Forefront

**Welcome to edition 129:**

▹ Coinbase launches Base\
▹ Li Jin on Token Airdrops\
▹ Joel John & Siddharth on Royalties\
▹ Spotify Exploring Token-gating features\
▹ Zora Removes Creator Fees\
▹ Mainstream news and more...

--- Let's get into it.

<h2 class="inline-block w-full text-transparent bg-clip-text bg-gradient-to-b dark:from-indigo-500 dark:to-cyan-400 from-[#090FF8] via-[#5227FF] to-cyan-300">Week’s Highlight</h2>

In preparation for Forefront's next research report on Tokenized Community Business Models, we wanted to highlight some discussion on this topic from the most recent [2022 TC Year in Review.](http://review.forefront.market/)

From 2020-21, tokenized communities really only had one business model that seemed to be working, if you could call it a business model at all: treasury diversification rounds.

In March of 2021, FWB governance approved a treasury diversification of 7% of the token supply at a $10M valuation. Later that year, they approved a treasury diversification at a $100M network valuation. Forefront also conducted a treasury diversification round at a $20M valuation in late 2021, with Cabin and others soon following.

This model was clearly flawed: tokens were being sold in bulk like equity, taking them out of the hands of potential active members and still failing to create sustainable revenue for the treasury. This is why the Nouns perpetual auction model was so exciting for folks: revenue could scale as the community and its meme scaled.

However, it's clear that most tokenized communities still struggle to generate sustainable revenue. No other "nounish" DAO has been able to generate even a fraction of the revenue through the perpetual auction mechanism that Nouns has.

Some communities like Water & Music and Forefront have managed to generate revenue through "membership passes," analogous to web3-native media subscriptions.

Others, like FWB, focused on brand partnerships, leveraging the influence and expertise of their community to build a unique collaborative experience alongside some major brands like Hennessy.

The end of 2022 saw experiments with open editions as a mechanism for DAOs to profit off of important media or cultural artifacts. Nouns DAO minted a DAO explainer video using Zora, which generated upwards of 300 ETH.

**Take Note**

It's clear that new, web3-native business models will need to evolve in order to maintain sustainable communities. We certainly seem to be headed in that direction this year, and we're excited to see how things shake out.

<h2 class="inline-block w-full text-transparent bg-clip-text bg-gradient-to-b dark:from-indigo-500 dark:to-cyan-400 from-[#090FF8] via-[#5227FF] to-cyan-300">What's Poppin'</h2>

[Coinbase Announces Base.](https://twitter.com/coinbase/status/1628760201254903809) Coinbase has announced Base, a new Ethereum-based L2 built using Optimism's OP Stack. Base will become the onchain home for Coinbase, acting as a bridge that brings their users onchain and enables them to go anywhere, including L1, other L2s, and ecosystems like Bitcoin & Solana. Importantly, Base does not have its own native token. The Coinbase team explicitly stated that they have no plans to issue a new network token for Base and will use ETH as the native gas token. All in all, this is an absolutely massive development for the L2 ecosystem and scaling Ethereum, as possibly the biggest player in onboarding new users to crypto safely and easily has committed to Ethereum as their onchain home.

[The Royalty Wars.](https://www.decentralised.co/p/the-royalty-wars) Last week on the Weekly Highlight, we discussed the NFT marketplace "royalty wars." This piece from Decentralised covers the story in further depth. Royalties evolved to enable recurring revenue for creators, but this made it more difficult for marketplaces to create a cheap experience for their users. What do you do if a marketplace does not want to enforce royalties to make trading cheaper for users? That is the crux of the problem plaguing the world of NFTs today. This piece discusses Blur's arrival to the market, OpenSea's response, and the short- and long-term outcomes on the ecosystem at-large. The authors also discuss LooksRare's impact on the ecosystem and how the game has evolved. This is a fantastic, data-backed piece for anyone looking to understand what is currently happening in the NFT marketplace ecosystem.

[Jump & Oasis Just Counter-Exploited The Wormhole Hacker For $140M.](https://twitter.com/tayvano_/status/1629259031939518464) Just over a year ago, the Wormhole bridge was attacked in one of the largest crypto loss events of 2022. Altogether, around 120,000 ETH was stolen --- $325 million at the time. Those funds were replaced by Jump Crypto, the Chicago-based crypto arm of Jump Trading, which was involved in the development of the Wormhole protocol. Jump's motive was "to make community members whole and support Wormhole now as it continues to develop" according to a tweet issued by the company at the time. It seems as though Jump and Oasis (MakerDAO team) has counter-exploited the Wormhole hacker to reclaim $140M of lost funds. The ethics and legality of this move will surely be debated over the coming weeks, but the verifiability of Jump's moves throughout this process are clear due to the open nature of the blockchain.

[ZORA Removes Creators Fees.](https://twitter.com/ourZORA/status/1628494694740099072) ZORA has removed creator fees across their entire Creator Toolkit. Instead, a very small fee will be passed on to collectors, which ZORA claims will still be net cheaper for the average user than competitors given how gas-efficient the ZORA protocol is. Meanwhile, Glass Protocol, a video NFT marketplace built on Solana, has also decided to remove creator fees entirely, opting for a donation-first model from collectors and creators who want to support the protocol. Both companies cite alignment with creators as the reason for removing fees -- having protocol-level fees on creators misaligned incentives between creator and platform. This is sure to be a massive development as more creator-focused protocols will be forced to compete on fees, and new web3-native business models will need to be developed.

[Love in the Time of Replika.](https://www.notboring.co/p/love-in-the-time-of-replika) Packy believes that crypto benefits from more things becoming digital. Crypto gives physical properties to digital things, plus some internet superpowers. And AI's success will mean that more of our lives become digital. Packy discusses Replika, an AI-powered digital companion, data ownership and governance, decentralized LLMs, and more. The conclusion is that crypto will likely become more important with the rise of AI, because it won't just be about data ownership -- it'll be about ownership of our relationships with real and digital beings, with media, with commerce, and more. If everything is personalized at the blink of an eye, then ownership over the underlying technology only becomes more critical. Great thoughts here from Packy.

[Consumer Tokens Should Look Like Web2 Incentive Programs.](https://variant.fund/articles/consumer-tokens-should-look-like-web2-incentive-programs-twitter-thread/) Li Jin from Variant believes that in the future, consumer token airdrops will resemble web2 incentive programs: largely used to engage and incentivize users who already have product-market fit and intrinsic interest to use a product, rather than to acquire new users. What does that look like? Various social media platforms have launched creator funds to pay creators on their platforms (e.g., TikTok paying $1bn over 3 years). The monetary incentives are an added mechanism to boost retention. How does that translate to crypto? In theory, tokens could be used in place of the above cash rewards, and to greater effect, since they represent ownership and can further drive alignment between users and the network. This is an interesting theoretical model for the future of platform token distribution.

**Latest on Mainstream...**

Lots of mainstream news this week! First, in light of their new L2 announcement, Coinbase [commissioned](https://www.coinbase.com/blog/new-national-survey-of-2-000-american-adults-suggests-20-of-americans-own) a survey of 2000+ American adults conducted by Morning Consult. 20% of Americans--which would constitute over 50 million people--own crypto. Despite the tumultuous events of 2022, crypto ownership has remained largely unchanged since early 2022, which has been the historic high water mark for crypto ownership in America. Ownership is also generally consistent across the political spectrum. Very interesting data across this survey.

Next, NBA Top Shot Moments may be securities,[ according](https://www.bloomberg.com/news/articles/2023-02-22/nba-top-shot-nfts-are-securities-judge-says-in-landmark-case) to a US federal judge. The judge said his conclusion "that what Dapper Labs offered was an investment contract under Howey is narrow," and other NFTs may not be securities. This is definitely going to be a major discussion in coming weeks and months.

On the music front, Web3 music streaming platform Audius is [adding](https://www.coindesk.com/web3/2023/02/23/web3-music-streaming-platform-audius-integrates-tiktok/) support for the popular social media platform TikTok, the company said Thursday. With the integration, users new to Audius can simply create accounts by linking their TikTok profile. From there, listeners can automatically import their handle and information and carry over their TikTok verification status to Audius. This is also in light of Spotify looking to [integrate](https://twitter.com/apoorvlathey/status/1628496224818184192) token-gating across its platform to enable new business models for artists.

<h2 class="inline-block w-full text-transparent bg-clip-text bg-gradient-to-b dark:from-indigo-500 dark:to-cyan-400 from-[#090FF8] via-[#5227FF] to-cyan-300">Signal Bites</h2>

▹ Read - [Governance As Conflict](https://blockscience.medium.com/an-introduction-to-governance-as-conflict-constitution-of-shared-values-defining-future-margins-69a2bca9f39c)\
▹ FF Library - [State of Digital Fashion](https://thisoutfitdoesnotexist.substack.com/p/the-state-of-digital-fashion-pt2)\
▹ Interesting - [NFT Swap on Uniswap](https://twitter.com/Uniswap/status/1628396162423160839)\
▹ Watch - [Common Knowledge | Shrey Jain](https://twitter.com/owocki/status/1628042758362636289)\
▹ Report - [2023 Social Token](https://twitter.com/purpletrader_io/status/1627532069294206976)\
▹ Listen - [Tokenized Communities in Review](https://twitter.com/forefront__/status/1628832120020795392)\
▹ New - [$COLLAB Launch](https://twitter.com/Collab_Land_/status/1626253185210884101)\
▹ Tooling - [Payments on Guild](https://twitter.com/guildxyz/status/1629245422769254406)\
▹ Techy - [Reflections on Ethereum](https://github.com/djrtwo/writing/blob/main/docs/2023-02-23_2023-Reflections.md)

◎ _Check out [Signal](https://forefront.market/signal)  for daily top web3 social headlines_

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<p class="opacity-50 text-xs italic mt-8 pt-10 border-t border-[#e5e5e5] dark:border-white/15 border-dashed">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.</p>

Welcome to issue 129: This week we cover coinbase launching a Base L2, Variant's Li Jin on Token Airdrops <> web2 incentives, Joel John & Siddharth on Royalties War, mainstream news and more...

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Newsletter: Web3 Incentive Model

Forefront is the leading content and insights aggregator on social tokens, tokenized communities and Web3 Social.

Newsletter: Web3 Incentive Model

Welcome to issue 129: This week we cover coinbase launching a Base L2, Variant's Li Jin on Token Airdrops <> web2 incentives, Joel John & Siddharth on Royalties War, mainstream news and more...

This edition of Newsletter is gated unless you hold Forefront Membership Pass or 2023 Annual Pass NFT.

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