The New Creator Economy - DAOs, Community Ownership, and Cryptoeconomics

Nader Dabit - Aug 26 '21 - - Dev Community

Since I first had what I can only describe as a spiritual awakening about 10 years ago to the fact that technology would (figuratively) rule the world, I've been obsessed with wanting to understand how software works and how to build it.

Since that moment, my life has changed significantly for the better. I can only attribute it to the simple fact that I have relied not only on my own instincts, but of those of people much smarter and more experienced than me.

My hypothesis is this - try to find and follow the lead of those who have exhibited a long track record of success, find interests in their wake, and do my best to excel at them (while continuing to explore my own curiosities).

This approach has led me to try and master JavaScript, and then React, and finally to build a successful consultancy ultimately landing me on a team at AWS in a life changing experience that lasted a little over 3 years. All of this with no high school diploma or college degree.

During this time (like many developers) I've relentlessly dived into books, podcasts, blog posts, YouTube videos, and source code of every kind, but there has always been a topic that has captured my curiosity the most - futurism.

Futurists like Gerd Leonhard and Michio Kaku speak of a future, sometimes beautiful and sometimes bleak, but always with the passion and phrasing that make your thoughts wander and move past the current moment in time and into a mind boggling world that does not yet exist.

I recently had another "aha" moment, similar to my technological awakening, that has completely changed the direction of my career and my life. In the spirit of these futurists, I want to talk about why Web3 excites me just as much as their ideas, but is instead happening as we speak.

Web3

This post is meant to dive more into what I think are the benefits and repercussions of Web3. If you want to know my interpretation of what Web3 is, see my thoughts here.

Web3 represents a handful of ideas which together bring about entirely new mental models, organizational structures, and community incentives forcing us to rethink many things that we have become accustomed to.

All of the recent innovation happening is being made possible because of decentralized protocols.

The internet itself has thrived because of native internet protocols that we use everyday, like http, ftp, tcp, and ssh. One of the reasons these protocols have been so successful was that they were widely adopted and not subject to change. If I build a site using http, people can use it without any centralized intermediary - we can trust that it is going to work.

There were two major pieces of native functionality that have been left out up until recently - payments and state.

Blockchains have enabled both of these things, opening the door for programmable money and state without the need of a centralized server, bank, or any intermediary at all.

Ownership

One of the driving forces and the one that resonates with most people (and me) is that Web3 enables ownership.

Gaming

At some point the internet and gaming became almost indistinguishable. Not only because most games continue to receive updates over time, but the most popular ones are often the most interactive.

Fortnite took a lot of people by surprise because it created an innovative new combination of gameplay, peer-to-peer connection, and a unique business model - and everyone gets the game for free. The experience is very interactive, you can join old friends and make new ones, there are constant improvements and enhancements that just happen automatically - the game is consistently evolving.

The monetization strategy was also innovative. Fortnite allows players to buy in-game currency as well as skins that they can wear in the game. If you have a child you know that the $65 you may have spent on the game itself is probably peanuts compared to the amount of money kids spend over the lifetime of their gameplay.

The problem though is this: when the player decides to stop playing the game or outgrows it, where has all that money gone? More importantly, who is allowed as a creator to benefit from all of the purchasing power? The answer is, well, Fortnite (the platform).

What if, instead, players retained ownership of their items and were able to keep or sell them. Their items would maintain, increase, or decrease in value like any physical asset. These types of experiences and communities are now being made possible via NFTs. NFTs (and other digital tokens) enable scarcity in a world where there was in the past no scarcity.

Axie Infinity is an example of how this looks in practice. It is a blockchain-based game that is the most successful of it's kind, and has recently had explosive growth, catapulting it to over $1 billion in sales with over $780 million in the 30 days ending August 10 2021.

The best part about Axie is that, instead of 100% of the revenue going to the platform, they only keep 5%. This means that 95% of the revenue gets distributed directly back to the gamers.

Parallel is an online card game that has done over $100 million in sales and is still extremely early. Dark Forest enables players to get paid to play the game.

When players realize they can retain much of the value of their time and investments while still enjoying the benefit of the game, it not only changes the way they view gaming and where they spend their money, it aligns new incentives around the game itself. If the game succeeds, they can share in that success, therefore they become even more invested.

The combination of ownership, community, and creators who have built audiences creates a whirlwind of new and exciting opportunities that we are just starting to begin see explored throughout the Web3 world.

Ryan Watt, the head of YouTube gaming agrees.

Mar Pincus, founder of Zynga, says "Play 2 earn and play 2 win is next evolution of freemium. Player owned and directed economies could change games and other industries forever. Cant wait!"

EA has called blockchain games "the future of our industry."

And web3 gaming is experiencing never-before seen levels of investment across the board.

Social media and art

Social media platforms were revolutionary in that they allowed anyone from almost any background the ability to grow and foster large audiences using tools that were made free to anyone with a device and an internet connection. There are no gatekeepers to becoming famous on social media as there have been in the past in film and TV, the intermediary was abstracted away — peer to peer connections and direct content sharing was made possible.

The flaw in these implementations is that they offer a terrible monetization system, not just for the platform but for the creator as well. Advertising and the exploitation of user data is the go to play. Also almost all of the money generated by the platform, goes to the platform - the platform monetizes the content being created by its users in exchange of use of the platform itself. This is how social media works today.

In Web3, both creators and the community are able to gain and retain ownership within a platform, creating a synergy that, once experienced, makes the legacy interactions of the past seem archaic and undesirable. When I say ownership, I don't only mean ownership of content, but actual equity as well.

We are seeing the beginnings of this in the art world of Web3. Artists who were, in the past, often barely making it are now able to leverage their platforms, often in collaboration with other community members or causes, creating one of ones or collections of many. Foundation, Super Rare, and Zora enable digital artists to finally begin earning the type of incomes that their brothers and sisters in other parts of the tech sector have been enjoying for the past couple of decades, all enabled by blockchain technology and digital scarcity.

Art and code are also beginning to overlap.

MoonshotBots, launched by Austin Griffith and Kevin Owocki raised over $2 million to give to developers working on Open Source through Gitcoin grants.

Projects like Generative Masks allow talented creators like Takawo Shunsuke to leverage the skills he's acquired throughout his career to generate over $3 million in sales for his collection in just a few minutes, spreading awareness for himself and his cause, and creating another new community (of owners) simultaneously. The best part is that he's giving all of the money to the communities he's benefited from. On top of that, smart contracts allow him to programmatically enable a commission for any future sale that happens going forward, and in just a couple of weeks that amounts to another over $600,000.00.

Generative art itself is an emerging category that combines code and creativity and is something that could alone warrant an entire post, but it suits the coming era particularly well as it enables artists to scale their creativity, community, and distribution.

There will continue to be a larger and larger percentage of digital artists because they can use powerful tools and programs to create art that can then be used in an infinite number of ways. They can then put it for sale on an international, 24 hour, liquid market.

Open Sea, the top online art marketplace today, has seen an absolute explosion in growth the past few months.

Even recently surpassing Etsy in sales.

Whether this type of volume continues, I have no idea. My guess is that there will be some volatility and fairly large swings both up and down. But there is definitely something there.

Another NFT platform, Super Rare, did a retroactive token drop to reward and provide equity to early supporters of their platform. 15% of the total supply of their token was given to artists and collectors who had already used the platform, amounting to anywhere between a few thousand to over a hundred thousand dollars per user.

Most of these NFT projects are launched on Ethereum. Ethereum is soon merging a new consensus mechanism that will make NFTs orders of magnitude more environmentally friendly as a means of sales and transfer of art than how we physically do today, which in the past all required ground transportation.

Future of social media

As it stands today, users of social media platforms can begin leveraging Web3 tools, communities, and platforms to begin monetizing their audience. I believe there will be a breakthrough app that will disrupt social media as we know it built in the in the next 1 - 3 years that blends all of these ideas together in a way that we haven't experienced yet.

Many people have echoed a similar sentiment. Aave, a very successful DeFi protocol built on Ethereum, has already begun work on a decentralized version of Twitter:

Jack Dorsey of Twitter is also working on a Decentralized version of Twitter, though I believe that this type of application will ultimately come from the community or a DAO.

Then there's Reddit, who's founder Alexis Ohanian is extremely bullish on web3:

Reddit is moving into the space claiming to have a goal to "Decentralize social media"

And of course there's the company previously known as Facebook who is unabashedly diving head first into the Metaverse, renaming their company to Meta, issuing their own token, and supporting NFTs.

DAOs, grants, community ownership, and social tokens

DAO stands for Decentralized Autonomous Organization. You can read about what a DAO is here, here, and here, but I want to focus on how DAOs will play a part in the new creator economy.

Shared ownership is a characteristic you'll see carried across all areas of Web3, including how we think about companies and incentive structures around how business is done.

In web2 companies, cash usually comes from large investors and there is no value returned to them for years. Ownership is largely concentrated in the first handful of employees along with their investors. Also, the average person has no chance of investing early in these companies. This funnels more money and more opportunity to the upper class, most connected, and most privileged among us and widening income disparities around the world.

These investments are also not liquid. It also usually takes years to reach a point where investors or employees with equity can begin to see any return on their investment and time spent, those revenues often through the old ways of advertising and exploitation of user data.

Web3 and blockchains bring about entirely new business models, made possible by tokenization and cryptoeconomic protocols.

In web3, communities and companies are built from the bottom up. Ownership can be created and issued to people in the form of tokens. Almost anyone can invest and participate in these communities and protocols much earlier on. Ownership is distributed much more evenly and fairly than in traditional companies. Developers and others can help build these communities, apps, and protocols in exchange for ownership. Unlike stock in startups which is not liquid, these tokens are indeed usually liquid.

DAOs enable communities to be owned by their participants. For example, developers often spend time helping answer questions in some company's Discord or on Stack Overflow. They might spend hours per month, taking time out of there day to do so. At the end of the day, the platform or company is benefitting and monetizing the value from that person, and they are not paid anything in return. In a DAO, community members hold ownership in the form of a token (usually either an NFT or an ERC20). The success of the community will determine the value of their stake, creating incentives for participants to make it successful, increasing the value they retain if the community continues to remain succesful.

There are quite literally countless ways that these tokens are being utilized to create new ways of collaboration and building, ranging from DAOs to web infrastructure to micro-economies:

  • Developer DAO which was created in September of 2021 already has over 3,000 members, a rapidly growing Twitter following, production projects, and investments to the tune of hundreds of thousands of dollars.

  • PartyDAO which created over $200,000 in revenue in its first day, was "built in 3 months by a small group of internet friends working part-time", and is backed by a smart contract

  • Compound, a decentralized finance protocol that allows you to lend and borrow cryptocurrency without trusting a third party with your funds with a market cap of over $2 billion as of this writing

  • Audius is a music streaming platform that enables them to create, grow, and directly monetize their fanbase directly without the need to sign a record deal or give all of the earnings to the platform like with apps like Spotify or Apple music. Investors include Nas, Pusha T, Katy Perry, and Jason Derulo.

  • Gitcoin is a platform that enables developers to get paid for working on open source projects

  • Graph Protocol is a decentralized web infrastructure protocol that allows developers to build APIs to enable the performant querying of blockchain data, all enabled by it's native utility token

  • Seed Club is a social token incubator that’s focused on helping creators launch and grow social tokens

  • Friends with Benefits is a social DAO and community that I'm part of that is 100% owned and governed by the participants recently valued at a market cap of around $250 million.

  • PleasrDAO allows investors to come together to purchase high-value non-fungible tokens like this piece from Edward Snowden

Most DAOs have desirable grants programs, enabling developers and other participants to work with various teams and projects at their will, on things they find interesting or that fit their skill set. There are more and more people beginning to work full time for grants and with DAOs vs traditional full time employment.

Conclusion

If this sounds like something you're interested in being involved, I'd suggest to jump right in. Try P2E (play to earn), get involved with a DAO, or even mint your own NFT.

Also check out How to Get Into Ethereum | Crypto | Web3 as a Developer which is what I put together after getting my own start in the space.

If you want to learn more about these ideas, I encourage you to follow some of the people I mention in this post:

Also, here are some of my favorite articles that touch on some of the stuff I've outlined here:

Thanks to Aditi for helping me with ideas and edits as I was getting this across the finish line 🙏

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