NFTs act as a digital twin of the physical object, breaking down the barrier between the on- and offline worldscategories
NFTs can also act as identifiers
Wallets & Blockchains = Web browsers & Web
Wallets and browsers are interfaces for users
”Treasuries” = greater scale wallets (e.g., for DAOs)
Users become owners with tokens
User-creator distinction is arbitrary after allcategories
No ownership means you can’t wear clothes you want, you can’t resell or reinvest in your house or car, and you have to change your name wherever you go
Homeowners invest more than renters
Airbnb exist because homeowners can do whatever they want
Ownership means you don’t have to ask for permission
The digital should see more ownership as it is in the physical
Composability is software’s version of compounding interest
The guiding philosophy of Linux:
“Release early and often, delegate everything you can, be open to the point of promiscuity.”
Promiscuous = indiscriminate, casual, unselective
We should use web2 UX/UIs because mega corporations such as Google, YouTube, Twitter, Facebook, Instagram spent millions and billions to meet the demands of people.
Ch. 8: Take rates
Internet startups undercut the high prices of traditional businesses
Blockchain networks expose the high take rates of corporate networks
Network Effects Drive Take Rates
More control over network = More control over price
Where bean counters see fat margins, entrepreneurs should see blood. Your take rate is my opportunity, as Bezos might say.
Successful founders see different problems
Your Take Rate Is My Opportunity
You can invest in and grow your businesses without the risk that the DeFi networks will change the rules, undermine them, and extract your profits later
In a sense, ‘key moment’ is already here
Squeezing the Balloon
Mega corps contribute to open-source projects out of self-interest, not out of charity
”Commoditize your complement” - A classic tech strategy
For Google, the fight for operating systems spills over to the fight for search profits
Intel supports Linux to commoditize operating systems
From thick networks to thin networks
Take rates + Token incentives = Economic equation for blockchain networks
Ch. 9: Building networks with token incentives
Incentivizing Software Development
Ether is the native token of the Ethereum blockchain
Blockchain networks externalize tasks
Tasks held captive proprietary in corporate networks go become market-based
Paradoxically, externalized incentives (negative externalities) go away when everything is externalizeddevelop
Similar to how [The most efficient business is one with trust, and one completely without]
Wider talent funnel and the base of network stakeholders
Permissionless means it privileges no app developers
[Inventor = Learner]
What matters is creativity per se
Not differentiating developers from users mean what attracts the former also attracts the latter, and vice versa.
Overcoming the Bootstrap Problem
As the network grows, token rewards should taper off ([Good supply-demand designs are necessary])
More participants make a network more useful; once enough people are participating and network effects kick in, the need to offer incentives decreases.
People who take a risk by contributing early, when a network’s success isn’t assured, gain the most.
This isn’t good just for users and contributors. It’s also good for the networks.
A key challenge when building networks is overcoming the “bootstrap” or “cold start” problem: attracting users and contributors before enough of them are participating to make the network intrinsically useful.
Network effects cut both ways: they can accelerate growth, but they can also handicap it. Scaled networks attract new users without much effort. Conversely, subscale networks struggle just to survive.
Corporate networks used subsidies, but subsidies go only so far.
Helium for a grassroots telecom service
They can also help break the rich-get-richer tendency in corporate networks, where only the employees and investors, not the users, see upside when a network succeeds.
Especially so when the company is not listed.
Tokens Are Self-Marketing
To get noticed and stay relevant, many startups need to pay for promotion.
Ads are necessary evils, as it were.
Tokens empower individuals to become stakeholders in networks, not just participants. When users feel a sense of ownership, they are motivated to contribute even more and spread the word. [Users become marketers with tokens] These user-evangelists are more authentic and effective than corporate marketing programs run by hired teams. ([Incentives]) They win hearts and minds through blog posts, tweets, and code. ([Writing is fighting]) They participate in forums. They sing praises and shout from the desktops. Thanks to their economic and other benefits, tokens don’t need marketing, per se; tokens are self-marketing.
Again, the city analogy is useful. Homeowners are incentivized to build and promote their cities. They develop real estate and start businesses, support local schools and sports teams, get involved in organizations and civic causes. They are true community members with financial upside and a say in governance.
This crumbled when real estates started to assume the role of money-substitutes.develop
Building true communities is the best way to go viral.
Making Users Owners
User-owner dichotomy is arbitrary
梵我一如
Dogecoin is a silly network but it’s owned by the users
It’s a part of their identity stack
Dogecoin demonstrates the power of tokens absent confounding factors
Blockchains allow users, and not just shareholders, participate in their financial success (e.g., Uniswap)
Peer-to-peer (i.e., no differentiation among network participants) means no ‘second-class citizens’ to be served up to ‘real customers’
So much for wanting to become YouTuber or TikToker
Tokens restore the vision of the internet as a decentralized network owned and controlled by its participants
Ch. 10: Tokenomics
Thomas Sowell: “Prices are important not because money is considered paramount but because prices are a fast and effective conveyor of information through a vast society in which fragmented knowledge must be coordinated.”
CCP Games publishes a monthly economic report about conditions within the gamedevelop
A blockchain economy must balance the supply (“faucets”) and demand (“sinks”) of native tokens to fuel sustainable growth
I think the same logic for AI development applies on the blockchains in general, that is, the cost of development decreases over time
NFTs
The lessons video game studios have learned to solve the attention-monetization dilemma (↔ Music industry)
Make all their money charging for virtual goods
The goods are cosmetic
Viz., the game is commoditized
Streaming = Sports spectating + Talk radio
Attention gained >> Monetization lost
”People love video games, but people also love music, books, films, podcasts, and digital art. These other creative industries have simply experimented with fewer new business models. People make and listen to music as much as ever. The problem isn’t supply and demand; it’s the broken business models in between.”
What virtual goods did for video games, NFTs can do for other forms of internet media
NFTs create a new layer of value—Digital ownership
NFTs can include code
NFTs can create digital native copyright variations
The corporate network approach = Command and control from beginning to end
It’s totalitarian embedded in free market network
NFTs allow free market network all the way down
Value shifts to adjacent layers
Social networks ⇒ Democratized content distribution
Generative AI ⇒ Democratize content creation
People won’t pay much for media
Similar discussion in Ch. 8 — “Take Rates”
People crave human interaction despite the rise of machine intelligence
Post-AI artistic expression will focus less on the media itself and more on the curation, community, and culture around it
Culture
Because we create culture?
Collaborative Storytelling
Most fans are passive observers with no financial stake
The media world doesn’t risk marketing new intellectual property
Safer to recycle proven material — sequels and reboots
Wikipedia, Quora, Stack Overflow
“Forking” characters and narrative paths
Multiple benefits:
Widening the talent funnel
The bazaar >> The cathedrals
Viral marketing of new IP
Meaningful narratives instead of meaningless speculation (Dogecoin)
From passive consumers to active evangelists
Increased creator income
“Fantasy Hollywood” >> “Fantasy football”
Fans are active participants, actually in the game, not just imagining it
Financial Infrastructure
Blockchain networks can make payments a public good
Analogous to a public highway system that spurs commerce and development in the physical world
Multiple benefits:
International payments
Micropayments
Composability
DeFi
AI
Google knew its relationship with content providers was symbiotic, so it let enough money flow back to publishers to allow many to subsist
Like a serfdom
If your worldview is solely neo-Darwinism, you’d be content with this.develop
AI could “one-box” the entire internet
We’re already seeing many internet services curtail their API access and enter lockdowns in response
“Content farms”
Creators must be organized and bargain as a group
The same reason labor unions bargain collectively
Invert: in the case where this fails, what’s the potential end-goal? What should I do?
Remember Naspers (news publisher turned to internet investor)
If I’m doing something valuable, am I getting paid for it?
Deepfakes
“Attestations”
The advantages of storing media attestations on blockchains:
Transparent and immutable
Credible neutrality
Composability
Third parties could build reputation systems that evaluate the track records of attesters, assigning trust scores
Tech is derivative (derivative is tech)
One of the lessons from the last era of the internet
If a service needs to be built, it will probably get built — if not as a public good, then as a private good
But now we have blockchains — we can publicly create a good that’s to be public, while getting compensated as contributors.
Low take rates have a multiplier effect
New stars rise along with the new platform
Apply the One Commandment and scale from there
”Digital” <> “Physical”
Both are reality and demarcation is arbitrary
Interoperability is a tool for growth in blockchain networks
E.g., transferring goods from other games
It’ll be like in the IRL (e.g., physical skills, physical connections, physical assets)
Digital skills-connections-assets aren’t fully owned by users within corporate networks
Cosmetic goods = Identity stack ?
Game = Game + Streaming + Virtual goods
You get what you measure + What counts cannot be counted
How can you apply lessons learned from game industry to other industries (e.g., book, music, podcasts)?
What NFTs can do for other forms of internet media = What virtual goods did for video games
Network effects (digital) > Supply and demand (physical)
“Skeptics sometimes suggest that NFTs will restrict the sharing of media. In fact, NFTs provide an incentive to loosen restrictions. Copying and remixing generally increase the value of NFTs, just as more players in video games increase the value of virtual goods. The same effect happens with physical art too. Both owner and artist can benefit from copying because, as the art is more widely shared, the original copies can grow in value. In the extreme case, a work of art, like the Mona Lisa, can become a widely reproduced cultural icon.”
What would be the WhatsApp & FaceTime equivalent for payment?
Imagine what could happen to legacy financial institutions with the advent of micropayment, and remember what happened to legacy telecom companies
”A few savvy ones did see the endgame coming: the South African newspaper publisher Naspers became an internet powerhouse by pivoting its business from news production to internet investing.”
What would be the equivalent move today?
AI could one-box the entire internet
In the long run, we will need an economic covenant between AI systems and content providers. AI will always need new data to stay up to date. The world evolves: tastes change, new genres emerge, things get invented. There will be new subjects to describe and represent. The people who create content that feeds AI systems will need to be compensated.
The frontier will be on-chain
Power must be organized collectively just like unions bargain collectively
We must remember the lesson learned with search in the 1990s
Because it can happen again
Can we avoid the worst case scenario by using blockchains?
Ask: can I get paid for doing this?
It’s an important one to ask given our familiarity with corporate networks in which no compensation is the norm
One of the lessons from the last era of the internet is that if a service needs to be built, it will probably get built—if not as a public good, then as a private good.
Conclusion
Today’s major technology movements involve sustaining technologies that look set to reinforce existing industry structures.
AI favors big companies with stockpiles of capital and data.
New devices like virtual reality headsets and self-driving cars require multibillion-dollar capital investments.
Blockchains are the only credible counterweight to these centralizing forces.
傾く・バロック
A world without ownership is a world with less creativity and human flourishing