
**What’s next for NFTs?** If the speculative bull market felt like a fever dream, the chill of the bear market has jolted the NFT world awake. In this state of clarity, it appears that non-financial NFTs might have their day in the sun. Non-financial NFT might sound like an oxymoron; in many ways, the term contradicts NFTs' demonstrated killer-app of equipping creators with capital markets. However, out of design or **[necessity](https://dune.com/queries/1549266/2594879)**, NFTs are trending to be used as a source of identity rather than revenue.
Much has been published about **[designing effective NFT releases](https://www.paradigm.xyz/2021/10/a-guide-to-designing-effective-nft-launches)** to maximize revenue or capitalize on hype, but how should releases be designed to advance goals of non-financial NFTs? For NFTs to successfully shift from providing financial services to enabling social, loyalty, and governance applications, release mechanisms should optimize for claims from unique, human-managed wallets. **Easier said than done.**
Identity solutions all make explicit trade-offs between _portability_, _privacy_, and _personhood_. Each application has different acceptable thresholds of humanity. Most existing solutions solve for vertices, but web3 social is perhaps the great compromise required for effective releases of non-financial NFTs.
### **The Dawn of Non-Financial NFTs for Creators**
At Decent, we roughly think of non-financial NFTs as falling into one of three categories: _credentialing_, _brand distribution_, and _utilitarian_, with many issued as **[open editions](https://nftnow.com/features/for-better-or-worse-nft-open-editions-are-on-the-rise/)**. In each case, the primary purpose of the NFT is to collateralize a wallet with a trait. As a wallet collects more traits, the more its identity comes into focus.
More and more creators are using credentialing or branding NFTs to grow their communities. While having no immediate financial value, there is implicit potential that the holders of these NFTs might someday be rewarded via unique access, loyalty rewards, physical merch, etc. _The present value of these potential future rewards is proving to be a substantial carrot in attracting new fans or community members_.
The business objective for creators is to convert as many impressions into paying customers as possible. The funnel from new audience impression to paying customer looks something like this:
![Conversion funnel for web3 social](https://substack-post-media.s3.amazonaws.com/public/images/be450e2e-3de3-4953-970e-4c036d1748d7_1130x980.png"Conversion funnel for web3 social")

Non-financial NFTs are extremely compelling because they **bridge an impression to an addressable wallet in real time and invert impression ownership**. A user can see a post on Lens and collect it with no thoughts surrounding its price.
In the case of traditional channels, the minimum threshold for addressability is an email address or phone number; both of which are incredibly difficult to collect. To put it into perspective, the average click-through-rate on **[Facebook & Twitter is only ~1.6%](https://statusbrew.com/insights/2021-social-media-benchmarks-facebook-instagram-twitter/#:~:text=twitter%20is%20%240.33.-,Click%2DThrough,CTR%20Twitter%20is%201.55%25.)**! Grabbing and retaining attention to any degree is like winning the lottery, but free NFTs promise to tilt the odds.
Furthermore, _[collects (vs. clicks](https://zine.zora.co/clicks-vs-collectors-jacob) or impressions) accrue to the user themselves as opposed to the product_. This meaningfully advances web3 playing out as composable ecosystems as opposed to walled gardens. Collectors affirmatively claim that they saw something, adopting it as part of their composable identity, versus marketing teams leveraging siloed impression data to target unwitting viewers. Additionally, user owned impressions mean collectors are not reliant on a single platform to maintain their preferences or reputation. A single point of failure undermines login with Facebook but could be avoided by sign-in with Lens.
In the bear market, bottom funnel monetization via NFTs has become significantly more difficult as **[speculative returns have plummeted](https://dune.com/rchen8/opensea)** and collectors have less surplus income. With fan-to-paying fan conversion deteriorating, many creators are intelligently revisiting the top of their funnels. We expect non-financial NFTs to shine and lay the foundation for composable creator and platform micro-economies.
### **The Humanity Trilemma**
_The primary goal of non-financial NFTs is to reach and retain human-managed wallets._ So, it’s really, really important collectors of non-financial NFTs must first pass some identity check!
‘Human-managed’ is probably conspicuous over-specification, but it refers to the difference between _legal_ and _fulfillment_ identity. Fulfillment identity is weaker, specifying only that a wallet is endowed with certain traits that meet a creator’s conditions. Legal identity endeavors to prove which government-recognized person is behind a wallet.
![Please see the end of the article for links.](https://substack-post-media.s3.amazonaws.com/public/images/23fb0083-590e-4e96-81de-8ee720b7d03c_1242x282.png"Please see the end of the article for links.")

Legal and fulfillment identity conditions exist on a pretty broad spectrum. The conditions creators set for issuing traits make trade-offs between protecting collectors’ privacy, portability of traits between applications, and certainty of personhood. A non-exhaustive mapping of popular identity solutions might look something like this:
![](https://substack-post-media.s3.amazonaws.com/public/images/5c32a3f4-6111-4a90-aec1-8291516a20f5_1136x768.png)

For example, **[Sismo](https://www.sismo.io/)** is a very desirable identity solution because it leverages a common standard to issue ERC 1155 credentials — interoperable with most web3 gating infrastructure. The protocol employs zero-knowledge issuance methods to prevent collectors from oversharing wallet information (NFTs issued for branding should probably not also collect the financial profiles embedded in wallet balances), and the tokens are soulbound and issued under fairly **[specific conditions](https://docs.sismo.io/sismo-docs/create-your-zk-badge/factory-guide)**. It would be both difficult and invaluable for a bot to claim a Sismo badge. Small plug, but this is the approach we’ve taken with zkSBTs at **[Decent](http://decent.xyz/)** as well.
By contrast, **[ENS](https://ens.domains/)** is extremely portable but is a desirable NFT for bots because certain names are financially valuable and there are no conditions for purchasing. Its lack of conditions means collectors can maintain anonymity, so it ranks highly on privacy but only by way of doing nothing to establish personhood — perhaps the clearest example of the trilemma in practice.
**[Proof of Humanity](https://proofofhumanity.id/)** and **[Worldcoin](https://worldcoin.org/)** maximize personhood guarantees but entirely dox users in the process and are maintained as registries, which are publicly accessible but not innately portable like NFT-based solutions.
Off-chain solutions like **[Ceramic](https://ceramic.network/)**, **[Disco](http://disco.xyz/)**, **[Lit](https://litprotocol.com/)**, **[Gitcoin](https://docs.passport.gitcoin.co/)**, **[Spruce (SIWE)](https://spruceid.com/)**, and **[Privy](https://privy.io/)** have discretion over their privacy guarantees. Ceramic as a base layer makes zero — all information, available to all — but Lit Protocol provides encryption atop Ceramic with access typically permitted as a function of highly portable NFTs. Their personhood and portability is generally a function of how they bridge data on-chain. For example, Gitcoin Passport registers stamps from other protocols and applications (e.g, ENS, Proof of Humanity, Twitter Auth) as verifiable credentials on Ceramic. Passport is relatively portable with fewer intrinsic guarantees of personhood given it relies on how the underlying stamps were issued — e.g., **weak**: ENS & Twitter auth w. anon account versus **strong**: Proof of Humanity.
In general, off-chain solutions are less portable than-on-chain counterparts; however, that’s not necessarily a bad thing. Verifiable credentials, like soulbound tokens (SBTs), ensure badges were earned, not purchased, providing high personhood guarantees without compromising collector privacy. Unlike SBTs though, there is no risk of **[negative reputation](https://vitalik.ca/general/2022/06/12/nonfin.html)**. Beyond the scope of this blog, but its merit is hotly debated. A key implication here is that no one of the solutions above is materially better or worse than others. Identity is too delicate to be rushed into and the right answer between trade-offs requires more, careful experimentation.
**Let’s bring it back to the creators.**
Non-financial NFTs are interesting to examine through this lens because in almost all cases fulfillment identity types are sufficient for establishing addressable wallets. Fulfillment identity is also more interesting and helpful for creators! What is the point of targeting outreach by demographic if not to maximize the willingness to pay of an average impression? Web3 creators can skip the demographic guesswork by catering to wallets that have already purchased similar assets or otherwise meet the creator’s desired traits.
However, it is always advantageous to the NFT issuer to collect as much information as possible on collectors. It’s pretty hard to say how this will resolve because it feels like something of a prisoner’s dilemma: we all cooperate to respect one another’s privacy to reach a great outcome versus cheat and farm user information to maximize individual welfare (_\*cough\*_ web2 social).
**Web3 Social’s Unlock**
Web3 social could be the first to find the Goldilocks zone of the humanity trilemma. Take Lens for example:
*_**Portability**_**:** profiles and the social graph uniting them are entirely managed through NFTs*_**Privacy**_**:** Similar to ENS, Lens is private in that it has a low personhood requirement*_**Personhood**_**:** Engagement with Lens applications constantly creates new associations between profile NFTs and applications. Profile NFTs alone would be similarly attainable and desirable for bots as something like ENS; however, bot-owned profiles will likely have far fewer associations with other profiles than human-owned ones. The network around a profile promises to be reliable evidence of personhood, _and_ it does not rely on any external dependencies that might compromise on privacy (e.g., Github auth for Sismo badge condition). If an app does require legal identity, Lens Profiles can store external credentials such as Proof of Humanity, PolygonID, or verifiable credentials to triangulate identity across multiple validators.
Web3 social is particularly well-suited for creators issuing non-financial NFTs, as well, because clients like **[Lenster](https://lenster.xyz/)** double as **[meaningful distribution channels](https://dune.com/sixdegree/lens-protocol-creator-economics)**. Rather than attracting audiences to a bespoke site or independent platform, creators can leverage shared audiences to, in theory, reach and obtain more collectors than they would otherwise.
### **One Big Idea Claim Case Study: Web2 + Web3 Social Auth**
Our most compelling case study for non-financial NFTs to date was the **[One Big Idea Season 0](https://mint.onebigidea.xyz/)** listener badge claim. Austin Hurwitz required collectors submit their email addresses, follow him on Twitter, and follow him on Lens in order to claim one of 500 available badges. While not right for all creators, Austin’s claim minted out over the course of a day, providing him hundreds of new email addresses and social followers. Collectors admittedly had a cumbersome number of conditions to meet in order to claim, and, yet, the potential future value of this NFT proved as a sufficient carrot to meaningfully grow Austin’s community.
The goal of Web2 + Web3 Social Auth was to reach mainstream audiences, funnel those through web3 platforms to create wallets, and capture those wallets as addressable via claiming an NFT.
**How We Built It:**
1. Connect Wallet1. How: **[Privy for authentication](https://www.privy.io/)**2. Why: Privy generates identity objects on behalf of a wallet that can save off-chain information, like an email address, with a wallet.2. Confirm Email1. How: the user enters their email address and receives a code to that email to validate.2. Why: An email is typically the minimum requirement for a fan to be in a creator’s funnel. The ability to promote opportunities to wallets of high-purchasing intent is valuable.3. Confirm Web2 Social Following1. How: Twitter’s API with some custom caching to mitigate rate limits2. Why: Necessary step to execute web2 → 3 social bridge from where creators primarily distribute their brands4. Confirm Web3 Social Following1. How: Decent’s 721A token-gated contract2. Why: This step bridges the gap between web2 → web3, asking collectors to verify from both their Twitter and Lens profiles which provides:1. On-chain validation of credentials via **[Lens](https://www.lens.xyz/)** follower NFT (or any other token)2. Proof of Humanity by limiting bot attacks through multi-step verification on- and off-chain3. Allowlist that automatically updates in real time
**Conclusion**--------------
As NFT prices have plummeted and individuals have left the space, those who stuck around were faced with an important question: _what value do NFTs really hold?_
There is no one right answer for how to navigate the proof-of-humanity trilemma, there are likely many. Tradeoffs should be deliberate and maximize the goal of the release. While there are many exciting identity initiatives currently being developed, _we are particularly excited by the potential of web3 social to establish fulfillment identity during claims_.
At Decent, we’re very excited by creators issuing non-financial NFTs using web3 social as the check for identity to fill the Trust stage of their funnels. We believe creators doing so are extremely well positioned to grow loyal audiences that will be readily monetizable.
### **Reference Links**
**Non-financial NFT Table Project Links**
* [Sismo](https://www.sismo.io/)* [Rabbithole](https://app.rabbithole.gg/quests/trade-on-dydx)* [Mint Podcast Listener Badge](https://adamlevy.xyz/vault-collect-ethereum-or-polygon)* [Rainbow Zorbs](https://rainbow.me/drop/zorb)* [Reddit Collectible Avatars](https://www.reddit.com/r/CollectibleAvatars/)* [Uniswap v3 LP Positions](https://opensea.io/collection/uniswap-v3-positions)* [Lens Profile NFTs](https://opensea.io/collection/lens-protocol-profiles)* [Credit score SBTs](https://vitalik.ca/general/2022/06/12/nonfin.html)
**Identity Type Table Project Links:**
* [Worldcoin](https://worldcoin.org/)* [Proof of Humanity](https://proofofhumanity.id/)* [Sybil Registry](https://sybil.org/#/delegates/compound)
**Humanity Trilemma Diagram Project Links:**
* [ENS](https://ens.domains/)* [Rep3](https://rep3.gg/%5D%5C)* [Lit Protocol](https://litprotocol.com/)* [Spruce](https://spruceid.com/)* [Gitcoin Passport](https://docs.passport.gitcoin.co/)* [Ceramic Network](https://ceramic.network/)* [Lens Protocol](https://lens.xyz/)* [Sismo](https://www.sismo.io/)* [Disco](http://disco.xyz/)* [Privy](https://privy.io/)* [Farcaster](https://farcaster.network/)* [Worldcoin](https://worldcoin.org/)* [Proof of Humanity](https://proofofhumanity.id/)


Navigating the Humanity Trilemma with NFTs

Mint Podcast episode in which I discuss why rentable NFTs are exciting. Companion media to my Rentable NFTs blog.
**[Listen to episode](https://open.spotify.com/episode/5pFAYjwwocgYv3OARc5smk?si=4c6df1fb04f1428b)**

Exploring the Impact of Rentable NFTs on the Creator Economy

Was able to share my thoughts on what motivating work environments look like for Gen Z with Fast Company.


Fast Company Article

Crypto is scaling with trade-offs. For each new ux innovation, crypto’s engineering-heavy constituency seems to pay equal attention is paid to the things it broke. For the last two years, the biggest thing that broke was liquidity. At this point, the problem space is well-understood; countless blogs and venture dollars have substantiated it.

Today, we’re going to talk about why the solution is much, much closer than most people realize.


Each of the most important advances in consumer UX have broken atomic composability and fragmented liquidity:

 Crypto is scaling horizontally via rollups. This approach has increased transaction speeds and lowered gas fees per transaction, which has induced demand and enabled consumer-friendly onchain experiences.

The trade-off has been liquidity fragmentation. Users tokens on one rollup are not interchangeable with those on another, which makes interacting with applications across different chains painful.

 Embedded wallets have changed the game for crypto apps by offering familiar experiences to mainstream audiences. Users need wallets to interact onchain, but they do not need to know that they are there. Embedded wallets enable users to sign into dapps with their email or socials and seamlessly engage without intrusive prompts to sign transactions.

 Embedded wallets make the in-app experience awesome & the onboarding experience… mixed. Abstracted accounts are scoped to a single application (or embedded wallet provider). Users that deposit into one of these embedded wallets can only use their funds within this one account. Users have to fund each new embedded wallet from an existing one or via an onramp. Despite seamless wallet creation, actually using the wallet can be a bit of a challenge.

 Smart contract wallets primarily improve application experiences by segmenting wallets’ core jobs of signing and execution. Traditional externally owned accounts bundle these tasks. A modular approach enables teams to pair familiar signers, such as Apple’s FaceId or embedded keys, with onchain accounts.

 Smart contract wallets are not designed for a multi-chain environment. Signing for an smart contract wallet requires that the signer know the state of the chain to which the smart account is deployed. With many rollups, there needs to be a way for a single signer to know the state of many underlying chains.

 Admittedly, this is not necessarily a UX upgrade so much as a requested feature from an increasing number of high profile applications. Large apps tend to deploy their own chain to provide a better consumer experience plus increase utility for their token as it can now be used to pay gas fees. It is a major contributor to liquidity fragmentation though, so I’m going to lump it in here.

 Liquidity does not just fragment with the number of chains, it also fragments with the number of tokens. For example, common approaches for cross-chain transaction require relayers to hold the native token on the destination. This is relatively straightforward when both chains require ETH, but what happens when the destination chain is Degen? Relayers cannot hold Degen without considerable price exposure, so it becomes very difficult to implement even relatively naive cross-chain tactics.

Given these innovations, we have reached an interesting point where the experience within any one application can be excellent, but the experience across applications is pretty brutal. User experience is fragmented at basically every level: app, signer, tx execution, and underlying chain.

So, why the cause for short term optimism?

Liquidity fragmentation is typically like it is this singularly defined problem for which there are competing but fundamentally similar solutions. That’s not really true. In reality, interop at the application layer is already just about solved, and a full stack solution will be comprised of many complementary providers.

At Decent, we like to say we work backwards from the application experience. From this vantage point, the problem is pretty simple: how can users seamlessly engage with applications? There are a lot of new chains and promising new apps, how can we reduce all of the friction between a user deciding to transact and actually being able to do so?

Apps with embedded wallets or app-scoped smart accounts need an easy tool for onboarding to the app’s preferred token on the app’s preferred chain(s)

Users need to be able to spend tokens they have on one chain on another

Users need to execute smart contract functions across chains, not just trade tokens

Execution needs to be fast, cheap & reliable

That is basically it. Sure, there is a lot of underlying complexity, but users have not and will never care about that.

These are all problems that Decent has already solved.

We designed Decent on a few key principles:

A one million chain future does not mean there are a million random chains sitting in isolation

. There will probably only be 10 or so generalized L2’s that act as liquidity hubs. Liquidity hubs are defined as settlement layers for other L3’s, and networks where users hold their tokens.

If that is true, each user will likely initiate almost all of their transactions from a single chain

. Fortunately, there is already terrific interop going towards a chain. We view interop functionality in a quadrant that roughly defines how many users can move seamlessly in how many directions. Today, any user can seamlessly transact liquidity hub → application spoke. That is huge! As an interop space, we are close on one-user in any direction, and there is cause for optimism that we will fill the fourth quadrant as chain teams continue to innovate.

For example, Decent can support any chain with any gas token on its first day. This means that from the moment a rollup is deployed, users can transact on it from their hub chain. Immediacy is the important threshold for marking this a solved problem.

In reality, most users do not need 200 millisecond transactions or synchronous composability for most of the things they are trying to do onchain. This is not to discount the incredible benefits that come from these innovations so much as to say, if you are a consumer crypto founder, your interop needs are pretty much already satisfied.

The future of rollups does not include bridge pages: it looks like users immediately interacting with the primary app(s) on the network

. The closest thing to a bridge page will be onboarding to application accounts. Decent can execute any non-permissioned smart contract function on any chain. The devex is on par with wagmi’s, so sending same versus cross-chain transactions is effectively equivalent.

A lot of interop is going to be driven by chain teams.

 Scaling with rollup framework upgrades is a superpower.

This is no to say that liquidity fragmentation is a solved problem. There is major room for improvement on quality of execution, decentralization, and directionality; however, there is also no reason 

 to deploy a rollup, or use an embedded wallet, or a custom gas token!

We have reached a very important milestone in that application developers can build extremely high quality onchain experiences AND they are immediately accessible to any crypto user!


Amidst complaints of liquidity fragmentation, it is important to recognize how far we have come and how close we are to putting this problem to bed.

Day one inclusion in cross-chain routing.

Integrate Decent's Onboarding Modal to let users fill accounts using any token from any existing wallet

Cross-app wallets: reduce total number of new accounts that need to be filled for each user

Use Decent’s executor contracts deployed to each chain to fulfill transactions. Obfuscates need to replicate signers across chains.

Pair day-zero rollup support with in-protocol swaps to provide solvers with last mile liquidity

Solving Liquidity Fragmentation: Summer 2024 Check In


Interview originally published by **[Dez Fleming](https://twitter.com/DezFleming)** on his Substack, **[All Things Venture](https://apexventurestudio.substack.com/p/startup-spotlight-decent)**
_This interview contains my thoughts on the music industry and NFTs that made me excited to found Decent. The vision for Decent has changed dramatically (we are no longer in music at all); however, thoughts around what web3 can offer are all still relevant._
### What is Decent?
Decent aims to be the first decentralized record label. We provide direct-to-fan monetization and facilitate discovery for artists through our novel royalty-collateralized NFTs. Decent is creating efficiency and fairness in the historically inequitable music industry by putting artists and fans on the same team.
Our NFT platform allows artists to mint and auction NFTs collateralized by royalty revenues. By tying investors’ ROI to artists’ royalty growth rates, Decent creates a synergistic flywheel between fans, investors, and musicians, incentivizing fans to market on behalf of artists. Just as streaming platforms democratized audiences, we aim to democratize ownership with Decent.
### What led you to build Decent, and why are you excited about Web 3?
This is going to be along answer, but bear with me. One of our co-founders, is an artist currently signed to Palm Tree Records at Sony. Over the past few years, he has run the gauntlet, advancing from a self-releasing artist to independent label to, now, a major label. His frustrations navigating that process and negotiating label deals motivated us to develop Decent. On a personal level I really loved studying behavioral economics in school and I wrote my senior thesis on information cascades, using sentiment analysis of tweets to derive a variable called “Agreement” which tracked how information disseminated through networks. Information cascades are powerful in financial markets because they theoretically define the residuals between an asset’s expected fundamental value and trading value (**[this interview](https://www.chicagobooth.edu/review/are-markets-efficient)** is a sweet synopsis of two schools of thought). I was immediately taken by the music industry because it is the purest grounds for behavioral economic models; I believe that few people would argue against the perspective that the music industry is an industry entirely predicated on consumer taste. In most cases, taste is not derived in isolation; therefore, information cascades play a huge role. So what’s cool about information cascades as it relates to Decent // why provide that context? Information cascades can be manufactured AND they have tremendous implications on financial value - e.g., Agreement stemming from celebrities’ tweets is a highly correlated predictor of individual stock prices. Accepting the above, success in music is a function of the ability to create an information cascade that a particular artist is really good & the magnitude of that cascade. The outcome of information cascades is herd behavior; in music, these herds are fanbases. It’s no secret that success as an artist is predicated on the size of your fanbase, but I think this is an interesting framing of an entirely obvious conclusion.
The reasons why I’m excited about Web3 is because we now have the power to reinvent every industry through (hypothetically) perfectly efficient markets via shared ownership and responsive monetary policies. Like Decent, crypto aligns incentives between market participants to achieve unique and mutually beneficial outcomes. Crypto distributes wealth creation while disproportionately rewarding engagement and positive contributions. I think it’s beautifully egalitarian without designing for or codifying equality or relying on retroactive redistribution. Hopefully, this answer illustrates how crypto alters economic structures such that there is no need for gatekeepers or middlemen.
### There’s lots of platforms/companies today looking to monetize NFTs via royalties - how do you all think about the current stage of competition?
The majority of music-NFT projects do not contemplate NFTs as anything more than JPEGs. It’s cool that artists can issue NFTs and fans can have some demonstrable proof-of-fandom, but honestly, who cares? If the platform just facilitates a discrete drop or the incentive is some experience with the artist, then the amount raised is entirely predicated on the artist’s existing fanbase. On one hand, yes - these NFTs and projects are a realization of **[Kevin Kelly’s 1000 true fans](https://kk.org/thetechnium/1000-true-fans/)** and can be exciting for artists. However, these projects do not advance us in any meaningful way towards the vision painted above of why crypto is exciting. Does a major label care if their artist drops an NFT for a quick buck? No, probably not. Do they care if their monopoly on attention evaporates? Yes, big time - that is real change and movement towards a brave new world in music economics.
To that end, some cool and competitive projects are:
- Royal.io- Catalog / Songcamp- Pianity- Royalty Exchange
Opulous (Opulus’ royalty advances are more of a debt instrument which makes them quite different from others on this list)
Pianity & Catalog involve minting a single song as an NFT which really isn’t a ton different than the “discrete drop” model. There’s some incentive for fans to promote the single song, which might trickle back to the artist’s popularity; however, it certainly is not a “mutual fund of audiences.” The homepage of one of our competitors listed above even reads: “Everyone can listen to music. Only one can own it.” My POV: they are self-advocating that they’ve missed the point.
Royalty Exchange and particularly Royal are definitely competitive - can’t make light of those guys. Decent is differentiated because we never force the artists to give up any IP or royalties in perpetuity. We wrote about it in **[this blog](https://mirror.xyz/0x673Fc290d919684A1B1E46AA69152f7b56FBADD8/qsvUuJOGdjj_o49zqtIaSx8wh-92usgJMkkomv-LHNs)** post - the work-to-rent concept - but our ultimate goal is to empower artists such that they retain 100% of their future royalties post listing with us. We believe this is critical in treating each copyright as the cornerstone of a vibrant career rather than a time card.
Other differentiating factors: due to our time-constraint, our NFTs will trade like futures contracts vs. bonds (betting on popularity of artist over listing period vs. having royalties remitted to NFT holders). Positive externality here is it should provide a sense of urgency for fans to get out and promote artists.
Ultimately, as this space matures, competition will be almost entirely a function of the artists that each platform attracts.
### What defines success for Decent over the next few months?
A few things, but I’ll walk through it on a month by month basis:
_November_: We launch our closed beta, issuing our first royalty collateralized NFTs
_December_: We analyze data from our first launch, proving Decent can generate a more popular release post listing (some indication of our manufactured information cascade hypothesis working); we also follow up with 3 more launches in closed beta
_February_: Our core focus switches to development of the fully integrated platform (automated royalties on chain) and community. We’ll do a few more launches in the closed beta to continue building community by giving that community something with which to engage; however, we want to be in market with a fully integrated platform in early January.
### What advice do you have for any aspiring Web 3 entrepreneurs?
**[KERNEL](https://kernel.community/en/)** really changed my perspective on web3 development. By focusing on the ethical and philosophical considerations, it really broadened by conception of what is possible in web3 and the extensive implications for successful projects. For example, Hayden Adams could turn out to be our generation’s Alexander Hamilton. **[This blog](https://taschalabs.com/how-to-value-layer-1-blockchains-the-right-way-the-wrong-way/)** describing how we should value L1s as national economies makes a solid argument for the implications of Dapps by extension.
I think a16z uses the word “skeuomorphic” a lot. I think this word characterizes the rapid pace of innovation right now. To pick on the “discrete drop” companies again, I think they’re competing in a skeuomorphic land-grab; it is hard for me to see how they have engineered incentives or leveraged cryptography to derive a novel socio-economic framework, but this is the potential of web3.
This might be awful advice because there’s definitely a good reason to produce the products you know with certainty people will buy - like Beyonce will sell however many NFTs she wants. But, I hope people aspiring to build in the space are entering with a truly ambitious goals rooted in web3’s values.
### What is your wildly ambitious vision for Decent?
Circling back to something mentioned in the competition section: new revenue.
At launch, Decent restructures incentives to change the earnings potential for artists, but we operate within the existing construct of the music industry. Frankly, the fact that we’re complementary with existing music players is what enables us to even enter the market. A secondary effect of our incentive engineering is likely the reduced power of labels, but we don’t change how revenues are produced in the industry - we just enable artists to earn more.
Without disclosing too much, we spend a lot of time thinking about how we could rebuild the music industry from the ground up. Because discovery is the fundamental problem, it is the one to tackle first. However, to reinvent the industry, we think you have to reinvent how revenues are generated in the first place.
The power of web3 is to align incentives such that the contributions of one are to the benefit of all. That is an extremely interesting premise from which to rebuild an industry currently antithetical to that sentiment...

Startup Spotlight: Decent


**What’s next for NFTs?**-------------------------
Through the bear market, NFTs as a tool for crowdfunding and speculation has faded similarly to 2017 ICO predecessors supported by the same motivations. The answer is beginning to come into focus as creators are prioritizing low-priced to free NFTs accomplish non-financial objectives.
_NFT releases targeting fan acquisition and retention are promising to drive 2023 NFT activity_. At Decent, we are incredibly excited about how creators and developers are using our technology to develop novel NFT-based apps. Today, we are introducing a web2 + 3 social auth template to equip creators and developers with another tool to advance the future of NFTs.

**The non-financial implementation trending most noticeably to product-market-fit is NFTs as carrots to drive social engagement and build addressable wallets.**

**2023 NFT Releases Target Top of Funnel Growth**-------------------------------------------------
The revenue funnel for creators begins with web2 social distribution. The goal is to convert the greatest percentage of your social impressions into paying customers. Every tool built for the cultural markets\* exists between these bounds and crypto’s value is principally at the bottom of the funnel. NFTs certainly can introduce creators to new audiences; however, the demonstrated 10x value is more efficient monetization. Improved flow of funds and the ability to capture value parallel to content releases via the wisdom of crowds promises to revolutionize the cultural markets.
In the bear market, bottom funnel monetization via NFTs has become significantly more difficult as **[speculative returns have plummeted](https://dune.com/rchen8/opensea)**, eroding a principal collector motivation, and collectors have less surplus income. With fan-to-paying fan conversion deteriorating, many creators are intelligently revisiting the top of their funnels.

Something we have believed at Decent since the beginning is that established social networks are poised to remain the primary distribution channel, but blockchain applications will become the financial rails. _Each will capitalize on their comparative advantages to open new frontiers._**The most pivotal step for creators using crypto is converting as many web2 impressions to addressable wallets as possible**. This is important because, today, creators principally earn as a derivative of platforms’ or intermediaries, boxed into their business models. Fans with wallets enables creators to monetize their work in real-time, completely autonomously. Autonomous monetization is extremely important; I will cover why in separate posts - _is Spotify the limiting function or force multiplier for an artist’s income_?

**Today, we launched a case study of our solution to this step with Austin Hurwitz’s Season 0 listener badges: [Web2 + 3 Social Auth](https://mint.onebigidea.xyz/)** (s/o Adam Levy’s Mint s6 listener badge which helped shape a lot of this release). _The goal with web2 + web3 social auth is to reach mainstream audiences, funnel those through web3 platforms to create wallets, and capture those wallets as addressable via either tokens or something like email addresses_.

**This is extremely exciting because it creates a direct bridge to onboard the next 10 million web3 users, and the motivation for crossing that bridge is rooted in unassailable properties of blockchains.** People come not for ponzi games but to be in the inner circles of their favorite creators and participate in their success (creators bridge for better flow of funds; fans follow). The NFT is ~free now to advance its principle objective of growing audiences; however, it could have speculative value for a litany of reasons across financial and access.

**The discounted future value of a free NFT is the carrot to bridge.** Value can be calculated as either financial or status - would argue the same valuation methodology applies.

_To creators: you can maximize that value, remove uncertainty or target a massive and exciting goal. The value of your NFTs should not be rooted in artificial scarcity to grow your audiences so use tools like NFT Staking, Bonding Curves, or Open Editions!!_


**One Big Idea Season 0 Claim Case Study**------------------------------------------
_Breaking down the component pieces of web3 + 3 social auth_
To claim, collectors first hit "**[Check Eligibility](https://mint.onebigidea.xyz/)**" and are prompted to follow austin\_hurwitz.lens Lens, verify their email address and follow @austin\_hurwitz on Twitter before minting. Once completed collectors are prompted to join Austin’s Guild to gain access to the OBI Telegram group.
**Auth flow components:**
***Connect wallet:***_How_: using **[Privy](http://privy.io/)** as the wallet provider.*_Why interesting_: Privy is part of a new breed of wallets that creates a **[DID](https://disco.mirror.xyz/UqHHismf1ookU2JMMkX2DPBA5PiTVF7-4vQkshTukEg)** for the user on connection. This card can associate email and social handles with an address***Confirm email:***_How_: user enters their email address and receives a note to that email to validate. Note: this email can sometimes appear in spam so be sure to check there if it does not hit your inbox.*_Why interesting_? An email is typically the minimum requirement for a fan to be in a creator’s funnel. The ability to promote opportunities to wallets of high-purchasing intent is valuable.***Confirm socials:*** This step is the 2 → 3 bridge, asking collectors to verify both their Twitter account and Lens profile***Confirm Lens follower NFT:***_How_: Decent 721A token-gate method*_Why interesting_:***On-chain validation of credentials*** Decent’s token-gate method verifies that the potential collector has a Lens follower NFT (could be any NFT) in their wallet.*_We believe it is extremely important that on-chain credentials (badges, tokens, etc.) are also validated on-chain and believe this gate to be the best solution in the market._***Proof of Humanity:*** On-chain validation means bots cannot attack the contract without engaging in at least one prior step* Because anyone can claim a follower NFT from Lens, it is an extremely weak measure. However, we believe it lays the groundwork for exciting innovation in sybil resistance by using web3 social platforms for Proof of Humanity. This is a strong use case for Lens as it is all on-chain, and there are already filtering mechanisms based on degrees of separation between followers to identity bots + their **[Proof of Humanity API](https://twitter.com/StaniKulechov/status/1609618602595958785?s=20&t=_T2KNO6BpKQqMLj6BvNDrw)**.*_Algorithmic social proof is an extremely compelling PoH solution and__could be web3 social’s killer app_ (if you’re already working on this - then I’d love to chat!)* Farcaster could be equally compelling as Dan Romero’s dm’s and personal filtering are could be the strongest proof of humanity that exists right now! It’s just hilarious that it relies on one person’s Twitter dm’s today.*_I expect web3 social to really reinvent proof of humanity mechanisms in 2023. In the NFTs as revenue era, many creators didn’t (& shouldn’t have) really cared whether their collectors were real, unique people. In the NFTs as top of funnel era upcoming, creators should care very deeply._***Dynamically updating allowlist\*\****_The token gate is proving to be a significant upgrade to allowlists because it can update in real time_:* follow → mint vs. follow → batch new follows → republish allowlist later & tell potential collectors to try again.* This shares very similar sybil-resistance guarantees as a traditional allowlist while being a significantly better user experience*_**Most importantly, allowlists are really undesirable to attract new audiences because they are fixed and retrospective. NFTs are only an effective carrot if potential collectors can meet the claim condition in real time!**_***Confirm following on Twitter***_How_: Twitter’s API with some custom caching to mitigate ratelimits*_Why interesting_:* Necessary step to execute web2 → 3 social bridge* Twitter (or other web2 socials) will be where creators primarily distribute their brands. Web3 social will house fans with high-purchasing intent given willingness to bridge and presence of a wallet that is well suited to purchase new content as released.

**Launch your next project with a Decent template!**----------------------------------------------------
_The social auth template is the fourth in a series that enables creators and developers to get up and running with custom minting and deployment sites faster than anywhere else._ We will be publishing this library to **[Decent](http://decent.xyz/)** in the coming days, but please see the list below in the meantime to start playing around today.
**[Start Decent](https://github.com/decentxyz/Start-Decent):** Next JS, RainbowKit, TailwindCSS & Decent SDK template to demonstrate how to use the Decent SDK and set up a custom deployment site.
* Vercel demo link: [Start Decent](https://start-decent.vercel.app/)
**[AI NFTs](https://github.com/cdsiren/ai-generated-nfts)**: Forked from Start Decent, this repository enables users to deploy NFTs with images generated from DALLE 2 prompts. This template requires a DALLE API key.
* Template in action: [Decent x Dalle](http://ai.decent.xyz/)
**[Minting Page](https://github.com/decentxyz/Minting-Page)**: Forked from Start Decent, this template lets users stand up a custom minting page to provide collectors with an experience that is uniquely yours. To see just how easy it is (& the breadth of Decent HQ!), please check out my [YouTube tutorial](https://www.youtube.com/watch?v=s72S5_5HWAk).
* Template in action: J [Dilla Release](https://mint.burble.it/)
**[Social Auth](https://github.com/cdsiren/Social-Auth-Mint)**: Cloned from Minting Page, this template asks users to confirm their email address and that they follow the creator on Twitter and Lens prior to deploying. _This repository is currently in beta. We are publishing it as an MVP with the hope that the community will close out our roadmap. We will be sure to recognize & reward contributors! If you are interested in using or contributing to this template, please DM me on Twitter [@cdurbinxyz](https://twitter.com/cdurbinxyz). Look forward to hearing from you!_
* Template in action: [OBI Season 0](https://mint.onebigidea.xyz/)
Template pages will be prominently featured on Decent in the coming weeks. Creators and developers to jointly contribute to build an interesting future for NFTs that does justice to all the primitive has to offer!


* * *
### **Endnotes**
\*_Think Creator Economy. I am not a huge fan of the term “Creator Economy.” It has become overused and naming the market by its participants does not reflect the nature of its dynamics. At Decent, we use “Cultural Markets” instead. We define Cultural Markets as those in which price is almost entirely behavioral._
_The price of a cultural good (a song, piece of art, a public good, a meme or viral social post) is continuous and determined strictly by how many people agree that the product or its creator is valuable (fwiw this is also why bonding curves are so attractive - see Simon’s piece on **[trading memes](https://medium.com/@simondlr/introducing-curation-markets-trade-popularity-of-memes-information-with-code-70bf6fed9881)**). I believe consumer preference (& how taste is formed) is a more accurate indicator of what drives the creator economy so like to use cultural markets instead._
_\*\*The token-gate method in Decent’s Editions and Rentable contracts is one of the most exciting and least well understood features in the Decent protocol. It can have significant implications across both NFTs & DeFi (anyone’s mind wander to fixed exchange rates??) We’ll be publishing an additional blog to highlight all its potential implementations across NFTs and DeFi_.
* * *
**Thanks for reading! While you’re here, you might want to check out another post I wrote in March 2022: [What Lies Beyond Patronage? Crypto’s Role in the Creator Economy](https://mirror.xyz/durbin.eth/EH7FaX8YW9gCY9gCf9o81Pm6x86Us3pp5XWYAxCwc7k).** In many ways, today’s post is an extension of this prior one. I believe the 1K True Fans thesis is badly misunderstood. These posts are to (hopefully) help creators create the best outcomes for themselves.
**Reality of 1K True Fans:**
> Let’s take music as an example. The average person can only name [10 to 20 artists](https://www.digitalmusicnews.com/2013/02/19/fan/#:~:text=%E2%80%9CThe%20average%20person%20knows%20between,to%2020%20artists%2C%20that's%20it.), that’s it. More artists than ever are [reaching 1M streams](https://loudandclear.byspotify.com/) and [old songs are remaining popular](https://www.theatlantic.com/ideas/archive/2022/01/old-music-killing-new-music/621339/) longer than ever. Therefore, competition for spots 1-20 in fans’ mindshare has increased as top artists are effectively retaining fans, and the long tail is acquiring new fans at an unprecedented rate. Visualize this as a consolidation of preferences in spots 1-10 and fragmentation across spots 10-20. If an artist slots anywhere into places 1-20, we can assume that they are safely in the red area of the chart above.>>**This is where the attention economy piece comes into play: each fan only has so much time to allocate to streaming music. Getting into spots 1-20 is structurally zero-sum. To retain mindshare, an artist has to displace another; to displace another, a fan has to stream that artist instead of another. Fans have an unlimited quantity of songs for essentially zero marginal cost (fixed fee subscription priced well below consumption); therefore, time ends up dictating quantity. For each fan, time is zero-sum, which means composing fan bases is cannibalistic among creators.**

Check Eligibility: A Roadmap to Navigate NFTs in 2023

 Usually watermarked images are a real non-starter, but, in a discussion about property rights, it feels more than appropriate. Sure, I could have found this cartoon in its original source, right-click saved, and spread the meme. The author might be happy to receive the additional distribution, but - the fact that this image was watermarked - really makes it quite clear the original publisher actually established intellectual property around this work to be compensated for usage.
Okay, time to talk about NFTs.
### **What are rentables?**
#### Rentable NFTs enable someone to use someone else’s NFT for a fixed period of time.
For example, let’s say I really wanted to go to the **[Bored Ape Yacht Club’s NFT NYC event](https://apefest.com/)** last summer. A BAYC or Mutant Ape (MAYC) NFT was required for entry, so, unfortunately, as a non-Ape owner, I am really out of luck. I could try to buy one, but I’m not really sure how I feel about BAYC’s as an investment, and I certainly don’t value entry to the event at >$100K. However, I’d pay a couple hundred bucks for single day access to see Lil Wayne, Snoop Dogg & Eminem perform. Probably half eligible NFT holders did not attend the event (venue capacity of 20K + 30K eligible holders). **Any one of those that did not attend could have rented their NFT to me, so that I could claim a ticket, and they could earn a few hundred bucks just for being a collector.**
The collector is better off because, at present, Ape Fest generates zero utility value; I am better off because I value the experience at least as much as I paid to rent the _ticket_; and the venue and all the event vendors are better off because their profits are directly correlated with event attendance. This is just one example to set the stage, but you can see how rentable NFTs begin to open new frontiers of pareto efficiency. _This is a very big deal_.
Decent’s Rentable NFTs use **[EIP 4907](https://eips.ethereum.org/EIPS/eip-4907)**. The base mechanic is really simple: the contract contains a `user` role in addition to the standard `owner` role. The user can be assigned to an address that is not the owner for a fixed period of time; after which, the role is automatically revoked. For those deep in the EIP game, 4907 is very similar to the proposal for subscription NFTs, **[EIP 5643](https://eips.ethereum.org/EIPS/eip-5643)**, except `isRenewable` is always false.
The key technical aspect to understand with rentables is that the NFT is _always_ owned by the original collector. If you make your NFT available to rent, even when someone is actively renting your NFT, _you still own it and it will still appear in your wallet_. It does not affect ownership of an NFT so can thereby be considered secure.
**Why should I really care?**-----------------------------
Rentable NFTs are bigger than Ape Fest tickets, much bigger. **If you subscribe to the idea NFTs are meant to be digital property rights, all NFTs should be rentable**. _All NFTs should be rentable if we want them to represent digital property rights for three tightly related reasons:_
### **1) Property rights exist to create investment efficiency**
Property rights facilitate two things: allocative efficiency and investment efficiency. Allocative efficiency means every good ends up in the hands of the person that values it most. Pure speculative NFT trading can still yield optimal allocative efficiency (in theory…). Investment efficiency means each asset ends up in the hands of the person who can grow its value most. Because the only way to capture value from investment into an NFT is to turn around and sell that NFT, there is very little way to measure investment efficiency and very little incentive to invest time, energy, or capital into anything.
A high performance economy makes smart trade-offs between investment and allocative efficiency (**[Harberger taxes](https://medium.com/@simondlr/what-is-harberger-tax-where-does-the-blockchain-fit-in-1329046922c6)** are a good thought experiment here). _The current state of NFTs is all allocative at the expense of investment - this is absolutely not the best trade-off._ It disproportionately accrues value to those that are already wealthy, leads to exceptionally low utilization rates of the assets themselves, and cripples socio-economic mobility.
Some of you will disagree with this take arguing the next secondary sale is a sufficient value capture event. In the case of art, this is true. In almost every other case, it is not. **NFTs are bigger than art sales**. **They will never reach their potential under the current market structure.**
### **2) Property rights establish ownership over assets. Assets are valued based on their future cash flows**
**Rentable NFTs are a big deal because they enable property owners to earn on the labor they invest into their holdings.**
Virtually every asset is valued as the net present value of its future cash flows. Analysts use discounted cash flow models (**[DCFs](https://www.investopedia.com/terms/d/dcf.asp)**) to forecast a company’s, a building’s, a plot of land’s, a vaccine’s revenue potential over the next, typically, five to ten years. Without going into too much detail into the valuation methodology, the important point is that almost every asset is valued by how much money someone can make holding it.
The future cash flows of _every_ NFT is $0 (barring NFT lending protocols - admittedly, being hyperbolic here to emphasize a mostly true point). **Why would anyone meaningfully invest into an asset that would trade for $0?** I think the answer for NFTs to date is people would actually pay to expend labor on the communities they’re of which they’re apart. That’s totally fine, BUT it’s also insufficient for NFTs to realize their potential.
If we want NFTs to represent and be treated as real assets, they need to generate cash flows. (if we don’t, also fine, but then people are holding property rights to individual enjoyment which requires zero formal rights and can be found in all sorts of non-financial places…).
### **3) Property rights foster inclusive institutions**
Rentables reinforce property rights by making ownership valuable. A landlord buys a building for the purpose of renting the units. While technically property rights can exist over goods with no economic value, we certainly care more about who owns something when that thing generates revenue. _Strong socio-economic regimes are built on strong property rights._
This isn’t a little “oh that’s cool” thing, this is a **[why nations fail](https://en.wikipedia.org/wiki/Why_Nations_Fail#:~:text=Why%20Nations%20Fail%3A%20The%20Origins,Robinson.)** level thing. As we “speedrun the history of finance” (ty **[Bankless](https://www.bankless.com/)**), **transcribing property rights on-chain is arguably the most important step for digital-native economies to flourish.** As Acemoglu and Robinson observe in their seminal macro-economic paper, the fundamental difference in prosperity between nations is the ability to foster inclusive institutions. _Picture North & South Korea or border cities Nogales (Sonora, Mexico) and Nogales (Arizona, USA): both have virtually identical resources with genuinely opposite levels of prosperity._
**Of the statements below, which one sounds more like the current state of NFTs?**
1._“\[NFTs\] protect the property rights of wide sections of society (not just the elite), they do not allow unjustified alienation of property, and they allow all citizens to participate in economic relations in order to make a profit” - [source](https://en.wikipedia.org/wiki/Why_Nations_Fail#:~:text=Why%20Nations%20Fail%3A%20The%20Origins,Robinson.)_2._“\[NFTs\] exclude large segments of the population from the distribution of income from their own activities. They prevent everyone except the elite from benefiting from participation in economic relations, who, on the contrary, are allowed to even alienate the property of those who do not belong to the elite.” - [source](https://en.wikipedia.org/wiki/Why_Nations_Fail#:~:text=Why%20Nations%20Fail%3A%20The%20Origins,Robinson.)_
If you picked option 2, you believe the current state of NFTs is one of extractive institutions. Of the examples above, North Korea and Nogales Mexico are the result of extractive institutions.
Rentables promise statement 1, inclusive institutions, by enabling economic prosperity without liquidation. If the only way to capture a value’s asset is to sell it, the likely outcome is vast economic inequality where the rich get perpetually richer. As the inequality widens, the future ability to implement extractive institutions increases.
**Some example implementations**--------------------------------
Zooming out to the scope of property rights and their role in societies is important in understanding the scope of what we are trying to accomplish with web3. However, it can be really abstract, so I’ll wrap up with some concrete examples.
First, a prediction. **I think rentables will usher in a new era of NFTs where we strictly refer to them as the utility they provide.** For example, if you set up a subscription with an NFT, it will just be called a subscription and no one will ever know about the NFT. We believe the market for “NFT-facilitated activities where you don’t know about the NFT” is much larger than the market for NFT trading.
Some immediately applicable areas for rentables:
1.**Access:** if an NFT’s utility predicated on token-gating or tickets to events, it should be rentable. See the Ape Fest example above. There’s tons of deadweight loss here rentables clean out.2.**Delegated Claiming for Airdrops:** crypto is a dangerous place - click on a bad link and, poof, wallet is drained. Accidentally send your NFT to the wrong place, you’re out of luck. Airdrops should recognize the `user` role and NFT holders should be able to rent their NFT to a separate hot wallet to claim the airdrop. This protects users if the link is malicious and mitigates the need to ever transfer NFTs out of a hardware wallet.3.**Incentive aligned creator royalties**: this isn’t necessarily a product just so much as a plausible solution to a hot button debate. _All NFTs could have zero creator royalties on sales but a 10% royalty on rentals._ In theory, rentals will only occur if the community - led by the creator - is still creating value. This would prevent creators from ever profiting off death-spirals and disincentivize rugs.4.**NFTs x DeFi:** cash flow sources for NFTs exist in DeFi: e.g., NFTfi, BendDAO, Uni v3 LP positions. NFTs either in pools or denoting LP positions should be rentable. A lot more to dive into here but probably warrants a separate post5.**Web3 gaming:** play-to-earn. Level-up: rent your powers. Not much of a gamer tbh, but I think this is the best, non-ponzi version of play-to-earn. Games are pretty good instantiations of digital economies. As shown above, ability to earn on property is fundamental to a strong economy so overall this seems to directionally be the right idea for a lot of games.6.**On-chain subscriptions:** as mentioned above, EIP 4907 and the actual subscription EIP, 5643 are relatively similar. With a little work, rentables could be tweaked into on-chain subscriptions. We’ll see a lot more of these as companies look to monetize their protocols or open source software with middleware applications.
* * *
That’s it for now! As you can tell, at [Decent](http://decent.xyz/), we think rentables are a much larger paradigm shift than any one application. We have a few ideas as to how apps can leverage rentables short-term but are even more excited by the long term implications of rentables.
If you have any ideas as to how to use rentables in your next project, we’d love to build with you! Reach out to me [@cdurbinxyz](https://twitter.com/cdurbinxyz) or our team [@decentxyz](https://twitter.com/decentxyz).

Rentable NFTs



Based NFTs enables users to purchase NFTs on Base using any token on any chain. Users do not need to worry about bridging tokens over to Base as a pre-requisite for transacting on the network. Based NFTs is equipped with Decent's Box product, which enables cross-chain payments at the point-of-sale. The Box also aggregates secondary listings so listed NFTs never hit a sold out state; users are simply presented the best available ask price on secondary markets.

The goal of Based NFTs is to make it as easy as possible for existing crypto users to start transacting on Base. This site meets users at their point of liquidity to mitigate the cold start problem of launching a new network.
Based NFTs also provides analytics on each collection and overall NFT collecting activity on Base. This site's focuses on analytics to further ease any hesitancy from new users about collecting on a new chain: if you know what you are collecting, whether other people are collecting it, and it's easy to do so -- you're likely to collect.

**[View Site](https://basednfts.co)**

Based NFTs

Joined OP Radio with one of my co-founders, Will Collier, to share Decent's origin story, product evolution - road to The Box, and what the future has in store for Decent.
**[Listen on Spotify](https://www.fastcompany.com/90911418/gen-z-workers-dont-love-their-jobs-so-theyre-changing-work-culture?utm_source=facebook&utm_medium=social)**
**[Listen on YouTube](https://www.youtube.com/watch?v=Lo3jBUZufnw)**

OP Radio

Edited by **[Jackie Berardo](https://twitter.com/jackieberardo)**
_This is the first of a series of posts evaluating how web3 can advance the creator economy. This post sets the problem by highlighting a novel interpretation of Kevin Kelly’s 1,000 True Fans._

**INTRODUCTION & MOTIVATION**

How can an independent creator build a vibrant career? This series of posts will explore the well-documented and romanticized pursuit of individual creation, without defaulting to creator monetization as the keystone problem-to-be-solved. Past iterations of this problem statement have considered this a one-sided question of patronage or exchange: what might a creator offer an audience for maximum profits?

This series evaluates creator monetization as a question of incentive alignment: how might a creator and an audience share in value jointly created? In creative endeavors, the benevolence and enthusiasm of each party persists with or without monetization. If we consider success, capital, and fame to be assets jointly created by both creator and audience, what new models of value-capture and creation might we consider?

Patronage is a straightforward problem to solve; however, fan acquisition and retention are more challenging and most important for creators. Applications should optimize for the amount of money each fan can generate on behalf of creators rather than price discrimination of fans.

The first blog of this series demonstrates this theory by establishing that Kevin Kelly’s **[1,000 True Fans](https://kupdf.net/download/1000-true-fans-kevin-kellydocx_5980e4addc0d60d3782bb17d_pdf)** (1ktF - 2016 revised version linked) thesis is predicated on relative fame more so than deep monetization of a loyal fanbase. Building from this distinction, subsequent posts will depict how Li Jin’s **[100 True Fans](https://li-jin.co/2020/02/19/100-true-fans/)** is a positive step and, ultimately, propose how web3 applications can dramatically improve the financial conditions of independent creators.

Web3 applications leverage token economics and are built on decentralized blockchains. Though it feels like the **[creator economy](https://signalfire.com/blog/creator-economy/)** goes through a **[rebrand](https://future.a16z.com/passion-economy/)** every few years; a recent iteration, the **[attention economy](https://econreview.berkeley.edu/paying-attention-the-attention-economy/)**, has interesting and relevant ramifications. The attention economy is the concept that quantity consumed is limited by time, not price. In a world where time is increasingly limited, it’s hard to see this existing dynamic as optimal for creators _or_ their audiences (more on this to come).

Let’s start here: the average earnings per creator on **[Patreon](https://www.patreon.com/)** is only **[~$120 / month](https://influencermarketinghub.com/patreon-stats/#toc-4)** and natively born stars are rare. Is patronage really the answer and if not, then what?

**1,000 TRUE FANS IS A BATTLE FOR ATTENTION, NOT A MONETIZATION STRATEGY**
In 2008, Kevin Kelly’s 1kTF theory predicted the “infinite riches of hidden niches.” The core premise was that a creator can earn a sustainable income by identifying their 1,000 biggest fans and charging them $100 per year. This was moderately contrarian as it instructed creators to forgo “blockbuster hits” and pervasive fame in favor of a strategic base of true fans willing to purchase anything a creator produces. The thesis was prescient as it assumed creators would be able to circumvent traditional distribution platforms and gatekeepers to monetize their work directly on internet networks.


The core idea is that a creator may be able to derive _more_ value from 1,000 True Fans than even 100,000 average fans. Previous analyses of 1kTF laude the idea of deep monetization of a small-but-loyal fanbase (**[one example](https://joanwestenberg.medium.com/nfts-artists-and-the-1-000-true-fans-theory-8bdae91d08d9)**, **[another with pictures](https://www.youtube.com/watch?v=OnVtWOSIICQ)**). The result of this has been an emergence of patronage-based solutions, but what if we draw a different conclusion?

To get to a different destination, let’s start at the beginning. Kevin Kelly makes a couple of interesting, and often overlooked, observations:
1.**Excerpt:**_The actual number may vary depending on the media. Maybe it is 500 True Fans for a painter and 5,000 True Fans for a videomaker. The numbers must surely vary around the world. But in fact, the actual number is not critical, because it cannot be determined except by attempting it. Once you are in that mode, the actual number will become evident. That will be the True Fan number that works for you. My formula may be off by an order of magnitude, but even so, it’s far less than a million._**Takeaway:** 1kTF != 1kTF. 1,000 is a nice round number on which to anchor. The back-of-the-envelope math checks out. However, really, the takeaway is just that creators do not need a million fans. Given this was written in 2008 and the creator economy has conservatively 10x’d since (just look at **[YouTube’s revenue growth](https://www.businessofapps.com/data/youtube-statistics/)**), let’s assume Kevin would have written 10 million today - only specifying for the sake of illustrative scale.2.**Excerpt:**_But the point of this strategy is to say that you don’t need a hit to survive. You don’t need to aim for the short head of best-sellerdom to escape the long tail. There is a place in the middle, that is not very far away from the tail, where you can at least make a living. That mid-way haven is called 1,000 True Fans. It is an alternate destination for an artist to aim for._**Takeaway:** Striving for stardom might not be necessary, but your relative position in the long tail of aspiring creators still very much matters. 3.**Excerpt:**_But the long tail is a decidedly mixed blessing for creators. Individual artists, producers, inventors, and makers are overlooked in the equation. The long tail does not raise the sales of creators much, but it does add massive competition and endless downward pressure on prices. Unless artists become a large aggregator of other artists’ works, the long tail offers no path out of the quiet doldrums of minuscule sales._**Takeaway:** Democratization of audiences commoditizes creators and puts significant downward pressure on prices. Fans derive a scarcity value belonging to each creator’s community, but most communities are substitutes.4.**Excerpt:**_A more important caution: Not every artist is cut out, or willing, to be a nurturer of fans. Many musicians just want to play music, or photographers just want to shoot, or painters paint, and they temperamentally don’t want to deal with fans, especially True Fans. For these creatives, they need a mediator, a manager, a handler, an agent, a galleryist — someone to manage their fans. Nonetheless, they can still aim for the same middle destination of 1,000 True Fans. They are just working in a duet._**Takeaway:** The pursuit of 1kTF takes work. That work comes at the expense of time spent on artists’ crafts.
The points above imply a significantly different problem than ‘ease’ of monetization. Rather than the gross number of ‘fans’ or ‘true fans’, what matters is a creator’s position in the long tail. Kevin Kelly states as much in excerpts #1 + #2.


To understand this distinction and what number of fans is enough, let’s double-click into #2. In practice, the theory of 1kTF is typically some retort to a zero-sum pursuit of celebrity; a creator only needs 1,000 fans for a comfortable income, and anyone can get 1,000 fans even if only a small number can have 1M. However, here, Kevin Kelly is actually saying that what matters is your relative fame:
![distribution of creators in Kevin Kelly's 1kTF](https://substack-post-media.s3.amazonaws.com/public/images/636bbb72-bdd3-431b-822c-b23af9760ef3_419x257.png"distribution of creators in Kevin Kelly's 1kTF")**

The diagram above is somewhat misleading (see #1); the point is really that **a creator cannot afford to be in the long-tail of semi-success**, or in this case, the orange. In the red, creators can sell a small number of products to a large number of fans or a large number of products to a small number of fans, but it’s unlikely creators sell enough at all should they slip into the orange. Therefore, **what matters is how a creator’s audience ranks among the fan bases of other creators and where a creator sits in the hierarchy of each fan’s preferences.**
The chart above characterizes the distribution of creators’ fan bases but applies to the consumption patterns of individual fans on the following curve:
![proposed distribution of creators for an individual fan](https://substack-post-media.s3.amazonaws.com/public/images/3254f2be-10c6-4068-a87a-319fe477b4f4_431x267.png"proposed distribution of creators for an individual fan")

Let’s take music as an example. The average person can only name **[10 to 20 artists](https://www.digitalmusicnews.com/2013/02/19/fan/#:~:text=%E2%80%9CThe%20average%20person%20knows%20between,to%2020%20artists%2C%20that's%20it.)**, that’s it. More artists than ever are **[reaching 1M streams](https://loudandclear.byspotify.com/)** and **[old songs are remaining popular](https://www.theatlantic.com/ideas/archive/2022/01/old-music-killing-new-music/621339/)** longer than ever. Therefore, competition for spots 1-20 in fans’ mindshare has increased as top artists are effectively retaining fans, and the long tail is acquiring new fans at an unprecedented rate. Visualize this as a consolidation of preferences in spots 1-10 and fragmentation across spots 10-20. If an artist slots anywhere into places 1-20, we can assume that they are safely in the red area of the chart above.
**This is where the attention economy piece comes into play: each fan only has so much time to allocate to streaming music. Getting into spots 1-20 is structurally zero-sum. To retain mindshare, an artist has to displace another; to displace another, a fan has to stream that artist instead of another. Fans have an unlimited quantity of songs for essentially zero marginal cost (fixed fee subscription priced well below consumption); therefore, time ends up dictating quantity. For each fan, time is zero-sum, which means composing fan bases is cannibalistic among creators.**


Artists cannot afford to lose fans _and_ have to acquire new fans at the expense of other artists to remain above the long tail. Even as new fans are onboarded to DSPs (digital streaming platforms - e.g., Spotify), artists must compete in the same manner for each additional fan.


This competition is fierce due to excerpts #3 and #4 of Kevin Kelly’s. The long tail is generally commoditized; there is no cost for fans to switch from one artist to another, and no benefit to fans to stick with any one artist other than intrinsic loyalty or social status.


To rise above the substitutes, quality matters. A creator has to be demonstrably better than their peers to capture and retain a fan. Excerpt #4 highlights the opportunity cost of curating 1kTF; it takes work and that work represents time that a creator is not committing to their craft when other creators are. This ultimately puts creators pursuing 1kTF at a competitive disadvantage to attract and retain fans.


**IMPLICATIONS IF THIS IS TRUE**
The anecdote **[of Robert Rich](https://kk.org/thetechnium/the-reality-of/)** captures the analysis above, likening the struggle of retaining and attracting fans to Sisyphus.


_In reality, the life of a “microcelebrity” resembles more the fate of Sisyphus, whose boulder rolls back down the mountain every time he reaches the summit. After every tour, I feel exhausted but empowered by the thought that a few people really care a lot about this music. Yet, a few months later all is quiet again and CD/download sales slow down again. If I take the time to concentrate for a year on what I hope to be a breakthrough album, that time of silence widens out into a gaping hole and interest seems to fade. When I finally do release something that I feel to be a bold new direction, I manage only to sell it to the same 1,000 True Fans. The boulder sits back at the bottom of the mountain and it’s time to start rolling it up again._
Robert’s experience effectively positions attention as the _a priori_ challenge to monetization. Creator economy solutions should target the root problem, not a symptom.
Applications touting 1kTF should be entirely focused on incentivizing fans to work on behalf of creators. **Creators should not ask how much money they can extract from each fan, but rather how much each fan can generate on their behalf.** This way, the theoretical boulder remains at the top of the hill.


**NEXT STEPS**
The next post in this series will cover Li Jin’s [100 True Fans](https://li-jin.co/2020/02/19/100-true-fans/). Her “value model” represents the power of moving beyond patronage, incentivizing fans to act in their own best interests to maximize value for creators. Li Jin introduces switching costs by rewarding those atop [information cascades](https://en.wikipedia.org/wiki/Information_cascade#:~:text=An%20Information%20cascade%20or%20informational,but%20distinct%20from%20herd%20behavior.). Future posts will highlight how this may be profitable with the right mechanisms (check out [Bonding Curves in Curation Markets](https://medium.com/@simondlr/tokens-2-0-curved-token-bonding-in-curation-markets-1764a2e0bee5) or my [senior thesis](https://dataspace.princeton.edu/handle/88435/dsp013r074x802) for a sneak preview). Ultimately, this series will synthesize recommendations for the creator economy into a logical evolution for NFTs, moving from patronage tools to an identity layer within incentive-aligned DeFi applications.


Thanks for reading! If you have any thoughts or suggestions for future posts, please feel free to reach out to me on [Twitter](https://twitter.com/cdurbinxyz) or in [Decent’s Discord](https://discord.gg/xNzAJ6TAK7).

What Lies Beyond Patronage?


Presenting my thoughts at Princeton's 2023 DeCenter Spring Conference as to why NFTs are and are not valuable and what where we can expect the space to evolve.
Delete the metadata.
**[Watch the panel discussion](https://vimeo.com/818826588?embedded=true&source=vimeo_logo&owner=2065450)**

Princeton DeCenter Case Study on NFTs

#### Link to model in Google Sheets: **[Bonding Curve Simulations](https://docs.google.com/spreadsheets/d/1SiLS9p0PBfYiYUnBGwUfN4aYosbMiOAT2ARToBS3F8g/edit#gid=1840172301)**#### Link to Github for Excel download: **[Bonding Curve Model Github](https://github.com/cdsiren/Bonding-Curve-Models)**

Bonding curves enable the price of a token to change with the quantity in circulation. They are used throughout DeFi because they uniquely enable both dynamic pricing and automatic liquidity. The concept for bonding curves were first published in 2016 by Bancor and Simon de la Rouviere. In 2017, Alan Lu published a **[Medium post](https://blog.gnosis.pm/building-a-decentralized-exchange-in-ethereum-eea4e7452d6e)** introducing the first constant product (x * y = k) bonding curve design, which has since been made famous by Uniswap and other DEX's that use this style of bonding curves to facilitate swaps.

Bonding curves have become foundational in DeFi but have struggled to find their footing with NFTs. Likely reasons include:
1. Limited ability for speculation. Bonding curves effectively preset a rate of appreciation. NFTs are better suited for order books that simultaneously enable buy-and-hold behavior and rapid floor price growth.2. Trapped liquidity. Bonding curves provide automatic liquidity by retaining sale volume in the contract so that collectors can sell back to the curve. DeFi has effectively incentivized external liquidity providers via trading fees to solve this problem; however, only **[Sudoswap](https://sudoswap.xyz/)** has created a somewhat comparable model in NFTs.3. Difficult to understand. NFTs typically skew towards more novice crypto users. An order book is intuitive, bonding curves are not. People trade are more likely to transact with things they understand.

Despite these challenges, bonding curves solve for a few key pain points with NFTs as well:
1. Ability to exit. The guarantee to get some, if not all, of your money back solves for the key painpoint for collectors - losing all their money (lol).2. Better price discovery. Most initial prices for NFTs are set randomly and create inefficient markets (gas price auctions, massive pops on secondaries, significant oversupply are all indications of a bad initial sale prices). Bonding curves effectively enable collectors to set an equilibrium price by buying to the point of maximum demand.

You can read more about the merits of bonding curves in Decent's post launching our bonding curve mechanism, Crescendo: **[Introducing Crescendo](https://decent.mirror.xyz/vO6w0X-fRibvaPSrJU1UBdCnC_kNps6jOCK3kbWnyTk)**.
To better understand decision making for creators and collectors with bonding curves, I've created this model: **[Bonding Curve Simulations](https://docs.google.com/spreadsheets/d/1SiLS9p0PBfYiYUnBGwUfN4aYosbMiOAT2ARToBS3F8g/edit#gid=1840172301)**.

#### Based on this model, we can make three surprising conclusions to better inform future designs for NFT bonding curves:
1. Traditional research really likes Sigmoid curves to mimic to maximize momentum trading, but we found a piecewise linear or straight linear curve works best for realistic applications + collector preferences. For the uninitiated, this is a **[good article](https://medium.com/linum-labs/intro-to-bonding-curves-and-shapes-bf326bc4e11a)** on curve shapes.2. (most important) Because most creators take a 10%+ royalty on buys & collectors have (mostly) 15%+ ROI hurdles, people sell much less than you'd think. This opens up profitable LP strategies for those willing to bet on low redemptions. This is BIG because solves for trapped liquidity!!3. (most surprising) Creators can actually increase their overall EV by sharing rights to claim a significant % of the liquidity balance with collectors! This strategy sufficiently boosts collector EV such that the curve does way more GMV making all parties better off.

Overall, I'm a big fan of bonding curves for NFTs. I think there is significant room for improvement in the mechanism designs, which builders should see as an exciting opportunity. The biggest risk is that bonding curves will always remain too complicated for NFTs most important use case, which is to onboard more people to crypto.

Charlie Work

Charlie
Work