Three Things #3: Jan. 30, 2022
Crypto Boomer Special Edition
A few days ago, I said I feel like a crypto boomer on Twitter and asked who would sign up for a newsletter that explains recent developments in terms we crypto boomers can understand. It turns out that a bunch of people liked the idea, so I figured I’d give it a shot.
Thing #1: The SimpDAO
I cannot imagine a phenomenon that more perfectly captures this moment in tech, society, and crypto than the rise of the SimpDAO, a development I’ve been following with equal parts utter fascination and horror.
“Simping” is a term (with, incidentally, a long and interesting history) that, as a boomer, I only learned recently. In the parlance of TikTok, it refers to fans (usually men) who idolize “influencers” (usually attractive women, often of the “e-girl” aesthetic), do unpaid work for them, and intentionally let the “idol” walk all over them. Don’t ask me why anyone would want to do this, because I can’t explain it, but apparently it’s a thing. (Here’s one explanation.)
One such idol, Instagram model Irene Zhao, has a Telegram fan community, and a member of the community decided to turn the group’s sticker pack into a NFT collection and build a DAO around it. Zhao, who was surprised to learn that she had a DAO, thus became the face of IreneDAO, the world’s first SimpDAO.
It’s unclear exactly what IreneDAO is, what its purpose is, or how it works, but apparently if you buy one of its NFTs—as Logan Paul and Mike Novogratz have done—you’re in as an official simp and you can help work it out. (Lest we be too critical, the same things can be said of most DAOs these days.)
Since then, dozens of other influencers and their simp followers have aped in and launched their own SimpDAOs, from Dua Lipa to Mia Khalifa to my personal favorite, ElonDao.
On the face of it, this all seems pretty silly, faddish, and about as harmless as trading JPEGs of monkeys and penguins, but the more I think about it, the more I feel that the SimpDAO is a phenomenon that’s long-overdue and that has real potential. Fan culture is huge, it’s getting bigger every day, and it’s evolving rapidly. There’s an entire economy built around it in China, known as Wanghong, worth around $15bn annually. You don’t have to like it or even understand it to appreciate that it’s a big deal. The intersection of DAOs, NFTs, social media, and fan culture is legitimately novel and interesting.
And most importantly, content creators, including Instagram models, streamers, and adult performers, are not well served by existing platforms like YouTube, Twitch, Instagram, OnlyFans, and Twitter. For one thing, these platforms are simply not designed to allow creators to monetize their followings or even maintain direct relationships with their followers. What’s more, they constantly deplatform, demonetize, and censor creators arbitrarily. Zhao agrees, and it’s her motivation for IreneDAO and a platform she’s building called So-Col.
If you’re not convinced yet, check out this tweetstorm from Eric Wall, a Bitcoin personality, who briefly turned himself (herself? themselves?) into an idol named Erica in order to launch EricaDAO. He argues:
[The] *strongest* incentives on the internet (and in much the world) are sex, status & money… There is a massive amount of pent up wants and desires currently trapped behind solo men staring at TikTok videos and Instagram reels. A *lot* of *strong* desire and all they can do is press thumbs up and/or masturbate. These technologies have enslaved them. Emasculated them… The SimpDAO liberates the simp… His sexual desire now becomes his financial potential.
Streaming and simping don’t make sense to me as a crypto boomer, but I do really love the idea of being able to invest in an up-and-coming artist that I’ve discovered, whether through purely artistic NFTs, partial ownership in a community, or owning a future share of revenue and royalties. And to be fair, crypto probably also doesn’t make much sense to the rest of the world, so… let’s all join a SimpDAO as an exercise in empathy 🤷.
For more: Read up on influencer and fan culture, follow some streamers, study the problems that influencers and creators have with Web2 platforms, look at attempts like So-Col that are taking a Web3 native approach… and join a SimpDAO!
Thing #2: Modular blockchains
In the beginning, there were Bitcoin and Ethereum, which both take a similar approach to blockchain architecture. They’re both self-contained, “monolithic” blockchains that do four distinct but related things: settlement, security, data availability, and execution.
Settlement refers to money and value: folks can transact amongst themselves in their local ecosystem with whichever token they want, or use various tokens in various applications, but ultimately there needs to be a base-layer money that everyone recognizes and that can be used to settle cross-chain, cross-ecosystem transactions (like gold or USD). Security refers to consensus and the properties it guarantees, safety and liveness: the fact that all honest parties agree on something, and no two honest parties agree on two different things about the state of the ledger. Data availability, as the name suggests, refers to the storage and availability of published data. However, it’s a bit more complicated than that: it needs to include a system of incentives for storing and offering data, punishments for lying about data storage and availability, and consensus on what data are in consensus and available. Finally, execution is where the magic happens. It’s where the logic lives, where smart contracts and the applications built on them run.
The first cracks in this monolithic approach appeared two to three years ago when the Ethereum roadmap was drastically changed. Rather than launching a bunch of Ethereum shards that work like Ethereum does today, in a nod to the success of rollups, it was decided that next-gen Ethereum would instead be built on top of “data shards” without the ability to run smart contracts on their own (i.e., without execution). Execution would instead be provided by rollups, and the Ethereum base layer would focus on security and data availability.
The unbundling of blockchain is well underway. Today, the projects getting the most attention are taking a decidedly modular approach. In addition to Ethereum itself there’s Starkware, a company building zero knowledge proof-based rollups, and Celestia, a blockchain designed specifically to provide only data availability. Dozens of other projects are building rollups, validiums, volitions, and all sorts of other arcane pieces of the modular puzzle.
Blockchains are far from the only technology to go through this cycle of unbundling, modularity, and specialization. One very helpful comparison is transistors: in order to keep pace with Moore’s Law even though transistors themselves cannot get any smaller or thinner, AMD and Intel have begun—you guessed it—making their chips modular. Specialization makes more sense as technologies mature and the demands placed on them grow.
I’m very bullish on the modular blockchain thesis. A year or two ago, it wasn’t at all clear where blockchains go from here and how they scale. Now, it’s starting to become quite clear. Vitalik recently wrote about his vision for an “Endgame” that’s modular and rollup-centric. I expect that later this year we’ll begin to see the first Web3 applications that look and feel like regular, usable applications, powered by modular blockchain components such as rollups under the hood.
For more: Read Rollups, data availability layers & modular blockchains: introductory meta post and explore all of the links.
Thing #3: The virtual land craze
Thanks to our sclerotic economy, buying property in desirable places like growing cities is really hard. A generation of young people has grown up feeling that owning a home is totally out of reach. So you’d think that, given the opportunity to build a new virtual system, they’d do something better. You’d be wrong.
A number of “metaverse” platforms began offering virtual real estate for sale a few years ago. The trend accelerated massively last year after Facebook rebranded as Meta and the metaverse thesis exploded seemingly out of nowhere. No one seems to be able to agree on what they mean by metaverse, but crypto bros have colonized it and they seem to agree about one thing: that digital land and assets should work the same way they do in the physical world.
Last year, coinciding with all time highs for various crypto assets including BTC and ETH and an explosion of interest in NFTs, plots of virtual land on platforms like Decentraland, Sandbox, and Axie (themselves sold as NFTs) sold for millions of dollars. In a single week, more than $100M of virtual land traded hands.
The pitch for virtual land, similar to that of the physical variety, has allure: we’re going to spend more and more time in the virtual world, so why wouldn’t land in the metaverse equivalent of Times Square be worth as much, or more, than land in the original version? The developers and backers of metaverses are of course incentivized to say that they will, since it’s an easy way for them to raise funds and cash out. Frustratingly, this often happens before a platform has even launched or is playable, a phenomenon I call the Cult of Ownership that is the single biggest reason Web3 has a branding problem.
But the proponents of these virtual spaces are missing something painfully obvious: virtual land doesn’t have to be scarce, and indeed it shouldn’t be. We got land totally wrong in the physical world: Henry George wrote 140 years ago about how important land is for production and about how it should be taxed in the simplest and fairest possible way, but that ship sailed and it’s basically never going to happen in the physical world, so rent seeking will continue and young people won’t be able to own homes. Even if virtual land did need to be scarce for some arcane reason, blindly copying what came before would make no sense—but it makes even less sense since it doesn’t have to be scarce in the first place!
Why doesn’t it need to be scarce? For one thing, metaverses can get creative and use non-Euclidian space, i.e., making the inside of a virtual property much bigger than the outside (think tents in Harry Potter). For another, land only becomes overvalued and scarce when location matters—but location doesn’t need to matter in the metaverse if travel is fast, cheap, and easy, which it can and should be. And land doesn’t need to be required for production in the virtual world in the first place. It can and should be a nice to have, not a requirement.
If we take a charitable interpretation, virtual land today looks like physical land because its creators are approaching it skeuomorphically and just aren’t being very creative. Over time we’ll see more creative “native” use cases of digital land and property. I think there’s an enormous opportunity to get this right: to balance the benefits of private property and scarcity, such as limiting spam, Sybil resistance, and economic efficiency, against economics that are broadly fair and sustainable over the long term while also emphasizing gameplay over marketization. Game developers, who have also been struggling with land speculators and housing crises for decades, are beginning to understand this.
Metaverses will eventually be forced to follow suit. If they don’t, users will simply move elsewhere. Unlike in the physical world, “spinning up” new virtual land is trivially cheap and easy. Any metaverse worth the name will be open and permissionless and many are open source and can be forked, like blockchains. I think we’ll see high profile examples of users abandoning platforms with bad economics, launching competing forks, and taking their characters and assets with them, a phenomenon I call a “pitch fork.”
For more: Watch a talk I gave on this topic last month, where I explored the idea much more deeply. Read this excellent, comprehensive article on land and sustainable economics in Axie Infinity. Read Progress and Poverty, and for a more modern take, Radical Markets.