Token Constellation Theory

The rules change when a technology stack becomes cheap, abundant and heavily networked. I saw this firsthand working in telecom when mobile went truly mainstream. Data speeds went from 128kbps to 5G, the cost of texting went to $0, international calling became as affordable as local calling and OTT apps replaced the need to talk and text over a carrier network. 

The second order effects were wild. Mobile data meant we got the iPhone and Android duopoly with massive app ecosystems inside of them. Facebook started as Hot or Not Harvard Edition and within a very short time became the foundation of the mobile surveillance economy because people had to check it on the go. We could go on and on, but the important point is all this happened because the stack became a retail playground for transacting everyday experiences that extended far beyond the original intent of the network.

AI, crypto and decentralized social networks are now converging to create a new moment when the rules are going to change. Generative AI has brought production costs to near zero. L2s are cheap and scale enough to blow open dozens of new use cases. An open social graph allows creators to build highly networked transportable audiences through reciprocal alignment of values. 

People aren't adequately thinking in terms of the scale that the package of AI, L2s and decentralized social networks enable and the second order effects of that. 

If you were thinking in terms of single NFTs holding speculative value, you need to reorient your thinking to include constellations of digital objects that you’ll only ever interact with at the network level as experiences. Think in terms of systems, of associations of objects and network actors behaving as self-organizing complex adaptive systems. Just think orders of magnitude bigger until you can view what is happening now at a similar level as the mobile revolution of the last 15 years.The time has come to expand our design patterns and playbooks. 

Token Constellation Theory (TCT) is a posture which looks at past trends where technology went retail to produce abundant scales at minimal to zero costs per transaction. It then maps that behavior to where crypto is today, understanding that we must adapt existing practices to be same, same but different. Same, same in that we’ll be working with ERC-20s and 721s, minting, token airdrops and a pattern of incentive alignment between project and users. Different in that it is going to fast forward past the commodification of NFTs as speculative assets to a logical future endpoint where a class of them are all free and worthless on an individual object level. 

TCT operates on a premise that attention is the ultimate scarce resource online. In this model, we define attention as the relationship between a networked audience and a constellation of objects which collectively represent belief in something. Simplifying this relationship, the project  produces objects which define and communicate all the many shades and nuances of a belief. The audience then signals their support in this belief by collecting these objects, holding an ERC-20 token governing the entire constellation of objects, and directing flows of attention to the belief by discussing it in a networked public social layer.

Before we get into relatable examples, let’s make it clear that we are being opportunistic here and not dogmatic. We are not saying that NFTs will never hold speculative value again. We are not saying this is the only way the future will play out. We have no interest in debating what will endure and what will change with people who want to protect their existing bags. We are presenting one of many possible futures, and running a strategy we have a high confidence in based on our reading of conditions today and how similar environments have played out. 

The overarching premise of TCT is that scale will force value to be measured in aggregate instead of at the object level. When a project starts producing millions of low cost NFTs, it is inevitable that the vast majority of them will have de minimis value. That is not to say they are worthless, only that their value only gets interesting at a collective level. 

In NFTs today, attention is closely linked to the value of an NFT. Illiquidity then equals death. You don’t want to agree with this, but in your heart you know it’s true. As we start scaling the number of NFTs produced, lowering their costs dramatically and operating in a more competitive environment for speculative capital (see memecoins as a competitive example) the structural conditions which create liquidity moats around NFT collections becomes increasingly difficult  to form and maintain. 

Rather than fighting uphill, Starholder is attempting to change the equation such that value aggregates via a single ERC-20 token representing a valuation of the entire constellation of objects that it produces and seeds onchain in a networked distribution model.

The benefit of this model is two-fold:

• First, it keeps liquidity and valuation centralized in a single token unit rather than fracturing it across a constellation of 721s.

• Second, it allows the value of the objects to be combined with the value of its networked audience in a single token unit.

Attention is the scarce resource here and attention exists as a set of interactions between audience and objects playing out across a public social layer. Who and how many people interact with your project is as important as the NFTs which signify the collective belief and values of the project. By keeping those two factors united in a single token vehicle, we can represent the total flow around the project as a single unit that interops with the larger composable world of crypto.

This means for Starholder:

• We will give most of our NFTs away for free. Unless there’s real production costs to offset or we are collaborating with an artist and respecting their practice, there’s no need to charge for our work. 

• The project token will often be included with free NFT mints. It’s a reward and thank you to the audience for giving us their attention and choosing to act as a host for our beliefs onchain. 

• We will mint mainstream consumer goods. Starholder will produce stories and artifacts from our world combined with analysis and theory. You’ll be minting music, stories, essays (like this one) and generative video and images, not fine art or pfps whose past behavior comes with expectations of speculative appreciation.

A side benefit of this is that we are asking to earn your attention by proving the value of our world, rather than entering into a relationship governed by the clearing price an NFT was acquired at. This is a lower friction, higher scaling model that reorders the relationship between project and audience. By lowering the stakes all the way down to zero cost, we are freeing ourselves to focus on development of the world vs. maintaining the value of existing collections.

The most immediate impact of a free NFT distribution model is that it dramatically opens up the range of tactics available for audience building. TCT assumes that the number of participants within crypto and decentralized social networks increases dramatically. Back to the mobile revolution, it began as an elite activity reserved for business people who would carry around a brick backpack to make calls on the go. It culminated with many countries skipping the building of landline telecommunications networks and just going direct to onboarding users via low cost mobile phones. 

Our read of the current L2 activity and growth of the Farcaster ecosystem is that we’ve reached a critical mass of users to start experimenting with low cost, direct incentive audience building techniques. Said another way, we are at a similar inflection point now as web 2.0 was when Google Adwords began to scale. If we are correct, then we have an opportunity to build an audience before competition for attention increases the cost and difficulty of doing so. If we are wrong, then we’ve jumped the gun and our efforts will fizzle out before meaningful value can accrue to the network.

This means for Starholder:

• We will roll out many of the tactics from the last era of online marketing and network building. This will include audience segmentation, forms of paid acquisition, and delayed financialization.

• Our network is our liquidity. We are at the start of a sophisticated digital migration. Prior to crypto, there was no sovereignty or economic security for homesteaders. This latest upgrade to the stack mainstreams those values and opens them up to new use cases. We are in a land grab to settle network space and open routes between our corner of this world and a larger system of culture, communication and commerce. Expect us to heavily incentivize membership in our Farcaster channel /starholder as a means of establishing an active foothold in the larger system.

• We will closely meter out our token distribution based on what we hope to be a virtuous cycle of user growth and world expansion through seeding NFTs onchain. 

• Airdrops yes, strip mining and farming no. There will be no early liquidity, I love you. Starholder needs to deliver proof of world before exposing itself to the crypto casino. That proof will only come by creating an engaged and growing audience willing to give their sustained attention to the project. We aren’t interested in hiding problems within the project with number go up. It’s better to solve them first, rather than use the token as a shield.

Trusted Computing and Creating Abundance Through Radiating Layers of Scarcity

The last part of Token Constellation Theory we’ll introduce is the concept of creating abundant value through outwardly radiating layers of scarcity across trusted computing environments. 

This theory posits that a digital migration happens in crypto systems by stacking scarce tokens on top of more secure scarce tokens. Each step further outwards on the trust curve comes with more risk, but also more reward which acts as incentive to explore and ultimately settle more and more of the digital frontier.

To provide a concrete example, Starholder exists in the following secure computing waterfall:

Ethereum mainnet -> Base/Optimism -> Farcaster/Degen -> Starholder

Ethereum exists in rare air as one of only two blockchains with a robust enough decentralized security model and threshold of TVL to effectively function as a global permissionless supercomputer. 

Above that we get into the L2 stack which settles down onto Ethereum, forming a chained security model in which the base layer (mainnet) lends its security to a cheaper, more performant chain above that. Here the trust model changes a bit because Coinbase (a US public company) is acting as a centralized trust authority in partnership with Optimism who acts as a somewhat decentralized validation partner. There’s slightly more risk at this level, but that is offset by the new affordances for value creation offered in a lower cost environment combined with a retail onboarding pipeline. 

Then we get to Farcaster and $DEGEN where the trust profile shifts because we are looking at a communications protocol sitting on top of two layers of secure computing. Farcaster is a VC backed company. $DEGEN is a relatively new community tipping token with a free distribution model. Both are in the early stages of proving their utility and scaling their economies. While signs are promising, there’s a lot of risk here because neither are as lindy and proven as the two layers below it.

Finally we have Starholder, which is what? It’s a bunch of content scattered off chain, combined with a Farcaster channel of about 40 people, and whose future potential currently rests on one person’s ability to capture attention by giving things away. Basically, it’s a toy at the end of a chain of trusted computing.

How can Starholder tie itself into this chain of trusted computing and evolve beyond a toy? It starts with recognition of how these systems behave, and hopefully this essay is demonstrating novel ways of thinking about how to interop with permissionless networks. 

Here’s a quick early roadmap for Starholder’s evolution towards trust:

• Step 1 was to create a Farcaster channel and move the project onto a programmable media platform and begin audience building.

• Step 2 is to start moving content onchain through free minting where we explore reward mechanisms to create alignment between project and audience

• Step 3 is to create a native ERC-20 token and make that the default reward mechanism for our audience minting NFTs and acting as network nodes for our content.

• Step 4 will be to organize and contextualize the world better offline at Starholder.xyz so there is a central location where we can project our beliefs and tell a communal myth

• Step 5 will be an IP rights transfer over to an entity, such that the native token has claims over the world’s content

• Step 6 will be to open creation up to our community so that they can participate in world creation and crafting a communal myth

• Step 7 will be to provide liquidity to our native token, possibly by pairing it with $DEGEN which the project founder has acquired at a relatively low cost basis.

This roadmap is incomplete and subject to change, but what it does show is a pathway where Starholder can shed its toy status and chain itself more tightly to the trusted computing waterfall that it sits at the end of. In doing so, we can then continue the chain of abundant value creation through outward radiating layers of scarcity.

If you notice the sequence of steps, it’s only at the end where we introduce liquidity into the project. The choice of $DEGEN as a potential liquidity pair is intentional. We want to be most closely tied to a community tipping coin for a decentralized social layer because we sit one step further out on this chain than it. Our liquidity should align with both intent (these are both effectively social media tokens) and maturity. There’s also a bet here that $DEGEN will continue to appreciate in value between when we entered the position and when the project is ready to support liquidity. The more it goes up, the deeper the liquidity we’ll be able to put into Starholder which further shores up its trust levels.

There is a lot we are not including in this document, but it’s already at eight pages and we don’t want to overwhelm people. The goal here was to introduce novel approaches to integrating ERC-20s and 721s into low cost, high scale networked media environments realizing that with shifts in scope it is necessary to both adapt old tactics and adopt new ones. My past professional experience had me working early with Adwords and then in telecom as costs plummeted astronomically only to be offset by massive increases in network usage. I see a lot of parallels to both periods emerging in these new L2 environments, especially since they are paired with force multipliers in decentralized social and generative AI.

Starholder intends to give ourselves away as a way to build a networked audience who gives us their attention, acts as nodes in vector space, and in time will co-create the world alongside us. We believe in value creation through collective communal work, recognizing that continued attention and passion for the project is the truest source of value. Our organizing model front runs the inevitable reclassification of NFTs from speculative objects to everyday consumer goods, by instead focusing on value and values expression via a single ERC-20 token that has a claim over everything sitting within the world.

Programmable media is in its infancy. There is a lot in the recent past we can draw upon, but also new novel practices to bring to the table. What you are reading now is theory, join us at /starholder and come along for the ride as we turn it into praxis.