate amongst a variety of folks around secondary royalties and creator NFTs.
For example, Spencer Noon of Variant Fund brought this point up in the context of Music NFTs and streaming: “Artist streaming royalties = rent seeking behavior / It makes no sense for artists to make $ every time a song is played when streams are just radio advertisements for their personal brands.” His core argument is that artists can make money off of monetizing their “core fanbase,” and that streaming is simply top-of-funnel distribution.
Many people believed that this take was very investor-centric, and failed to consider the lifestyle that most artists actually want to live.
Zeneca wrote a post about how royalties today are not built-in at the smart contract level, they’re enforced at the exchange level. That means long-term, royalties will probably go to zero since any smart consumer would simply sell on a royalty-less exchange (unless they had the sole motivation of further supporting the artist). Punk6529 brings more nuance to the conversation, arguing that while anti-royalty people are mostly self-serving, artists need to prepare for this future.
Tying it back to the Music NFT example, it’s clear that the playbook for web3 creator monetization is still not mature enough to rule any of these futures out as being the dominant ones. Royalties will certainly continue to exist in some capacity, and figuring out when and how they are most manageable and practical is probably the next major step.
TAKE NOTE
Although a promise of web3 is ownership and monetization for creators, and while many tools already exist, we are still early in exploring what best practices can and should look like. Any categorical takes on the state of creator economic models are misguided, but we have much to learn from these debates.
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Platformless Quests: The Missing Piece of the Community Equation. The promise of tokenized communities is to build platformless networks. However, Jihad of Forefront and Reka of Guild highlight a key problem: the vast majority of spaces where we do stuff on the internet are off-chain, siloed, and not composable, which hinders the contextualization process. The magic of the “platformless community” stops with the collectively held key, the assets. This is where platformless quests become all the more important. To turn the internet into our playgrounds, we need every action we take on the internet to be open and composable for the purposes of true membership. This essay offers great insight into the goals of web3 communities, what is possible today, and what we still have left to build.
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Tezos: Web3’s Gritty Underground Art Scene. One of the prominent art movements in the Tezos ecosystem is Trash Art, a chaotic medley of glitch art, GIFs, AI-generated mashups, and depictions of, well, trash. Like Tezos itself, the movement was created as an act of rebellion. In this essay, Liv Pasquarelli explores the Trash Art movement, its roots, and what it can teach us about subcultures and digital art movements. “The idea that an artist’s work could be removed from a marketplace at the discretion of centralized moderators didn’t sit well with the quickly growing community. They encouraged NFT artists to mint their best trash on Tezos.” NFT discourse across the world of web3 can be heavily Ethereum-centric. This is an awesome look into a story and culture of rebellion, creation, and belonging in the Tezos ecosystem.
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Designing Governance Tokens. In this essay, Alana Levin of Variant Fund outlines a three-step framework for teams to think about governance token design. The three questions include: “1) Does our project more closely resemble a corporation or a country? 2) What level of control over the project’s direction are we willing to grant to governance holders? 3) Do we even need to launch a token yet?” Ultimately, the answers to these questions will be different for every project and their unique situations. The point about corporation vs. country is particularly interesting as many projects have realized that they would be much better off without a governing community, likening themselves to a traditional startup. All in all, this is a concise framework for thinking about governance in your current or future web3 project.
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Web3: Decentralized Identity. This piece clearly outlines some of the problems of current identity management on the internet and how web3 might solve them. First, the author outlines the components of decentralized identity: identifiers, authentication, and credentials/claims. Next, they explain how a decentralized identity system requires issuers, holders, and verifiers in order to be truly complete. This quote highlights the perspective very nicely: “The Web 2.0 Internet is optimized for communication between computers across networks, as opposed to people across networks.” With all of its new tech and jargon, web3 is fundamentally focused on people being in connection with one another and owning those relationships. Decentralized identity systems are hard to build because they remove the abstraction from the progress and put us in charge of it all.
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The State of Digital To Physical. This piece highlights a new EIP, 4159, which will provide an “interface for non-fungible tokens representing physical assets that can generate or recover their own accounts and obey users.” This EIP would enable a whole slew of functionalities by associating a token to a physical smart device. Further standardization will be needed, which is why the Ethereum Reality Service (ERS) is building a protocol that would be open to chip manufacturers, creators and their end users as a public good to enable any crypto asset or token to be associated with a small computer chip attached to a physical piece, thus linking the physical piece to the blockchain. There are many projects experimenting at this intersection, including friend-of-Forefront Metafactory, and the stack is only continuing to evolve.
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Canada Restricts Crypto. Canada-based crypto exchanges Bitbuy and Newton are enforcing a 30,000 Canadian dollar annual “buy limit” for “restricted coins” for users in certain provinces, including Ontario. Restricted assets include every coin on the exchanges except BTC, ETH, LTC, and BCH. Newton clarified that if a trader bought and then sold a restricted coin, the sell amount would be subtracted from the limit. In a post last week, Newton stated, “These changes are to protect crypto investors, like yourself, and to make sure investors are aware of the risks associated with investing in crypto assets.” While many are confused and outraged about the restrictions themselves, what is more confusing is the choice of assets. For example, why would Bitcoin Cash be considered less risky than USDC? This comes on the back of many other regulatory conversations in the US around ETH, Tornado Cash, and more.
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A Survey of NFT Licenses: Facts & Fictions. The Galaxy team published this piece on NFT Licenses, their future, and their implications. Their core argument is that decentralized metaverses will be decentralized only in name if action is not taken to address digital property rights. Specifically, if property in these metaverses is not owned by users, then the platform is not materially different that what we’ve built in web2. Additionally, there is an open question around modification of copyright. The ability of the copyright holder to modify an NFT license at any time is problematic, even where commercial use rights have been granted, when IP hasn't been assigned to purchasers. Even CC0 isn't a panacea, and suffers from the opposite problem: anyone can monetize the IP. All in all, this is a great piece to explore NFT licenses and what that could mean for the future of the worlds we are building.
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The Future of the Tribe DAO Proposal. In December 2021, the Fei <> Rari Merger was officially formalized. By April 30th of this year, Fei Protocol was hacked, losing over $80M. Originally, the DAO passed a proposal to repay a large portion of the lost funds to users. However, as the market took a major turn for the worst, the vote was re-done and this time it didn’t pass. Fast forward to today, and Fei Protocol’s founder Joey Santoro has announced that Fei Labs will stop participating in Tribe DAO and that funds will not be returned to the extent originally agreed upon. Community members, obviously, are furious given that there are enough liquid funds in the DAO to repay all harmed users and still continue to be sustainable. However, the Fei Labs team has failed to uphold that responsibility and keep their word following the initial vote. This is yet another example of performative governance and the failure of DAOs when votes aren’t meaningfully executed on-chain.
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Market data on the last 7 days. Last updated Aug 22, 2022
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Updates from the DAO
— We published two pieces in the FF Journal last week: Platformless Quests by Reka (Guild) and Jihad (Forefront) and Web3’s Gritty Underground Art Scene by Liv Pasquarelli. Give them a read!
— We published a Request for Essays. If you’re interested in writing for the Journal and are looking for a topic, definitely check out this post.
— We pushed new updates to Terminal.co and Adjectives for Nouns. If you have any feedback, let us know!
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◎ Check out FF Signal for more headlines
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