#284: Tipping as a Growth Strategy

We all know and understand the concept of tipping, especially if you’re based in the US.

No matter what your stance on tipping is, the core intention of it is good. Over the past couple of months, we’ve seen the concept of tipping evolve in an onchain fashion, expand beyond its transactional roots, and become a novel growth strategy.

$DEGEN has been a memecoin/culture coin/whatever you want to call it that has taken the Farcaster, Base, and memecoin ecosystem by storm. Initially started as a humble Warpcast channel, the $DEGEN ecosystem has grown into a $1 billion+ (fully diluted) ecosystem with its own Layer 3 network and multiple apps adopting the token as a form of value exchange.

How did $DEGEN gain traction for its ‘slowly than all at once’ moment? Tipping!

TLDR on how it works within the $DEGEN ecosystem:

• Qualified users (linked wallet, at least 3 casts, and 10k $DEGEN in wallet) receive a daily tipping allowance for content they deem worthy of a tip

• Users give tips by replying to Farcaster posts through the XX $DEGEN format, eg: “100 $DEGEN”

• Tip recipients receive points which are eventually converted into $DEGEN and claimed at the end of each airdrop season

An example of tipping $DEGEN for quality content is with my friend Kairon, who shared a deep dive on the history and growth of $DEGEN. Users tipped $DEGEN as a token of appreciation for the content and the effort he put into it.

Most users who qualify for tipping have a modest daily allowance, but there are some more notable examples of users with a large tipping allowance due to their activity on Farcaster. Threadguy is one of them.

With these social and financial incentives, $DEGEN snowballed into something that felt like it came out of left field.

$DEGEN wrote the initial tipping playbook and other communities are remixing it. $ENJOY is Zora’s (NFT minting and creator platform) first memecoin. It may sound familiar because it was featured alongside $DEGEN in my memecoin piece a couple weeks ago.

I was fortunate to be a part of the initial claim, so I’ve become more familiar with how $ENJOY’s tipping system works:

• Tipping allowances are determined based on a variety of factors (collecting activity on Zora, creating activity on Zora, $ENJOY holdings, etc.).

• The tipping allowance is allotted on a weekly basis and it is recalculated every Sunday. The allowance does not roll over.

• Tipping happens on Zora in the comments section in a similar format as $DEGEN, eg: “100 $Enjoy”. Users have to mint in order to make a comment.

• Tips have a 90% creator / 5% first tipper / 5% tipper distribution

Here’s an example of how it works:

Do you like tipping? Reduce your tipping guilt by sharing or subscribing!

How do we reconcile the traditional concept of tipping and this novel and still-evolving tipping mechanic that $DEGEN has introduced and $ENJOY has built on top of? To better understand this newer variation of tipping, we should introduce a tried and true growth strategy: Referrals.

If tipping is one end of the spectrum, referrals are on the other end. Broadly comparing tipping vs. referrals:

I’ve never really thought about tipping and referrals in the same train of thought because in practice, they’re very different interactions. However, $DEGEN and $ENJOY challenge that, allowing these concepts to intersect and more importantly create new interaction and growth models.

If we add another column to this chart we can see that in action:

Note that I’m using the term ‘onchain tipping’ rather loosely. These are points that are eventually converted into and claimed as an onchain token.

Onchain tipping takes the best from both worlds. It creates more flexibility in a traditionally rigid model, provides more agency to the tippers, and removes social guilt.

And how does onchain tipping support ecosystem growth? Focusing on $ENJOY since I’m more familiar.

There’s a lot more nuance to the above cycle. The 5% first tipper incentive encourages savvy tippers to cast their tipping net as far and wide as possible, and as quickly as possible. Maybe one of these tips goes to a creator who is clueless about $ENJOY. Perhaps they notice the comment and eventually enter the $ENJOY ecosystem as a creator, holder, and potentially future tipper. In this example, the tip functions as a tip and as a referral into the $ENJOY ecosystem.

In addition to the people who benefit from this interaction model (tippers and creators), the platforms benefit too. Zora gets increased engagement through more mints, creators, and tipping comments while Farcaster benefits as the social and coordination layer.

As a result, we’re seeing some wacky, and interesting stuff happen. For example, this has almost 4 million mints due to the fact that it costs only 1 $ENJOY ($0.0004).

The concept of onchain tipping may provide some inspiration for future points systems if applied creatively and thoughtfully:

• Points are an effective and saturated strategy. That’s ok, but there’s an opportunity for a more creative approach to capture everyone’s attention.

• Crypto and web3 have an ethos of ownership. Tipping provides agency and ownership that complements this ethos.

• Onchain tipping puts a twist on the traditional referral model and is focused on giving rather than receiving.

On the other hand, tipping provides a whole different set of headaches in terms of fraudulent behavior and sybiling that would need to be addressed depending on the implementation.

As for myself, I’ll be taking some time later this week to scroll through Zora and enjoy the creativity from the $ENJOY community 😉

See you Thursday!