david phelps Profile picture
Oct 23 2 tweets 3 min read Read on X
why consumer crypto completely fucked up
(a mini-essay):

in retrospect, consumer crypto made a disasterous mistake in 2021: trying to oppose a 30-year trend towards democratizing free digital goods. after all, this *was* what the internet was always good for—making goods free and abundant.

but in 2021, we decided crypto should make it the opposite.

the clearest example of this, i think, is music NFTs. the past 30 years of the music industry moved definitively towards making music cheaper and events more expensive than ever. the digital goods (music) were democratized to the point of being nearly-free; the irl experiences (events) became the primary point of sale for artists.

music NFTs, however, decided they could buck a 30 year trend—often with the very good intention of getting artists paid and democratizing ownership of catalogues themselves. but it was an uphill battle for a simple reason:

there's no reason for people to buy music NFTs unless everyone else is buying music NFTs, at which point you find yourself in tulip mania. and this is especially true in the absence of enforceable royalties. if you want to hear music, you can do so for next-to-nothing online—including with music NFTs. and even if you want to hear a favorite experimental musician who depends on superfans to monetize, you can pay $20 on bandcamp.

the music nft has no intrinsic worth except as a memecoin for an artist's career, and memecoins are far more accessible to fans to buy. memecoins, in some ways, represent more democratized NFTs that actually can enable anyone to speculate on a creator's career—in theory, anyway.

regardless, this is a disaster for artists who have been continually undercut by internet democratization and struggled to find new ways to monetize—which is why i personally have hoped for years to see NFTs actually work. and why, frankly, i think was wrong.

but there are still so many ways that crypto *can* support artists and simply has not done so.

in music alone, the internet should have taught us that the financial opportunity is in events, not collectibles. @KYDLabs, for example, uses blockchain to disintermediate giant ticketing companies with their production fees to enable fans to get memberships to see artists. the artists and venues become their own ticketmaster, and get far better insight on their community by leveraging onchain data. this is a no-brainer, entirely in keeping *with* the trends of the internet to undercut middlemen by making experiences more accessible directly to users.

similarly, @MintStarsReal is seeing explosive growth right now by building an onchain only fans that abstract away crypto completely from the end user—letting the unbanked get paid for providing experiences, not digital goods, to users.

in retrospect, this begins to feel obvious because it's entirely in line with decades of internet history: people pay for online experiences, not online things, and the cost of media generally trends toward $0 as a near loss leader for theme parks, concerts, and sports events, as irl experiences become even more valuable.

nevertheless, i think we can forgive ourselves for fucking up. the common thesis for why we thought digital scarcity would work is simply that it's inherent to crypto—that famous hard cap of 21M $BTC—though there's no reason it needs to be. stablecoins alone, after all, are designed to inflate with the economy.

so the real reason we fucked up, i think, is simply because, well, the tech was only usable for whales. in an era of $100 gas fees, slow throughput, cumbersome UX, and crypto-natives pouring their recent fortunes back into the ecosystem, it made perfect sense that we could only find product market fit with luxury goods for crypto whales to celebrate their newfound status in the digital upper classes.

but building for whales is not, it turns out, how the internet works. we should have known this from web2. what the internet is actually good for is enabling the masses to participate in culture—both in producing and financing it. the tech just wasn't ready for that.

until now.
from "against scarcity," a piece i published in june 2021, arguing that the actual scarcity to replicate was time

that didn't really happen... until @timedotfun

lots i got wrong, but stick by this all today Image

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More from @divine_economy

Apr 29
if you thought you knew eigenlayer, that just changed.

to date, excitement was around major protocols using restaked eth to bootstrap more easily.

it turns out, it's way bigger than that.

it's a way for protocols to exist that couldn't otherwise.

1/15
restaked eth, we were told, was useful to secure objectively verifiable transactions like those we've had in blockchains for 15 years.

all good

but the eigenlayer tokenomics explains it can be used to verify something new in blockchains: *intersubjective* transactions

2/
imagine it's 2030, and you've elected AI agents to handle your finances who are trained on the whole history of economic data

but one of the agents keeps making bad decisions and losing money

is it malicious? and if so, how do we stop it from trading its capital?

3/
Read 16 tweets
Jan 11
tokenomics for chains have been plagued by two issues:

1. you can't stake your liquidity and use it too (thus rise of centralized staking protocols)

2. governance can be bought

@berachain just released their docs, and it solves both

it's the greatest tokenomics i've seen

1/
like any traditional chain, berachain has its own token, $BERA, for paying gas, trading, etc.

but it also has another token, $BGT, which you earn by staking $BERA

$BGT is *non-transferrable* and can be exchanged for $BERA—but there's no way to buy it

which means two things

2/
first, you've always had to pick whether to stake your token to support an ecosystem (store of value) or use it within that ecosystem (medium of exchange)

chains need both, but that was impossible without centralized staking services

now it's built-in at berachain

3/
Read 13 tweets
Dec 28, 2023
we’re officially living in the memeconomy

i don’t just mean that value in every sector is in the ability to become a meme

but that memes themselves are now money—and arguably the primary driver of blockchains, toys, etc

lemme repeat:

we’re officially living in the memeconomy
the memeconomy is the natural culmination of a century of consumption that has seen the imploding of manufacturing jobs, rise of automation, and buying as a *hobby*

to invert marx, commodities are now definite quantities of congealed *attention-time* in place of labor-time
what happens when the improvements to everyday life standards have diminishing returns?

what happens when there’s little to invest in besides the giant monolithic corporations that have won?

you shitpost or you shitinvest—in memes
Read 12 tweets
Oct 5, 2023
the hardest question in crypto consumer is whether you even *want* to build for mainstream adoption

@friendtech makes $1M a day from 15k users; @blur_io does $7M daily volume with about 1500 accounts

the reasons crypto is a pain at the bottom are why it's a goldmine at the top
elasticity: being able to capture consumer surplus of the most people will pay for given items

financialization: everyone pays gas anyway, so 10xing that price tag is not a big ask

these are massive unlocks enabled by crypto *and* frontend barriers to entry

both can be true
my dream is that we're building global financial rails for interoperable access anywhere in the world

that we're starting at the top, but building for anyone in the world

but the data doesn't lie: you understand why everyone in crypto consumer loooooves the narrative of luxe
Read 4 tweets
Jul 27, 2023
nobody is admitting it, nobody wants to admit it, nobody should want to admit it, but i am so sorry to say that crypto is 100% the future of advertising
sorry, but you think single accounts that are transparent and interoperable across services that incentivize them to take greater social actions than ever *won't* be a massive boon for consumer profiling?

advertising is one of crypto's *greatest* use cases
now think of how crypto has already unlocked *user-generated advertising*

yes, users are incentivized to market projects they're invested in

but they can also *earn* rewards for getting social media to back their involvement in crypto projects

it makes ads permissionless
Read 4 tweets
Apr 6, 2023
1/16

few realize it yet, but shared sequencers are one of the few genuinely great business opportunities in crypto right now.

here's why: Image
2/

shared sequencer fans tend to be excited for a simple reason: decentralization.

sequencers just order a chain's transactions—so letting rollups share a *decentralized* sequencer means better MEV protections and censorship-resistance, yes.

but that's not why i'm excited.
3/

as @jon_charb pointed out, you *could* approximate decentralization with a centralized sequencer by handing it to a multisig 😬

but you know what you couldn't do with a centralized sequencer?

let chains transact with each other.
joncharbonneau.substack.com/p/rollups-aren…
Read 18 tweets

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