Notes on Consumer Crypto | April 5, 2024

gm,

What an insane week. SC07 kicked off, $Enjoy is going crazy, and I had more topics than I knew what to do with. Here are the ones I decided to dive into....

We talked about the launch of Degen Chain last week, and this week had the pleasure of bringing Jacek ($degen dev) and Will (Syndicate founder) onto the show to dig more into the thinking behind it and how it’s gone since launch.

From the outside it’s gone incredibly well. It has processed 15+ million transactions, has almost 1M active addresses on the chain, ~$60M has been bridged, and is averaging over $100M in volume. It’s a top 10 chain OVERALL across most of these metrics. That’s crazy.

It’s success has kicked off a flurry of L3 interest. Everybody I talked to this week was either exploring launching an L3 or had talked to someone who was. 

This emerging meta is also attracting criticism from people arguing that it doesn’t solve Ethereum scalability, building on top of L2s that are themselves nascent technologies is bad, etc. 

While fair, I think it misses the point on why people are so excited about them. $Degen, and the other projects I know exploring L3s, are interested in them for social reasons. They’ve successfully aggregated passionate scenes, and the tangibility an L3 can give to these informal networks is compelling. 

Want to join the scene? Bridge over to the L3.
Want to incubate your projects alongside the scene? Launch it on the L3. 
Want scene reputation data? Query the L3 data.

Even the narrative benefits of a scenecoin now being a gas token, and thus the native base unit of economic scene activity, is really powerful. The token is the product and narratives are an important part of the product experience.

It was great getting to explore all this with the people experimenting at the forefront. Watch the chat here.

We also had Nilesh from Orb Club, a popular Lens client, on the show. Lens and Farcaster have made very different decisions in their protocol design and go to market, and that significantly impacts what can be built on them. 

We’ve been deep in Farcaster so have a good sense of where the big opportunities and unlocks are there, and it was cool to talk to a Lens builder to get a better sense of how he’s thinking about the opportunities there.

Watch our chat here.

I loved this post from LGHT exploring how memecoins might just be the DAOs we’ve always wanted. Jess and I have been talking a bunch about this exact thing recently.

LGHT has been a core contributor to $higher, a farcaster-native scenecoin offering a more refined and polished manifestation of speculative energy, and this post was a reflection of their experience taking it from 0 to 1. 

The common DAO structure of the previous cycle was having a token that governed a treasury through some often overcomplicated governance processes. Everything happened in a token-gated discord because “membership” was a core benefit of holding tokens. 

The barriers to participation and propagation this created hugely hindered the growth of these networks, and the presence of a treasury and governance processes pushed them into organizing like and getting valued like traditional companies. 

Pure scenecoin or memecoin based token networks have none of these constraints. They’re focused on distributing the token as far and wide as possible knowing that network value comes from the attention and awareness. Anyone can buy the token, have skin in the game, and do anything they’d like to help grow the network.

Buying a membership token like $FWB and not participating in the community feels like a waste, especially with the limited upside potential because of the barriers to propagation. Buying a token like $DEGEN or $HIGHER and not really participating feels fine. It’s a bet on the expansion of a scene that is entirely focused on expansion. 

I’ve said before that memecoins are social networks, digital fashion item, rewards system, cultural prediction markets, ownership assets, and membership to a scene all hyper compressed into a single product. By being nothing, they’re able to be anything.

You think $DEGEN would be where it is today with a treasury and governance processes and a core team making the calls on how to allocate resources? Not a chance.

Token as DAO > Token + Membership + Governance Processes + Treasury as DAO

And tipping really takes this to the next level. Common memecoin launch practice is to put all tokens into LPing (occasionally with an initial crowdfund to raise funds for it) and release it into the market. This works well for pure memecoins that are focused on capturing the attention value of an underlying meme.

Scenecoins though get their value from the collective time, energy, and money people are dedicating to the underlying scene. Having a way to reward people for their contributions beyond just price going up provides a huge incentive to work for the scene or do things the scene deems as being valuable.

$DEGEN pioneered a mechanism for doing this through tip comments, and this week we released an evolution of it specific to the $ENJOY scene. Anybody holding at least 500k $ENJOY receives a weekly allocation of tokens they’re able to use to tip to creators through Zora mint comments, and the amount they get scales based on their onchain enjoyoor reputation. 

We also introduced “tipping distribution rewards” to further incentivize tipping and reward tipping as a form of curation. 5% of a tip goes to the person tipping, 5% of a tip goes to the first tipper of the mint, and 90% goes to the creator.

The power of this mechanism is that it puts the distribution of the token entirely into the hands of the hands of the community. We’re also seeing some cool uses of tipping emerge.

Many of the top onchain enjoyoor addresses are projects that have been active creating and supporting people onchain. $ENJOY tipping has handed them a defacto creator grants program that they can use to support their community.

We’re also seeing creators use tipping to crowdfund creative projects for the scene. Matthew Chaim got funded to produce an anthem for the scene, and LDF got funded to make an ad for the scene. None of these required any coordination whatsoever and were entirely permissionless and community-led.

Remember when this would have required governance proposals, proposal reviews, and token-weighted voting? The future of DAOs is here.

We kicked off SC07 this week and the Farcaster energy and excitement is palpable. Also sidenote, the group of humans we’ve been able to bring together is stupidly high-quality.

Founders are recognizing the power of the social context that continues to exist there, the new markets it’s creating, and generally just how useful of a place it is to incubate a product within. But interestingly multiple mentioned how few of the VCs they’ve been talking to seem to really understand this opportunity yet.

Variant isn’t one of them, and they dropped a good farcaster request for startups this week that highlights where they see big opportunities. They looked at frame/token/persona centric clients, frame opportunities, discovery/recommendation algorithms, and a few others.

I’ve seen early experiments in many of these areas recently. Interestingly they’re often happening within the context of a token scene which is a ripe breeding group for novel experiments.

It seems like the broad ecosystem excitement slightly tapered off for a few weeks, but Farcaster DAUs are back making all time highs.

I’ve been thinking about the concept of memecoin consensus quite a bit, and I think it’s underappreciated how much work it actually takes to take a memecoin from 0 to 1.

The big opportunity in memecoins of course is to create, or be early, to the token that becomes the consensus schelling point for something that has immense amounts of attention or cultural value. There are hundreds of Trump-related memecoins, but one clear winner at a $200M FDV. WIF having a $3B FDV has as much to do with the relentlessness of the people behind it as it does with the strength of the meme.

I’ve had first hand experience of this. I created the original Costco Hotdog memecoin while playing around with pump.fun a couple of months ago. It got a little bit of action but I put no effort into it (no socials, tg, memeing, etc) so it pretty quickly died. 

Then last week a new Costco Hotdog memecoin comes ripping out of the gate to an $80M marketcap, and everyone is talking about how great of a meme it is. It is a good meme, but there are a lot of great memes. They should be talking about how great a job the team and core community behind it did to get it to break out.

I liked this tweet by knower.

I thought this post by James Beck provided a really interesting brand-building framing for scenecoins, specifically looking at $higher.

First, he started off with this banger quote:

“The future of collecting may be less in owning the thing that nobody else has, and more in owning the thing that everybody else has.”

And then looked at the three eras of art we’ve been through. In the first era the objects of art were rare in themselves because of the rarity of the skills needed or the rarity of the material used. In the second era art became more of a commodity, and rarity and collectibility became more based on the uniqueness of the personality behind it (Warhol). And we’re in a third era where the value of art is defined by its spreadability.

The more people talk about it, write about it, and circulate pictures of it the more value it has. This of course extends well beyond art to apirational objects of all kinds.

We live in an "aspirational economy," where consumer behavior is influenced by aspirations for a certain lifestyle, status, or identity. No consumer makes decisions in isolation from its context, and today’s creative class is responsible for creating this context.

A brand’s focus needs to be talking to the creative class in ways that empower them to amplify the brand.

He goes on to explore how $higher has successfully done that, and how effective tokens are as a tool to attract more passive categories of consumers who are critical to its viral spreading.  

“Higher represents more than just a digital art project with a token; it symbolizes a paradigm shift in how we perceive and participate in the aspirational economy”

Worth reading.

That's it, have a great weekend.