It Pays to Participate
Shifting internet participation in activities you would be doing ordinarily away from web2 into web3 and specifically the crypto ecosystem is an absolute no brainer. There is more of a community vibe, obtainable governance and transparency which is difficult to enjoy under a web2 framework. It turns out Christmas does come around more than once a year!
“ The days of simply being a user on the internet in our view is dead and buried RIP 🪦. Instead, be a user but also vote, enjoy transparency and receive rewards which sometimes have monetary value. “
The decentralised exchange dYdX is using NFTs to further develop its community and brand. We’re gonna take a quick dive into how this serves as a perfect case study to illustrate why it pays to participate in a web3 era.
Before crypto, benefiting from the value generated within internet communities/platforms was pretty much impossible unless you were the actual creator selling something or the owner of the platform itself. In 2022, we are now in a completely different reality. It’s pretty customary for those engaged in community to indirectly and mostly passively benefit in the value generated by the community they are participants and contributors to. In other words, engaged users of internet products tend to structurally benefit from growth and development through mechanisms that capture and redirect this value - this didn’t exist before. Let me walk you through a case study.
Hedgies by dYdX - Case Study
User-Owner Status
A few of us in the Nizzynomics crew are users of the decentralised exchange dYdX which provides crypto perp-trading capabilities - more on this here. Companies built in the Web3/blockchain-based internet era more generally tend to have greater open dialogue with their communities by design. As well as old school incentive structures, due to the inherent nature of web3, users are able to stake ownership of the thing they are using. This is powerful and a game changer. The result is a unique user journey as in addition to exchanging early adoption for incentives and a great product, you hold the potential to benefit from the value generated by the broader community. Let me explain.
How Eligibility Works
Keeping in line with the dYdX example, as mentioned above a few of us are users of the platform (some later than others) and are plugged into the community here as there are always tons of fun & informative things going on. Beyond that, there are lots of active users plugged in to learn and contribute. Recently, dYdX announced that there would be an opportunity for active and engaged users (i.e. those who vote on decisions as well as use the platform) to claim a free NFT before the rest of the internet got an opportunity to. The NFT collection is part of dYdX’s next stage of branding and community enhancements. Prior to now, there was no way users would structurally be aligned to this process of growth such that they’d benefit from the value generated. Through the mere participation in healthy community around a top notch product, not only do we get first dibs on a new NFT collection but we are also aligned with the value created during this transition and beyond.
Why does the NFT have value if it was free? How do you realise this:
Nothing in life is truly free. To be eligible for first dibs on these kinds of drops you would need to be recognised as a recently active participant of the platform or a voter on key decisions. Data on the blockchain proves this. Nevertheless, value here is determined by communities across 3 landscapes:
dYdX product & user community
crypto community
internet community
The more native the community is to you, the more passive the participation feels. For example, we use the dYdX product because it provides a desired service and is undoubtedly best-in-class. We qualified as active users but we also engage in community by voting on decisions so qualified in that sense too.
Therefore, all we had to do was follow the claim procedure which literally took 1 minute. The rest of the internet got a chance to claim the NFTs at a later point which we can still class as passive but was probably 1000x more competitive, more stressful and had much lower odds of success. All claimants would have had to pay small claim costs in the form of gas fees (we’re talking tens of dollars) which is how things move around the ethereum blockchain.
The floor price for this NFT collection a few days after all claims were made was 1.5E and to those of you who reject the idea of internet money, that’s equivalent to around $4,500. Some of us were made offers by bots i.e. someone out there saw this hot collection and wrote some code to try and buy some hedgies at discount to probably sell at floor price or higher for a quick profit. These were real offers which we could easily accept, convert the received crypto into GBP and stare at the cash in the bank account ready to spend.
Anyways, I don't think any of us are selling, after all we are users of the product and look forward to participating in further product developments and keeping aligned with future growth. There are tax implications to consider when you sell NFTs - check out the piece below for some deep thoughts on cryptotax. Cryptoasset prices can be volatile so that’s another consideration, it could make sense for someone else to accept incoming offers and take money off the table - in some instances this could be life changing.
Unpacking “Value”
A skeptic’s question would be:
“ why is an internet image worth anything at all? “
Well, the value of something is simply based on the level at which a buyer and seller are happy to exchange. Usually, a buyer and seller will have their own reasons for choosing a certain level.
Fundamental reasons: owning a Hedgie NFT affords certain benefits on the dYdX platform
Utility reasons: a case of needing x to do y
Simply yolo & vibes: this thing looks cool and I want it to be my profile pic
There are never ending debates about which of these drivers are theoretically the most acceptable and important in a given time period, but all said and done the reality is that transactions are being structured and executed regardless of the debate - internet money and assets are changing hands frequently in notable size which means it’s Christmas for someone somewhere on most days.
Ultimately, whether at a micro or macro level, the community dictates whether something is valuable or not. As alluded to earlier, the reality of the internet now as expressed in the crypto-ecosystem is that users are able to stake ownership of the thing they are using with active governance and potentially participate in the value generated by the product’s community and future development roadmap. In this case, claimants can decide to sell or hold their NFT. And of course, if they want to they can buy more Hedgies.
Another cool element is that while users are now aligned to value, the platform itself takes no value from the drop explicitly. Instead, it facilitates future product development, creates awareness so that more users can migrate and use a great product and the NFT artists (https://twitter.com/anna_paschenko & https://foundation.app/@kajdax ) they collaborated with earn a 2.5% royalty from all future transactions which is honestly so dope! Again, this is one of the benefits of the new internet age, artists from all specialisms now have a mechanism to be rewarded for resales of their work on the internet in perpetuity.
Takeaways
This illustration is focused on a finance based product which not everyone is a deep participant in but the principles hold true across sectors. It pays to participate in the community of products you genuinely use. Prior to web3 you may have had to acquire equity to achieve a similar alignment whereas in the current reality all it requires is engagement which naturally occurs by virtue of being a user.
It goes without saying but if you haven’t switched your crypto trading activities from centralised platforms over to dYdX, erm what are you waiting for? Chop chop.
Catch you later,
Peace!