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gm fam, fresh off the press:
▹ Week's Top Signal
▹ Andrew Hong on Web3 Membership
▹ Antonio Garcia on Privacy in Web3
▹ Dao governance attacks via a16z Future
▹ Q2 NFT Report by NonFungible
▹ Tiffany CryptoPunk NFT Drop
▹ ... much more
Plus: Market Pill, What else is Poppin'
Let’s get into it.
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Web3 publishing platform Mirror launched subscriptions this week. Creators can now enable wallet-based subscriptions, which will allow audience members to get notified of new posts by email and allow creators to carry the wallet addresses of their readers with them across the web. As Alex Atallah, co-founder of OpenSea, pointed out, the decision to center wallet addresses rather than accounts plays well into the vision of composale, cross-platform identity.
In the same week, WalletConnect announced that they’re launching a WalletConnect Chat, which will allow you to DM any user using any wallet on any chain. Web3-native messaging tools like Bunches are working on similar problem spaces, putting wallets and tokens at the core of the next wave of creator and social tools.
As the expected features of a truly P2P web3 social stack get built out (notifications, friends lists, etc.), it will be interesting to see what features begin to develop that we don’t expect. Forefront continues to hold the position that the real unlock is in platformless communities and token networks, but we’re still in the early innings of what this might look like outside of “token-gated X.”
TAKE NOTE
Whatever “web3 social” ends up becoming, it will be led by creators. Putting more tools into the hands of creators that empower them to own their audiences and have optionality over how they monetize will be key to any future web3 unlocks. Companies like Mirror are true creator-focused companies, but that doesn’t mean infrastructure plays like WalletConnect won’t be critical to this movement as well.
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Music NFTs Breakout Moment? This week in the FF Journal, Azeem Khan asks what it’ll take for Music NFTs to have their breakout moment. In short: Music NFTs won’t take off because of adoption from a Drake or Taylor Swift-sized artist. In fact, we’ve seen a few reputable artists experiment with Music NFTs with little to moderate success (at least outside of the usual crowd of NFT collectors). Instead, Azeem argues that it’ll be the up-and-coming TikTok star who uses NFTs as yet another tool to catapult into stardom and profit off of their meteoric rise. Even if this were to happen, though, record labels would probably still stick around in a meaningful way. However, giving independent artists agency through this powerful tool to monetize their work while maintaining ownership is a massive step in the right direction, and shifts the leverage back in favor of the artist.
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On Web3 Membership and Composable Monetization. Building on his previous piece on the Web3 Membership Stack, Andrew Hong explores the various tools and frameworks used for community membership today and their effectiveness at monetizing. He breaks down communities into three categories: benefactors, builders, and members. Andrew then further breaks down these groups by what existing tools best serve them from a monetization perspective and why. How these systems are evaluated and evolve over time is very much an open question, but Forefront’s Terminal.co is mentioned as a potential tool in this ongoing evaluation process. All in all, this is a great piece for those looking to audit their own community’s membership models and tooling.
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The right to never be forgotten. This fantastic essay from Antonio Garcia Martinez of The Pull Request analyzes the implications of a fully public, immutable blockchain on our norms around privacy. The challenge before us, he says, is to figure out the ground rules of privacy in web3, where previous norms and government regulation no longer hold at all; in fact, they’re utterly flipped. Antonio outlines what “personal data” might really mean in a world of blockchain adoption, and how new models might make living in a fully-transparent world more reasonable, meeting some semblance of our expectations of privacy. These sorts of socio-technical analyses will be critical to charting the right path forward as we continue to move at breakneck speed in the world of web3.
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Social Rules for DAOs. From an operational standpoint, Alisha.eth of ENS DAO writes, “DAOs require human input to prepare and advance executable proposals that can be voted on and executed in a trustless way. Proposals are not prepared in a vacuum — instead, DAOs rely on people to coordinate, submit, and action proposals.” Alisha uses this observation to highlight the importance of social rules and spaces – constitutions, forums, town halls, codes of conduct, etc. – to ensure the ongoing health and prosperity of a DAO. Given her experience, ENS DAO is used as a deep case study for how and why these social rules need to be implemented, who is responsible for them, and mental models for thinking about them for your DAO. This is a must-read piece from a DAO operator who has helped grow one of the most important, impactful DAOs in the ecosystem.
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DAO governance attacks, and how to avoid them. Many web3 projects embrace permissionless voting using a fungible and tradable native token. Pranav Garimidi, Scott Duke Kominers, and Tim Roughgarden write for a16z Future that this sort of voting is vulnerable to governance attacks, in which an attacker acquires voting power and uses that voting power to manipulate the protocol. The trio outlines a framework for understanding when a governance attack is rational and what systems make a protocol more or less prone to facing one. Toward the end of the piece, a series of examples are given of “increasing the cost of governance attacks.” One of which is Nouns DAO, which simply allows the Nouns Foundation (an off-chain legal entity) to veto any on-chain proposals deemed problematic for the protocol or DAO. While such examples require high levels of trust in the stewards of the Foundation, they are also best suited for a world where governance attacks are still relatively novel and uncommon.
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The paradox of DAO profitability. Samantha Marin writes consistently thoughtful and insightful essays on DAOs, and this one is no different. In this piece, she highlights that most DAOs aren't profitable. While this doesn’t have to be the case, it remains to be seen whether DAOs should actually be evaluated in the same way we evaluate traditional startups vs. more like public goods. She makes a powerful observation that DAOs need to balance user-ownership with making enough money to at least take care of their core teams. Without a solid mission and a means of sending value back to the core team, a DAO will never become an economically sustainable organization. As we continue to explore new ways of funding public goods, it is important to recognize the limitations of those funding models for organizations that are adjacent, but aren’t public goods themselves.
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Redeem-and-retain NFTs are the future of luxury goods. Redeem-or-retain NFTs had a moment last year. Unisocks were one of the first examples of this model, and they gained a cult following amongst early Uniswap supporters accompanied by a massive floor price on unredeemed tokens. However, Nic Carter argues that redeem-AND-retain is probably a better model for NFTs that have a corresponding physical item. The reality is that people who hold collectibles want to flex physically and digitally. This essay is especially timely in light of the Tiffany & co. announcement of CryptoPunk pendants, which a limited number of Punk holders can purchase by buying an NFT and redeeming a pendant of your Punk. As more experiments with physical-digital collectibles come to light, creators will realize that scarcity isn’t the only goal. Consumers and collectors are looking for valuable items, but would often prefer not to sacrifice their existence online or offline.
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Quarterly NFT Market Report. The Nonfungible Team released a new report for Q2 2022 on the state of the NFT market. While active wallets haven’t seen a significant drop off, USD volume traded certainly peaked in May of this year and then collapsed to under $50M per day in the month following. Q2 saw significantly fewer sellers and longer holding times, indicating that HODLers are stronger in the bear market (despite more people selling for a loss as well). However, the average price of NFTs decreased only 6% since Q1, in stark contrast with the 60-80% drop in crypto token prices. Gaming and collectibles continue to be the biggest segments across all volume metrics, far ahead of art, for example.
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Market data on the last 7 days. Last updated Aug 1, 2022
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Updates from the DAO
— We wrapped up Week 2 of Cohort 2 of the W3CR this week! Make sure to stay up to date in the W3CR Discord channels, on Twitter, and on the FF blog/newsletter.
— We published “Music NFTs Breakout Moment?” by Azeem Khan, an exploration of when Music NFTs might go mainstream.
— Keep an eye out for a new proposal focused on exploring new ways to earn and distribute $FF!
— We're running a "networked writing" experiment in the FF Discord focused on sparking some microblogging and conversation around the topi of "web3 and labor." If you're interested in participating and hold 100 $FF, check out the channel in the Discord!
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Firelight
— The full synthesis of this week can be found here.
— Cohort 2 moved into Week 2 of their 4-week residency, effectively shifting from theory and explanation into planning and tinkering.
— Kabuki, multi-disciplinary artist, musician, and DJ, taught us how to use the “cable salad visual creator” beta program, Cables GL. Kabuki’s sessions are especially valuable for non-coders and those interested in designing off the hook generative NFT’s or interactive visuals.
— Solarpunk 3D artist and video game developer Nico immersed us in her thinking around multi-disciplinary community design. She did a deep-dive on permaculture and its emphasis on ecological wholeness. Nico also took us on a dizzying tour of her workflow in Blender, introducing us to asset optimization, vertices and structure during building.
— 3D artist and musician D3MO is working on finalizing some of his magical creatures and their accompanying soundtrack in his fictional world yh⁴. D3mo took us again into the Blender program to give a in-depth look at all the yh⁴ creatures he has imagined and constructed thus far. (A community favorite was a sublime butterfly-like creature!)
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◎ Check out FF Signal for more headlines
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