Welcome to Issue 110:

▹ Week's Top Signal
▹ The Great NFT Debate
▹ Austin Robey on The Evolution of "Solopreneurs"
▹ Building a Contributor DAO by Shreyas Hariharan
▹ Apps as Sovereign Communities by Aditi
▹ BAYC Yuga Labs Faces SEC Probe
▹ ... much more

— Let’s get into it!

The Great NFT Royalty Debate continues to rage on.

This week, popular Solana NFT marketplace Magic Eden announced that they are making royalties optional. Two key decisions were made: first, the decision on how much royalties to pay will be passed to the buyer. Second, by default, ALL collections/listings will still honor full royalties.

This is in line with Beeple’s thoughts on the issue: support royalties, but put the burden on the person buying into the collection rather than the seller who is trying to exit the collection.

The DeSo founder also came out with an article this week, outlining the game theory that led Magic Eden to make this decision. He argued that while on-chain royalties were probably outside of the technical wheelhouse for Solana (at least insofar as such a decision would be relatively safe for assets on the blockchain), DeSo made the decision to put royalties on-chain with the belief that it would hurt them in the short term, but be a major advantage in the long-run. Robert Leshner and Alex Atallah had another idea: a soulbound NFT proving whether or not you paid creator royalties that creators can use to identify their loyal collectors.

Essentially, horizontal NFT marketplaces are moving toward zero-royalty models. But this doesn’t mean we will live in a world of no royalties. As more and more communities curate their own vertical NFT marketplaces, buyers and sellers who choose to interact with these marketplaces will pay a brand premium through royalties. This makes community and brand all the more important for creators, communities, and collectors alike.

It will be extremely interesting to see how this all plays out. It would not be surprising if we see a world where traders/flippers are using horizontal marketplaces that focus on NFT financialization, while collectors/fans use vertical marketplaces to more closely engage with creators and communities.

TAKE NOTE
If you’re a creator or collector in web3, you should be keeping a close eye on royalty developments. These debates will have deep implications on creator economic models and community monetization moving forward.

Evolution of the "Solopreneur". This essay from Austin Robey, a friend of Forefront and co-founder of Metalabel, outlines the path many “solopreneurs” have taken evolving from creator economy solo projects to community-led collective organizations. For example, Cherie Hu started Water & Music as a solo newsletter and Patreon, and eventually turned it into the tokenized community it is today with its own token and community of contributors. Song a DAO took a similar path, from Jonathan Mann’s long-term creative endeavor to a community governing a collective treasury. This transition is key to Metalabel’s thesis, but also highlights the reason why tokenized communities will be so important heading into the near future and beyond: collective creation is more fulfilling, more fun, and often more lucrative for the long-tail of creators.

Building a Contributor DAO. Shreyas Hariharan, co-founder of Llama, begins this piece by discussing the three types of transaction costs: triangulation, transfer, and trust. He goes on to argue that DAOs inherit certain traits from blockchains, such as the ability to make widely credible commitments, and thus DAOs unlock an economy of open-source software, permissionless capital formation, and liquid labor. A contributor DAO is a collective of like-minded individuals who make contributions through a unified brand but preserve their independence and ownership. These DAOs make contributing to DAO economies much easier, in large part due to the governance power in the serviced protocol that a contributor DAO might hold. In a way, these organizations are internet-native labor unions, and will hold significant political power in the long-term.

Apps as Sovereign Communities. Aditi writes this piece through the lens of a broader web3 conversation around sovereign communities or network states, advocated widely between Balaji’s The Network State and investors in web3. It’s argued that the protocol-first model of building cryptonetworks is broken. Applications, she writes, is a much more effective way of getting people to care. Once you have the community, you can put together a decentralization strategy. Aditi believes that Farcaster is the strongest example of this: it is building client-first – like email (see: SMTP) and has generated a vast ecosystem of projects building on top of the protocol, with no monetary incentive structures like grants or the promise of a token. “We are not building tomorrow’s next gen sovereign communities with today’s protocol wars. Mass social coordination will likely happen at the application level.” Powerful stuff.

Reprioritizing Artists Over Industry. The relationship between art and capital feels more toxic than ever. How can we build a world that supports meaningful and subversive work? Kelani Nichole writes that we should be leading with four strategies if we wish to put artists over industry: reflection, matchmaking, stewardship, and participation. Each of these strategies not only has a place in the world of web3, but in the art industry at large. The point around stewardship was particularly interesting, as Kelani argues that “by imagining how we want this moment in time to be remembered, we can reprioritize where to place our attention and leave the space better than we found it.” We cannot lose sight of the impact that we want our work to have, not just what impact we believe to be inevitable.

Yuga Labs faces SEC probe. This week, we learned that the SEC is investigating Yuga Labs, the creators of Bored Ape Yacht Club, over whether sales of its digital assets violate federal law. Specifically, the investigation is focused on whether the NFTs are more akin to stocks and should follow the same disclosure rules. While very little information has been released on the current views of the SEC on this matter, the results of the case will have major implications for the NFT space as a whole. If BAYC is found to be a security, the thousands of NFT projects that followed the BAYC model would likely fall in the same bucket. It will be interesting to see what the SEC decides to focus on in drawing their conclusions, and how various analyses will be used moving forward across the crypto ecosystem. As usual, all eyes on Yuga Labs.

Farcaster is the New Crypto GTM. Investor and founder of Chapter One Jeff Morris, Jr., believes that every few years, an important new platform emerges as the go-to-market strategy for consumer founders. Until this point in crypto, it has been Twitter. However, today, Farcaster is taking over the throne as the premier place for crypto GTM. Farcaster is a “sufficiently decentralized social network.” It is the opposite of hype beast crypto culture and rewards thoughtful conversations, with a community that has a shared passion for cryptocurrencies and emerging technologies. As a result, products like Daylight and Perl have found strong traction in the small but mighty Farcaster community that will likely propel them to future success. Jeff also speaks to a larger conversation around protocol vs. product-led development, and how the community on Farcaster positions the company to make big moves in the world of decentralized social and beyond. 

Building Partnerships with NFT Projects and Communities. Speaking of web3 GTM, building partnerships with NFT communities and DAOs is hard. Each of these organizations has a different structure, hierarchy, and set of needs. As a result, it is difficult for companies building for these communities to forge strong partnerships. This piece from a16z Crypto outlines some key best practices for building partnerships with NFT communities. First, understanding a project’s organizational and legal structure, as well as their mission, is a top priority. This is the most legible aspect of the community from the outside. Next, small measurable goals can help keep you on track. The authors also discuss whether or not you should join a community buy purchasing the token in order to build a partnership with them. All in all, this piece offers some extremely tactical advice on how to best approach some tokenized communities to sell your product.

Market data on the last 7 days. Last updated Oct 17, 2022

Updates from the DAO

— We’re working on a website redesign to better capture Forefront’s mission and ecosystem. We’ll also be launching a new community membership model to provide more clarity for folks in the ecosystem on how to best get involved. Stay Tuned for updates.
—  Last few days to cop Forefront “Infinity” merch drop. Don't miss out!

▹ Pitch - FF Request for Essays
▹ Read  - Social vs. Science Experiments
▹ Crypto - The Rise and Fall of Bitcoin Culture
▹ Deep Dive - Web3 beyond the hype
▹ New  - On Music NFT metadata
▹ Notes - The State of Network States
▹ Interesting - Redeemable Phygital NFTs
▹ Thread - Is Money Just A Game
▹ Watch - Fav Talks from DevCon
▹ Report - Web3 Identity Landscape
▹ DeFi - October $718M Hacks
▹ Techy - Wallet Security

◎ Check out FF Signal  for daily top web3 social headlines