Newsletter: Tokens and the Future of Web3 User Ownership

Welcome to Issue 117: Week's Highlight on web3 <> ownership, ChatGPT taking over the internet, TGC Crypto on Web3 Messaging Landscape, Paul Krugman spicy take on Blockchain, Stripe & Uniswap Mainstream launches, and more.

Welcome to Issue 117:

▹ Week's Highlight
▹ ChatGPT taking over the internet
▹ TGC Crypto on Web3 Messaging Landscape
▹ Paul Krugman spicy take on Blockchain
▹ Stripe & Uniswap Mainstream launches
▹ ... much more

--- Let's get into it!

Week's Highlight

The Next Wave: Tokens and the Future of Web3 User Ownership

Li Jin and Jesse Walden published a piece this week taking a "long view" of the web3 and user ownership landscape in light of the FTX debacle. In their view, FTX is an example of why we need blockchains and autonomous smart contracts rather than trusting traditional corporate and financial structures.

On the other hand, user ownership is made possible by tokens --- akin to packets of value that are encoded on blockchains. "To be clear," they clarify, "when we say "tokens" we don't mean speculative meme coins --- we are talking about a radical innovation in ownership on the internet."

There is a lot of work to do to fully realize the potential of web3 as the next iteration of the internet that turns users into owners. Building decentralized systems that empower users is challenging, and the playbook is still being written.

So much so, in fact, that Vitalik came out this week with a wide-ranging critique of governance tokens:

The notion of "governance rights" as a narrative for why a token should be valuable is pathological. You're literally saying "I'm buying $X because later on someone might buy it from me and a bunch of other people to twist the protocol toward their special interests"

While there was pushback on the idea that "governance rights" as a narrative for token-value is completely bad (at Forefront, we'd disagree with Vitalik), it's obvious that Vitalik's point is rooted in some truth: user ownership and governance will not stop at token governance. We must further experiment with novel ways of improving the ownership experience so that it is valuable, but also useful.

TAKE NOTE
User ownership isn't a new idea, but it's definitely a new practice. We talk a lot in web3 about ownership of platforms and protocols, but we've only begun to scratch the surface of what that looks like in practice, who should actually be owners, and how that is valuable both financially and experientially. Our hope is that these experiments will become only more widespread in the near future.

What's Poppin'

The Dawn of Mediocre Computing. Released this past week, ChatGPT is a conversational AI model that makes it possible for the bot to answer followup questions, admit its mistakes, challenge incorrect premises, and reject inappropriate requests. It has taken the world by storm with its simplicity and power. According to Venkatesh Rao, ChatGPT has "done to the standard high-school essay what cameras did to photorealistic painting and pocket calculators did to basic arithmetic." He defines "Mediocre Computing" as computing that aims for parity with mediocre human performance in a realish domains where notions of excellence are ill-posed. While this essay series is yet to be completed, Venkatesh believes that crypto and AI are two sides of the same coin, and that combining them will lead to Mediocre Computing in its fullest extent. This future is exciting, although unclear, so we look forward to his remaining essays on the subject.

The Web3 Messaging Landscape. Gaby and Sophie of TCG Crypto have spent the last few months exploring the web3 messaging landscape. They believe the potential for web3 messaging extends beyond peer-to-peer chat. It's protocols talking to users, users talking back to protocols, and all forms of information exchange getting pushed on-chain. Messaging is not an end, but a means --- and that is the exciting part. This is not to say that traditional P2P messaging won't exist in web3 -- it almost certainly will. However, as platforms begin with this new functionality, user-protocol messaging will become a ubiquitous format as protocols will be just as important as actors in the ecosystem as humans are (this is arguably already the case). This fundamentally expands the conversation from "social media" in the web2 sense to a whole new world of interactions at our disposal in web3.

Blockchains, What Are They Good For? Paul Krugman wrote about blockchains, and it's exactly what you'd expect. "The original rationale for Bitcoin was that it would do away with the need for trust --- you wouldn't have to worry about banks making off with your money, or governments inflating away its value. In reality, however, banks rarely steal their customers' assets, while crypto institutions more easily succumb to the temptation, and extreme inflation that destroys money's value generally happens only amid political chaos." This isn't a very long read, but the talking points are what you'd expect from a crypto-hater who isn't meaningfully interacting with the ideas put forward by the technology. The conflation between CeFi and DeFi is especially worrisome, although expected, as the core value proposition of DeFi is ignored in light of the FTX crash and many other centralized companies stealing funds. In light of all of this, we have a responsibility as an industry to better educate folks on specific use-cases of crypto and differences between crypto-adjacent companies and the technology itself.

Web3's Wallet Opportunity. Recent events in mainstream crypto serve as yet another sobering reminder of the importance of self-custody. However, self-custody of assets is certainly not the route with the best UX today. Web3's Wallet Opportunity explores the history of wallets and what the future must hold to reach mainstream adoption. For example, Contract Accounts would allow for social recovery of wallets, gas optionality, and more. Additionally, reddit set a great example of frictionless infrastructure, where assets can be self-custodied and used on the blockchain, but most users don't need to know that unless they want to. Finally, wallets will need to be customizable: in Jan. 2022, MetaMask announced the developer release of its Snaps platform, which allows anyone to safely extend the capabilities of MetaMask to create customized wallet experiences. This is a great step forward for truly innovative wallet experiences.

Speaking of Mainstream Adoption... This week, Stripe announced a fiat-to-crypto onramp tooling. The onramp is a customizable widget that developers can embed directly into their DEX, NFT platform, wallet, or dApp. Stripe handles all the KYC, payments, fraud, and compliance, removing the need to integrate multiple third-party services. The tool is already being used by Audius, Magic Eden, and Argent, and will likely be quickly adopted by others in the coming months.

On the other hand, Uniswap has officially integrated NFT trading into their platform. The interface is much like Genie, the NFT aggregator that they acquired earlier this year, and the experience moving between ERC-20s and NFTs is seamless. Uniswap also announced gas rebates for users who try the platform in the coming weeks and an ETH airdrop for pase Genie users as well.

Nounish DAO Spectrum. The Nouns DAO model appears to be best applied when primarily anchored on a meme. For Nouns it is the ⌐◨-◨ (noggles) symbol. However, a symbol is not entirely necessary. Memes can be ideas, behaviors, styles, and more, as long as they are proliferated socially and symbolize some larger idea. According to Jacob, "This is an interesting construct because oftentimes the originator of the idea may be correct, but their application of the idea is incorrect. In the case that the DAO is created on the application of it, the DAO will likely fail. In the case it was created on the idea itself, then the DAO may continue to flourish on one of the multiple applications of the idea." For all the talk around Nouns DAOs and Nouns Builder this past week, this essay is a must-read on meme-crafting.

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What's on Signal

▹ Deep Dives - The Emerging Field of Digital Fashion
▹ NFTs - Uniswap NFT Marketplace
▹ Interview - Xcopy on Rightclicksave
▹ Proposal - Content Moderation Policy
▹ Drop - Rainbow Zorbs
▹ DeFi - Ankr & Helio Hacked For $20m
▹ Listen - Jacob from Zora on Nouns
▹ Techy - Ropsten Shutdown Dec 15/31
▹ Cool - Public Assembly Launch
▹ Thread - Punk6529 on SBF & FTX

◎ Check out Signal  for daily top web3 social headlines

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The information in this newsletter is not intended to constitute legal, financial or investment advice and should not be construed or relied upon as such. Any opinions reflected are the opinion of the author(s) of the newsletter only and not necessarily of Forefront. Please DYOR.