Newsletter: The Open Edition Edition

Welcome to issue 125: This week we cover the The Open Edition Season, a16z Crypto team "Regulate Web3 Apps, Not Protocols" Part III, Variants COO Shough.eth on Token Ownership, Leighton on DAOs <> Companies <> Protocols and more...

By Forefront - Jan 30, 2023

Welcome to issue 124:

▹ The Open Edition Season
▹ a16z Crypto team w/ Web3 DAO Dilemma
▹ Leighton on DAOs <> Companies <> Protocols
▹ Variants COO @shough.eth on Token Ownership
▹ @camiinthisthang Account Abstraction Guide
▹ Public Assembly feature on Zora Zine
▹ Mainstream news and more...

--- Let's get into it, plus don't forget to collect this edition.

Week’s Highlight

Folks... it's open edition season.

Open editions are NFT collections whose only scarcity limits are time (and maybe per-wallet mint limits). For example, I might create an open edition portrait that folks can mint for 1 week. This could be a free or paid mint. New UX improvements from Zora and Manifold's open edition creator and claim pages have made it insanely easy to launch an open edition project of your own.

Given how different this is from the scarcity-focus of the 10k PFP boom of 2021-22, there has been some discourse as to what this means for the ecosystem moving forward.

Some folks, like 33NFT, are against this trend. "Generally, I wouldn't recommend any artist to drop an open edition until their 1-of-1s have become unaffordable for most," 33 continued. "There should also be a good reason for the open edition. I'd much rather see a limited edition of 50, 100, or 1,000 if the artist so wishes. But I like to know what that number is."

On the other hand, it's clear that OEs have some clear advantages to sparking collector activity. Take Jack Butcher's new project, Checks. The project began as a cheap ($8) open edition, of which 16k+ editions were minted. Following the mint's close, Jack announced he would be creating a full project around this collection, complete with a burn mechanism that incentivizes holders to burn their tokens for more "rare" ones. The project has sparked millions of dollars in secondary volume and dozens of derivative projects.

Likewise, @Ness_Graphics 'M0N3Y PR1NT3R G0 BRRRRRR.' open edition just raised more than $2.2 million in an hour -- insane stuff.

It remains to be seen how open editions will impact an artist's larger collection of work in terms of both valuation and legitimacy, but one thing is clear: if the ecosystem is to continue to grow, scarcity mindset is only going to line OG collector's pockets, not create a welcoming environment for new collectors.

Take Note

Open edition season has arrived. While some artists are clearly having immense success, OEs are simply another tool in the toolbox. We're excited to continue to see more experimentation in this space.

What's Poppin'

Regulate Web3 Apps, Not Protocols: The Web3 DAO Dilemma. This week, a16z Crypto published part three of their "Regulate Web3 Apps, Not Protocols" series to complete the foundation of their framework and to address a significant loophole: DAOs. Web3 protocols can be designed to accrue value (fees, commissions, etc.) and be semi-autonomous. The DAO of a web3 protocol could be set up to profit from illicit uses of the protocol, and be incentivized to facilitate such illicit use. Ultimately, these characteristics enable bad actors to operate DAOs like businesses to circumvent app-based regulatory schemes (the exact issue in CFTC v. Ooki). But, applying app regulations to DAOs would destroy the utility of protocols. This piece discusses this dilemma and potential regulatory solutions, including a novel approach that protects the utility and potential opportunity of the DAO landscape.

Hybrid Ownership. Token design often fails to reward ownership to stakeholders in a way that aligns with how they uniquely provide value. This essay from shough.eth, the COO of Variant Fund, explores a hybrid token model that assigns different forms of ownership based on the value contributed by users, founders, and investors uniquely. He argues that users have to come and stay for the product. Ownership should be an enhancing part of their experience rather than the whole of it. A hybrid model is not the best model for bootstrapping new users because there is no expectation of outsized future profit, it does not excite the same type of greed. However, in the long run, a hybrid model is likely more sustainable and does a better job of keeping protocols governed and owned by their users.

Account Abstraction (AKA Smart Contract Wallets) for Everyone Else. Account abstraction is a tricky concept to understand, but Cami's piece makes it easy. Account abstraction, in general, is the ability to set the validity conditions of a transaction programmatically. Cami walks us through everything from a clear definition of account abstraction to its UX challenges and potential application-layer unlocks. With the rise of L2s on Ethereum, we can get fees down low enough to make blockchains usable, but the applications' UX needs to be more pleasant and robust. Over the next cycle, Cami foresees more teams will focus on account abstraction-enabled UX improvements and flows. Great piece for developing an understanding of the future of Ethereum.

Not Companies, Not DAOs But a Third More Secret Thing. We talk a lot about Forefront about what a "DAO" is and how various types of internet-native organizations may or may not be classified as a DAO. Oftentimes, mainstream thinking in the space speaks of models of companies that are being incorrectly applied to protocols. And more recently, the ill-defined term "DAO" is being incorrectly applied to crypto protocols with tokenized governance. According to the author of this piece, that is blatantly wrong. Calling a crypto protocol a "DAO" makes it sound like a human centric organization, much more similar to a company. It ignores the very things that make protocols revolutionary -- their ability to operate without humans according to immutable rules. DAOs have humans at the center, protocols have humans on the edges.

The Product is the Process: Prototyping Reality with Public Assembly. Public Assembly is a DAO born out of Zora that ships rigorously documented templates that encourage iteration and experimentation, in line with their core mantra, "build what's missing." The DAO was launched onchain using Nouns Builder, and its token is distributed through a perpetual auction mechanism. The team is constantly interrogating new and old ways of work, viewing participation in the DAO through the lens of a "punk label" (metalabel, anyone?) and trying to balance a fixed structure ("nounishness") that has some ability to be malleable. From its birth, the original group of PA contributors created their own squad, #FF89DE, that functions independently of the DAO, rather than being the DAO's official "core team." This, and many other experiments, make for a very rich experience throughout the PA ecosystem.

Latest on Mainstream...

First off, Porsche's NFT collection, launched just last week, looks to be a flop. The 7,500-edition collection, which pays homage to the brand's iconic 911 sports car, opened minting for allowlist holders at 9 a.m. ET on Monday. After the initial allowlist mint ended, the mint was released to the general public with an open-ended stop time. Collectors were allowed to mint up to three virtual 911 Porsches at 0.911 ETH each, roughly $1,490. Plenty of folks throughout the ecosystem criticized the project for its high price point and unwillingness to truly interact with the broader web3 community.

Second, Amazon is launching a digital assets enterprise, according to four sources familiar with the matter, who said that an NFT initiative is expected in the spring. Said to be among those entities are layer-1 blockchains, blockchain-based gaming startups and developers and digital asset exchanges. There's a focus on blockchain-based gaming and related NFT applications, two sources said. One example in the works, per one source: getting Amazon customers to play crypto games and claim free NFTs in the process.

Finally, with tight regulations already in place that helped insulate FTX Japan and its investors from heavy losses, Japan is working on policy and guidelines for stablecoins, NFTs and DAOs as it welcomes a crypto future, a welcome sign for the industry.

Signal Bites

▹ FF Library - The Future of Cryptocurrencies
▹ Read - Disambiguating Autonomy
▹ Opinion - Digital Innovation <> Crypto
▹ Update - Kevin Rose Hack Debrief
▹ Mainstream - Bright Moments x Samsung
▹ Interesting - Illegitimate Bitcoin Transactions
▹ Listen - Jack Butcher on OE
▹ Nouns Digest - Terminal for DAOs
▹ Thread - On Smart Contract Wallets
▹ Techy - The Cryptoeconomics of Slashing

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.

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