Thread by @swombat

Thread.

So here's another anti-pattern that I see across many projects. It's also one that takes those projects quite close to a legal grey area where they might be shut down by SEC and FCA and other financial authorities.

I'm talking about "giving back to the community".

How could "giving back to the community" be an anti-pattern?

Well, it depends on how you look at the project. Here are two perspectives:

- Project as a DAO-type entity with some sort of long-term vision to be around. Let's call this P1.
- Project as a money-making scheme. P2.

P1 is a bold step into the future. Who knows where it might lead. Maybe it will, as I've suggested in earlier threads, form the building blocks of Capitalism 2.0. Did the founders of BAYC know how huge what they build could get when they started? Maybe, maybe not.

But they were building something for the long term, something cool, something that could take over the world in some way, without necessarily knowing the details of what that might look like, but knowing it was there to be a "thing" of its own.

Building things is very hard and expensive even when you know what you're doing.

When you're flying blind into uncharted space like most Avatar projects, it's super-hard. You need all the help you can get.

As I argued yesterday (

https://twitter.com/swombat/status/1453660407546236932?s=20

) your superpower when trying to build one of those things is going to be unlocking a creativity explosion in your project, by attracting the right people, inspiring them, etc.

But the money that you raise is also part of your rocket fuel to get there. It is a precious resource. It is not there to line the pockets of the founders, at least not until they've actually delivered something exceptional.

It is fair to say that people minting a project (at least, a P1 type project) are like early investors in a startup. They believe in your vision. They want to help you build it. They're willing to put chunks of cash forward to give you the runway you need to take off.

Hopefully, they're also willing to participate in making your project a success. But even if they're not, at the very least they're investing in your wild idea, your leaderhsip, your vision, your dreams...

From a P1 perspective, it makes no sense to then give them the money back right away as raffles, giveaways, or even royalties (yes, even Roarwards like in #LazyLions - gotta tell the truth here). The money has been invested. Go do something with it.

Seeing a P1 project give that money back is as nonsensical as if I invested £10k in a cool tech startup that was raising £150k, and then found out a month later that they're holding a raffle and distributing £50k back to investors. Wait, what? How does that make sense???

Of course, from a P2 perspective, it makes perfect sense.

If the avatar project is mostly a money-making scheme, then it functions much like every MLM, ponzi and pyramid scheme out there. It needs to grow by attracting more people with dollar signs in their eyes.

A P2 project is very, very similar to an MLM scheme. Price goes up as long as there are more people to attract. As long as it's growing like gangbusters, you can attract more people. Once it starts deflating, everybody runs, and some poor sods are left holding the bag.

I won't give examples because there are so many that anyone in the NFT space can name 5 from the top of their head.

From a P2 project, the giveaways, raffles, etc. make perfect sense. They're all part of building the hype, and getting those dollar signs flashing in people's eyes.

If that's what you're building and you know you're building it, fine. I think there are ethical questions you should be asking yourself there, and I also think it's good that the SEC and others are looking into these very closely, because they're nothing new.

But don't fool yourself that you're building the next big thing if you're building yet another pyramid scheme by another name.

Why am I posting this thread though? Obviously I'm not going to convince someone who is deliberately building a get-rich-quick P2 project to abandon their plans. Would be silly to even try to.

However, I think the "give stuff back to the community" meme has spread and infected also P1 projects that genuinely want to build something awesome that will still be there in X years and change the world and all that. I see it in projects I'm in.

I'm posting all this to suggest to those P1 founders, who have big dreams, that "give stuff back to the community" is a poison meme. It's an anti-pattern. It may give you a short term marketing boost but it is at the cost of the precious lifeblood of your project.

And to make it work it tends to mostly attract people who are looking for short term gains, rather than the Whale Contributors you want to bring onboard.

Everyone likes to get free stuff, so extremely few people will complain when you drain your project's war chest to turn your project into a lottery.

But think about your long-term vision. Why are you doing this at all?

If your vision is to build something new and amazing and change the world (P1), think *very carefully* about whether any sort of giveaway, staking, royalties, raffles, etc, really makes sense for your *long term* goals. It may be a short term gain, with a bigger long term loss.

If people have given you money... do something awesome with it. Even better, use that money to enable the Whale Contributors in your project to do even more amazing stuff.

Don't splurge it all on free stuff for punters with dollar signs in their eyes.

As we like to say in #LazyLions, ROARS > FLOORS.

Projects likely to succeed long term don't spend their time coming up with ways to drain their resources to boost the floor. They get busy with the less flashy work of actually building something worthwhile.

If you want to build something worthwhile, do that. Inspire others to participate in your vision. Power up the whole thing with the money that your investors gave you.

And don't give a cent of "royalties" back to anyone.

Let them make their money when they sell their shares, I mean, NFTs, for 100x gains.

<EOT>