Welcome to Issue 111:

▹ Week's Top Signal
▹ Post Discord <> Web3 Era
▹ Mason Nystrom on Tokens <> User Behavior
▹ Jacob Horne on Prediction Market <> Provenance
▹ Raphael Spannocchi on Voting Participation
▹ Reddit Web3 Wallet Adoption
▹ ... much more

— Let’s get into it!

Web3 Social Season is here.

A recent tweet from Avi listed the most popular web3 social platforms, including Lens, Farcaster, Urbit, and more. The chart analyzed web3 social platforms across a variety of dimensions, from their data layer to native privacy to active users. It’s clear that the space is still very immature, but the developments are promising.

ETH Bogota also saw plenty of conversation and development around web3 social, with the expectation that it might be the next big sector of the ecosystem to really take off.

This was all in light of a recent announcement from Bluesky, the project started within Twitter to create a decentralized social network, which launched a waitlist and more information on its protocol. Some of the highlighted features include algorithmic choice and portable accounts, which seem to be the big two draws of building a social network as an open protocol.

But the news isn’t limited to protocols. With Ye buying Parler, NFTs on Instagram, and Reddit’s NFT play leading to millions of new wallets being created, it’s inevitable that we’re going to see a seismic shift in the world of social media here in the next few years. From Kanye to Jack Dorsey to Elon Musk, some of the most controversial yet well-known figures in the world are doubling down on their bets here.

It’ll be most interesting to watch how users react to all of this. As mentioned before, the user numbers on some existing web3 social platforms are extremely low. Now obviously, many of these are brand new and will take some time to build up a user base. However, it’s one thing to theorize about the benefits of a social protocol, and another to actually get people to use it over a centralized service with a (currently) better UX.

TAKE NOTE
Time will tell how the web3 social ecosystem develops, but it is clear that the season is here and players big and small are taking shots to build the next great social experience – protocol style.

Rise of the Collector Economy. This piece from Javi Park of Reamp begins with a telling quote: “In contrast to the traditional economy, the collector economy recognizes that taste is socially created, and that a community creates consensus on the value, rarity and desirability of a collection.” Javi writes about the rise of collectors, segmenting this population into five distinct groups, each with different reasons for collecting and levels of depth in the market. Supercollectors, for example, are the top 5% of collectors. They’re the ones who collect every artist's drop. Supercollectors have built such a strong emotional connection with an artist they have no intention of selling their NFTs anytime soon. This is in contrast to superfans who enjoy a premium music listening experience and frequently buy tickets to shows, but have not yet collected an NFT. The goal is to bring more of those superfans into the collector market. All in all, this is a great landscape of the collector economy, which we will certainly be hearing more about both in and out of the music industry.

Post Web3 Discord Era. We may (finally?) be moving towards the post-Discord era – but now how we originally imagined. For years, web3 communities have advocated for a “web3 Discord,” an alternative to the commonly used communications app that is the home of nearly every DAO. This past week, Nouns DAO made the decision to delete the official Discord. While some argued that this was a great move as a DAO shouldn’t have any “official” homes, and others argued that it limits newer members’ ability to embed themselves into the community, the immediate results have been clear: there are now many, many more Nounish Discord servers. The decision didn’t force people to move to new apps, it simply led them to start more servers. This problem was clearly highlighted last month by FF Lab’s Cut the Cord experiment. The Forefront team is also working on a collective information curation tool and space that could create more “platformlessness” in communities.

When Tokens Shape Behavior. This piece from Mason Nystrom highlights the trend from skeuomorphic to emergent behaviors catalyzed by new technologies, and applies this framework to tokens. For example, he argues that wallet-to-wallet messaging is actually a skeuomorphic (although useful) behavior in crypto. The emergence lies with web3 social: open graphs where information and relationships can be ported across apps. The same relationship exists with token distribution: token incentives often look like discounts, rewards points, or cash back incentives of the web2 world. However, retroactive airdrops are an emergent behavior, especially since they are entirely permissionless and are often used as a trojan horse into a new audience or community. All in all, it’s important to remember that there is nothing new under the sun. This essay highlights some of the subtle shifts that make web3 so powerful and tokens the tool that will unlock that power.

How to Design web3 Platform Governance. Today, the large web2 platforms that dominate our economic and social experiences lack fair structures and decentralization of power. But web3 governance — if built thoughtfully in a way that reflects lessons from the history of governance — will offer an embedded foundation of credible trust to build the next generation of platforms. This essay highlights various best practices and opportunities for protocol governance to break away from the mistakes we made in the past. For example, the authors Porter and Andrew argue that encoding rules at the protocol level is the first, fundamental step you can take toward decentralized governance. They also argue that more granular governance should happen at the application level, not the protocol per se. Finally, creating opportunities for the rules to be changed by users when they are no longer being served by the status quo is critical, as many web2 companies pay lip service to “listening to customers” but fail to create avenues to make that a reality.

Predicting Provenance. This essay from Jacob Horne begins with an observation: a limitation to prediction markets is that they are zero sum. This means that for every dollar won, there is someone losing that dollar on the other side—it is winner takes all. That means if you want to make a prediction, you need to find someone willing to take the other side. This piece argues that provenance could create one-sided prediction markets. For example, imagine an artist that wants to make a bet that a hovercraft will appear over the Eiffel Tower on December 1, 2025. The artist could paint an image of exactly that and sell editions to folks who find this prediction intriguing or simply enjoy the art. Jacob believes that if the prediction were to come true, the price of these paintings would absolutely skyrocket. NFTs, he says, create an obvious opportunity to verify predictions as art, and could potentially form provenance-based prediction markets. This is an extremely intriguing idea and we’re excited to see how it plays out.

How an Online Community Becomes a Digital City. CoinDesk hits us with yet another deep dive into FWB. FWB’s vision is to equip cultural creators with “the community and Web3 tools they need to gain agency over their production.” The author of this piece explores the question, “what is a social DAO?”. FWB, she says, provides something for people to coalesce around. It serves as a nexus, larger than the personal connections of its founder, where intersectional connections of creativity collide in curated moments of serendipity. The goal of the social DAO, then, is to allow people to gain agency through the creation of new economies and propagate cultural influence aligned with the overarching DAO. This is spot in, and is generally aligned with our thesis around tokenized communities: these DAOs are valuable when they support the creation of new projects in-line with a common meme. For FWB, that meme is far reaching, but they’ve built the high quality community necessary to sustain it’s development.

NFT vs. Token-Based Voting Participation Rates. An analysis from Flipside Governance nails a pretty insightful observation: NFT-based communities have 4.14x more voter participation than token-based communities. A significantly higher percentage of members of NFT-based communities vote in Snapshot polls. There are a few factors at play here. For example, NFT communities were found to have significantly fewer proposals and fewer proposal authors, which could be argued is a sign of relative centralization. However, it remains to be seen whether that’s a bad thing for any particular community. Punk4156, co-founder of Nouns DAO, tweeted this week that he’d like to explore non-token voting options for some of Nouns governance. It’s not clear how serious these explorations are, but given the increased activity in the Nouns community and their willingness to experiment with DAO models, it will be very interesting to see what comes from these discussions.

Market data on the last 7 days. Last updated Oct 24, 2022

▹ FF Library - Web3 x AI
▹ Read  - Context Collapse in Social Networks
▹ NFT - Physical Backed Token (PBT)
▹ Crypto - SFB Thoughts on Regulation
▹ Mainstream - Reddit Web3 Wallets
▹ Updates  - Latest on Digital Fashion
▹ Opinion - Coopetition in Web3
▹ Deep Dives - Mapping the Identity Space
▹ Interesting - Pokémon & Society
▹ Watch - NFT Royalties Debate
▹ "Metaverse" - Interpol <> Metaverse
▹ Resources - DevCon Recap
▹ Techy - on Developer Communities

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