Jun 23, 2021 | Fred Ehrsam
This post originally appeared on fehrsam.xyz
Almost exactly one year ago, Jesse Walden, Blake Robbins, and I speculated about the future of Creators, Communities, and Crypto. Little did we know all the last year would bring, especially with NFTs reaching the mainstream. We got together for another conversation, revisited what’s happened over the last year, and speculated on what’s yet to come. Condensed transcript below.
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Fred: Great to see you both again. Almost exactly one year ago, we talked about how crypto might enable creators and communities. A lot has happened since then. What have been the biggest developments?
Blake: The last time we talked, all of us were sitting here thinking what would status symbols look like if you were early to a creator or you wanted to support a creator? What could digital merch look like? And it turns out it was actually just digital art. You can take a cynical view and say, "It's pure hype, you're buying a random NFT, it'll have no utility", but as I continue to dig, there are some really cool elements around this idea that you can create economic alignment.
Jesse: I think what happened in the last year was three big inflection points, some unique to crypto, others more general. The first is that 2021 is the year that investing became mainstream culture. And that wasn't unique to crypto: it was WallStreetBets, GameStop, etc. I think it taught people a lot about investing, internet communities, and making money together.
That paved the way for the second major inflection point: culture then became investing. With NFTs, you could now invest in culture via digital art.
The next step is the complete synthesis of the two, where investing is culture and culture is investing. Investing becomes a team sport that you play with your friends on the internet. What's exciting is people now understand crypto is the right stack for doing that. Crypto is inherently social. The legacy financial system is not.
Fred: Blake, how have the traditional creators looked at this whole phenomenon? How do you see them responding?
Blake: If we've learned anything over the past year or two, it's that there’s more and more power going towards these creators. Let's use OnlyFans as an example. We've seen that blow up because it unlocked a new way of monetization. I think we're going to see that happen here with NFTs. We haven't seen a big creator really nail it yet, and I'm curious to see if and how someone will do it. Because if they do it right, there is no limit.
Jesse: One really cool thing that started to happen is we started to see collector DAOs form around NFTs. Edward Snowden sold an NFT for $5 million. The purchaser was not an individual but a group of people who pooled money using a smart contract on Ethereum.
What we'll begin to see happen is groups starting to tokenize themselves. And so now you have this group of fans of a work, creating a token for that work, and that may function like a social token for the creator or for the community that's excited by the stuff that they make.
One possibility to get content creators involved is that maybe they aren’t the issuers out of the gate. Maybe the fans take it into their own hands and that's how social tokens get off the ground.
Blake: I hadn't really thought about it in that context, but you can imagine how ‘stan’ culture might play into this. For example, Beliebers might come together to form a DAO and buy the NFT of Justin Bieber's newest song.
Fred: Jesse, do you have intuitions around other ways multiplayer investing or “investing as a team sport” might evolve?
Jesse: If you play that idea out to its logical extreme, it puts both you and me out of a job. I think investment clubs end up dictating what people pay attention to on the internet because it’s no longer who has the most retweets or who has the most attention. Rather it's, who has the most skin in the game? Who invested in what? That'll expand from NFTs to internet products and services.
Fred: We already see some examples of this today. The modern art market works like this. The economic backing of an artist tends to mean that it rises to the top in terms of cultural awareness. Crypto might create a really strong form of that economic value to cultural value feedback loop.
Blake: I was younger at that time, but I remember there were these sites where you basically had to earn a reputation - either you uploaded a certain amount or you proved your worth in some way to get into these exclusive torrenting sites. I imagine that we will see similar dynamics here happen with DAOs.
Jesse: Membership in these DAOs will become more sophisticated. Right now for the most part, it's just capital. But to keep the quality bar high and these communities fun, it will have to be more than capital. There's a number of startups that are trying to essentially help crypto communities raise the bar for their memberships, creating scavenger hunts or Easter eggs that people need to find.
Fred: You can see this in venture investing already today. It's just not tokenized. In other words, if you're early and investing in one or two startups, then others are likely to want you to have access to invest in their startups early.
Blake: You can imagine an artist actually choosing who they want to sell it to. For example, we want to sell it to PleasrDAO even if they aren’t the highest bid because we know there’s just a lot of value in working with them.
Fred: Entertainment and investing are becoming part of the same package. Sneakers started mostly as a status symbol and now are making its way towards being financialized. The Yeezys that Kanye wore during the Grammys were purchased and now are being sliced up such that many people can invest in them. I would argue this is true of politics. You tune into an election debate and it feels like you're watching a boxing match with sports commentary as much or more than what is the substantive outcome for the future of a nation-state and its policies.
Jesse: It's an especially potent combination in markets because whether it’s making money or losing money - having skin in the game elicits very powerful emotions.
Fred: We talked about this before, where coupling economic alignment with these communities around different creators or projects just effectively turns them into highly motivated distribution. Bitcoin has shown that for 10 years now, and I think we're just starting to see that in the NFT space.
Blake: You both have a view from deep in crypto, but I'm thinking about it from the lens of a YouTube creator, because I imagine at some point they should just mint NFTs for all the content they're producing. But do you think they'll still use centralized platforms as distribution?
Fred: I think we know where we're going in the long-run, which is that crypto allows creators to directly interface and own their followings independent of any platform. We're just at the beginning of NFTs. It’ll be interesting to see people build out platforms where NFTs are the basic media building blocks. That’s where you get totally crypto-native platforms that build on NFTs as the primary building block, and we're in year 0.5 of 10+ years of that.
Jesse: In the short term, the successful Web 2 creators are likely to do better creating NFTs that are not the original work that they're posting elsewhere, but rather thinking of NFTs from first principles, maybe as a new kind of digitally native merch that's distinct from the YouTube video.
I do agree with Fred that, long run, every single piece of media on the internet is going to be incepted as an NFT. And there will be markets for it. I don't think we get there by YouTube just slapping on an NFT widget to their existing platform. I think it will be more bottom-up emergent.
Fred: To take that even further, one concept embedded in this is that blockchains will be the single source of truth in digital worlds. So quite literally every piece of digital media will likely be minted at some point in time, whether it's because you want to see when it was originally created, who owned it, how it morphed over time.
The second thing embedded in that is we're very early in the form factors of NFTs, and there will be many that work. We're mostly in a shoe-horning phase today, like the beginning of any new technology. And we're just starting to play with some of the interesting ways in which NFTs can create novel forms of media, art or otherwise.
CryptoKitties breeding, you could argue, was one of the earliest versions of this novel mechanic where you take two digital assets and then you create a new unique one. I'm sure there will be others. Gaming and in-game economies seem especially likely.
Jesse: Tim Sweeney, the founder of Epic Games, is on record talking about the metaverse as something that can only exist once you have a truly digitally native property rights system. Blockchains are exactly that. We're now starting to see the collision of the metaverse and crypto native assets. I think that the synthesis of these two things is inevitable and will happen sooner than people think.
Fred: There's a really good recent podcast of Tim’s where he talks about what infrastructure is necessary for the metaverse. If you listen to the whole thing, it's just like a red light flashing, "this is crypto, this is crypto," in a great way.
Blake: Gaming specifically has had these issues and these centralized platforms really do own the assets. So it's not shocking that they understand it probably better than most, because users are saying, "I bought this skin and I can't transfer that into another game?" That feels inevitable at this point.
Fred: One thing that might be underappreciated is how much kids have grown up in these virtual worlds, so these ideas might just be a lot more intuitive and normal to them. Not just that, but kids understanding finance, kids super into creating their own culture and being a part of that more and more directly in any way they can.
Jesse: One of the really remarkable things that’s happened since our last discussion is that, in addition to kids who were native to crypto or native to gaming, a lot of other people also showed up at the door of crypto and learned behaviors that were completely esoteric six to twelve months ago. Like installing a crypto wallet in your browser, on your phone and the concept of signing transactions and paying gas fees, these are things that Web 2 people sort of sneered at, yet millions of people have figured it out.
Fred: MetaMask announced 5 million monthly active users the other day. That's starting to get pretty real. And even some of these experiences like TopShot where people debate if that’s really crypto or not. The answer, I think on some level, is that most things which use crypto are normalizing it for everyone.
Jesse: I think that that's where it ultimately goes, but it is interesting how it seems some people have gravitated towards the full crypto experience, all the jankiness included, because it's the real thing. It'll be interesting to see in a year from now where that conversation is, whether people want the abstraction or they want a sense of really owning their stuff and having it go with them wherever they interact.
Fred: One other dimension people might under-appreciate is how automated getting paid for various actions on the internet might become as crypto proliferates. If you're an influencer on Instagram, currently you do various paid partnerships directly with a brand. In the future, it might just be you take a picture with a product in it, irrespective of whether or not you meant to, the image is scanned, and you get paid automatically. If you're a software engineer and you contribute code to a crypto protocol, the very same thing may happen. There's no employment agreement.
At some point, kids are just going to stop opening bank accounts and just have a crypto wallet. It's so much better. It's like, “Here's a little downloadable widget and it works with everything on the internet.”
Blake: In a crypto context, everything is an API and your data - what you actually share, what you opt in to, all these choices you make - can be stored with you and you can share your friend graph if you want to for certain applications. This is really empowering in a lot of ways.
Fred: I think people have not yet internalized that crypto or blockchains will be the single source of truth for everything in digital life, and digital life is becoming most of life. And that includes bank account, reputation, identity, all those form factors get combined.
Jesse: To end, there were some ideas we talked about a year ago that haven't happened yet. One is tokenizing physical goods. The other is social tokens. We're still trying to figure out product-market fit around those.
Tokenizing physical goods is definitely going to happen. The logistics of the physical world are still not entirely wired up to the blockchain yet, but they will be. The way social tokens will come to fruition is essentially through these investment clubs buying NFTs from creators and then creating communities around those NFTs wherein the community token or access to that community ends up becoming something akin to a social token for the creator.
Blake: On social tokens, I don't have a concrete way of how it will happen, but I think at some point, people will hold these tokens whether earned or bought, and it’ll unlock access to communities or access to creators, or both.
The physical goods stuff is really limited by the logistics side of it. That gives me a little bit of pause, but it does feel inevitable that at some point you can just own a fraction of a Yeezy. That just seems like a no-brainer.
Fred: Tokenizing physical goods will be like Webvan in the early internet. It's not the thing that's going to work first, but it will work later. I think we'll see people try that idea again soon.
Social tokens: It sounds like we're all still high conviction!
It’ll be exciting to see what happens with crypto and creators after another year._
Disclaimer: This post is for general information purposes only. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. It should not be relied upon for accounting, legal or tax advice or investment recommendations. This post reflects the current opinions of the authors and is not made on behalf of Paradigm or its affiliates and does not necessarily reflect the opinions of Paradigm, its affiliates or individuals associated with Paradigm. The opinions reflected herein are subject to change without being updated.