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Notes on Consumer Crypto | Feb 9, 2024

Backdrop, Party Rooms, ERC404, the memecoin opportunity, headless marketplaces, and more.

My brain is so fried from all the consumer crypto activity this week, it's a miracle I was able to write this today. Have some awesome topics in here though, hope you enjoy!

500 Builders

We kicked off Internet Explorers this week with Joey from Backdrop. They’ve been on a multi-year journey figuring out how to best support builders of frontier technology and have landed on a model where they bring together thousands of builders, grants, and social accountability into a 4 week cohort. 

They’ve run 2 to date to raving reviews, and applications are open for their 3rd which starts in a few weeks. It’s worth checking out if you’re very early in your building journey and need a little push!

Party Rooms

We also had Danny from PartyDAO join the show this week to announce their new product, Party Rooms. Rooms are the latest attempt at packaging the primitives of bonding curves, treasuries, and token-gated chats into a compelling consumer experience.

They’re building off lessons from DAO failures and their insights building group coordination tools over the past couple of years. They think a less serious and more socially motivated product creates the right initial conditions for these groups to form, and emissions from trading fees building up a shared group treasury will be a strong community rallying point.

We created a consumer crypto room to play around with, and are going to explore how to  integrate it with our new /consumercrypto channel on Warpcast. It’s a beautifully designed product that’s worth clicking around in at the very list so come hang out!

ERC404

ERC404 is an experimental new token standard that has gone crazy with experimentation and speculation since it first showed up a week ago. It’s a hybrid ERC20/ERC721 implementation that introduces native liquidity and fractionalization to NFTs.

How it works, and let’s assume a 10,000 NFT collection size, is that there are 10k fungible tokens and 10k “replicant” NFTs. These can each be traded, the fungible tokens on DEXs like Uniswap and the NFTs on marketplaces like Blur, and the tokens essentially follow each other. 

If you sell the token the NFT gets burned, if you sell the NFT the token gets transferred alongside it. If you go buy more than 1 token on Uniswap a new NFT gets randomly generated from a mint contract. If you buy less than 1 token you don’t get the NFT but get price exposure.

So you get both the speculative and liquidity superpowers of ERC20s and the cultural/artistic/visual value of NFTs. You could do this in the past with NFT fractionalization protocols (NFT perp) or burn to redeem mechanisms (Unisox), but the simplicity of this from the user perspective feels like a big improvement. 

This has an insane origin story with a guy using chatgpt to hack together some contracts that first represented the idea, but the contracts were horrible and got exploited. Some devs tried to help him out but got nowhere so decided to build it properly on their own and released Pandora as the first implementation of ERC404. It has gone through a crazy pump this past week.

I expect this to go crazy over the next few weeks because of the new market dynamics it introduces. In the thread above the creator calls it an “NFT shitcoin friendtech key abomination with persistent liquidity” lol.

Who knows how useful it’ll end up being, but it’s cool.

If you release generative art projects this way you could allow for more accessible speculation and easily allow people to regenerate their art until they found one they loved.

If you release memecoins this way you could have generative visual representations accompanying the tokens.

If a new PFP project gets released this way and becomes expensive it remains easy for anyone to buy into the community without projects having to release more collections.

There’s a good article here by Blocmates if you want to go deeper.

The Memecoin Opportunity

I wrote a mini post this week highlighting The Memecoin Opportunity that exists. It’s very short so go read it, but the tldr is that they have clear product market fit yet very little has actually been built to make them accessible to broader audiences. They’re products of attention and more accessibility means more attention means more fun.

Many people like to dismiss memecoins as just some stupid speculative game crypto degens play, but I think these are just the early signs of something much bigger. I’m seeing others start to agree.

This week mechanism capital announced they took positions in Trump related memecoins in preparation for the election cycle. They shared the schedule of the primaries as the “project roadmap” which is perfect. It’s an attention roadmap, not a dev roadmap that matters here.

Nick Tomaino from 1confirmation also announced that they bought $1M of $DEGEN on a 2 year lockup (!!). A 2 year lockup is an insane vote of confidence in a new memecoin, but it’s understandable as $DEGEN continues to be a massive rallying point for a farcaster ecosystem that is going through insane growth.

The tip mechanism they’re pioneering for Airdrop 2 is really interesting. Farcaster users have a varying daily allotment of $DEGEN they’re able to tip to deserving casts based on their account activity. If you post something good that appeals to degens you’ll often receive them.  

We also saw Titles announce a similar mechanism this week in partnership with Own the Doge. They’ve trained a specialized model for creating Doge related images and are rewarding people that use it to create good memes with a $DOG airdrop.

Anyways, people are starting to take memecoins seriously. They’re going to be a core part of internet culture going forward. 

Headless Marketplaces

Jesse dropped a great post last week about Headless Marketplaces, which finally put a good name to a crypto business category that has existed for years. The core idea is that you can now build marketplaces that distribute locally to where users already are instead of having to attract people to a destination (airbnb, ebay, every web2 marketplace).

This is uniquely unlocked by crypto because identity, money, and data travel with users, as well as the permissionless composability of protocols.

Being able to use Uniswap in your wallet and plug into their liquidity marketplace is a classic example of this, and with the explosion of Farcaster usage and the release of frames there’s a ton of fresh opportunity to build new, more socially-inclined ones.

Bountycaster (a bounty marketplace), Ponder (a survey marketplace), and Perl (a prediction marketplace) are three great examples. To create supply (a bounty, a survey, a bet) or provide demand (accept a bounty, answer a survey, take the other side of a bet) you don’t even need to leave Warpcast.

Marketplaces are network effect dominated businesses and once one has a hold on a category it’s very hard to dethrone them. With the emergence of frames and the increasingly rich social context of farcaster the time is now to build them.

Crypto: The Game Final Day

Crypto: The Game is finally coming to an end today after a very wild 10 days. I was reflecting a bit on it yesterday and think my big takeaway from the experience is confirmation of the opportunity to serve the culture of crypto without necessarily needing to deeply integrate or leverage the tech. It was a very crypto-native yet mostly offchain experience.

I tweeted more about this yesterday but what they needed more than decentralized infrastructure was very online, reasonably affluent, and interest-aligned people to create the social fabric of the game. And crypto is the absolute perfect scene for that.

I think this is an underappreciated reason to build consumer products in crypto, and be completely focused on crypto-natives as the initial target audience. People get hung up on all the potential ways they can use the technology, but the culture we have here is our most valuable asset. 

I like Matt Huang’s framing for thinking about crypto as a new planet that’s getting settled. We have new physics and laws that allow new types of buildings and institutions to get built. But we also have a new culture that needs to be served in distinct ways from web2 culture.

Crypto: The Game spoke our language and designed an experience that was incredibly compelling for the types of people that live here. Sure it could have been built on the web2 planet, but I can promise you it wouldn’t have been as fun.

And because Dylan is building it here, it’s going to evolve in ways the social and environmental pressures of crypto want it to. That’s likely more onchain, more speculative, and certainly weirder. See ya for Season 2.

Polymarket Bets

It’s Superbowl weekend and making a bunch of weird prop bets has always been a core part of the entertainment experience. Throughout the season you can typically only bet on more standard game-outcome type bets, but the attention and betting volume the Superbowl attracts allows the sportsbooks business models to work on prop bets as well.

Now that I’ve spent enough time playing with memecoins and prediction markets, getting excited about the novelty of Super Bowl prop bets seems laughable. I bet $20 on an anonymous internet human to win a 10 day mass multiplayer crypto survivor game last week and won, and you want me to get excited about betting on whether Taylor Swift is going to kiss Travis Kelce? Come on.

Buuut I am still excited, I love the superbowl. It’s way more interesting though when betting isn’t gatekept by Vegas and anyone can create their own markets, on the superbowl or anything else they care about.

So I’ll probably take my CTG winnings in and put them on some weird polymarket superbowl bets this weekend.

That's it, have a banger of a weekend.

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