Newsletter: Consumer Social Financialization

This week we cover NFT Bound Accounts via new ERC-6551, the rollup "debate", consumer social financialization feat Li Jin and Patrick Rivera, Multicoin team on the convergence of Crypto x AI, "New Creative Era" Zine, plus Market Trends, mainstream news and Signal TL;DR.

Good morning and welcome to edition 143rd of the FF Newsletter.

This week we cover NFT bound account via new ERC-6551, Rollups vs Bridges, consumer social financialization feat Li Jin and Patrick Rivera, Multicoin team on the convergence of Crypto x AI, Metalabel new release : "A New Creative Era”, plus Market Trends, mainstream news and Signal TL;DR.

Let's get to it.

Week’s Highlight

NFT Bound Accounts : The next big thing in NFTs.

ERC-6551 is the next big thing in NFTs. The new standard allows every NFT on Ethereum (ERC-721 standard) to get its own wallet. Instead of connecting your wallet, you can now connect your NFT.

The possibilities are endless.

Imagine you own a CryptoPunk, and you want to collect mints that are only available to Punk holders. With ERC-6551, all the tokens can now be tied to the Punk rather than the wallet. Your NFT now acts as a "character" in an endless game that can hold inventory independent of the wallet that it is held in.

Your NFT can now also interact with any protocol a wallet interacts with, essentially making an "avatar" that can trade on Uniswap or borrow on Aave on your behalf.

You can message a PFP directly without knowing the holder's Twitter. This allows projects to start integrating decentralized messaging more simply.

Finally, it makes NFTs even *more *non-fungible, since acquiring an NFT is also acquiring the wallet attached to it.

Benny from Future Primitive has been advocating for ERC-6551 for weeks now, and their project is dedicated to building new use-cases with the standard. Some other companies, like Station, have already been using it in their new product for member identity and reputation purposes.

Take note. ERC-6551 is the future of NFTs, enhancing every NFT with game-like mechanics. We're excited to see where the ecosystem takes this new standard.

What's Poppin'

Rollups, Rigor, and Reality Jon Charbonneau wrote a piece on rollups and their misconceptions, many people got upset, and then Kelvin Fichter wrote a follow-up attempting to clear the air. The article explains that "rollups" often refers to as a combination of a Sovereign Rollup (a blockchain) and a Rollup bridge (a system that allows communication between blockchains). Kelvin argues that the current understanding of rollups focuses too much on the bridge, while overlooking the fundamental nature of the Sovereign Rollup. He emphasizes that social consensus, not the bridge, determines the true version of a blockchain system. The article also highlights the power dynamics and implications of governance in upgradeable rollup bridges. The author suggests reframing the understanding of rollups to emphasize the Sovereign Rollup and promote accuracy and transparency in describing these systems. While rather technical, these ideas are deeply important in the context of Zora (and Sound, etc.) launching their own L2s in the coming weeks.

Web3 Social to Financialize or Not Li Jin published a counter to her original post on web3 social, arguing that financialization might be less important than simply creating the ability for digital communities to stay small and still have novel, sustainable business models. Tie this together with Patrick Rivera's recent thread on "ephemeral apps," and you get a really interesting thesis around where the future of consumer social is headed. AI makes it insanely simple to create your own custom software. Meanwhile, crypto makes it insanely simple to develop new business models for your community. The combination of these two trends may lead to communities dropping temporary experiences, meant to capitalize on the culture and the moment at any given time, with the freedom to move forward when the community wishes to do so. The future of crypto consumer social is ephemeral.

The Convergence of Crypto and AI: Four Key Intersections Crypto and AI are increasingly converging, and the team at Multicoin has laid out four key intersections. One intersection is the "AirBnB for graphics cards" model, where individuals and organizations can rent out their unused GPU resources for AI tasks. However, challenges include matching the right GPU resources with the appropriate workloads and adjusting training processes for higher latency connections. Next, token-incentivized reinforcement learning from human feedback (RLHF) can enhance AI models, particularly in narrow domains, by providing incentives to workers and vesting tokens over time. This approach can be applied in various industries such as medicine, law, finance, and education. Third, zero-knowledge machine learning (zkML) can enable trust-minimized computation of off-chain data on the blockchain, benefiting applications like yield aggregators. Finally, maintaining authenticity in the age of deep fakes can be addressed through public key cryptography, linking public keys to verified identities on a decentralized and tamper-proof identity registry.

A New Creative Era Introducing Metalabel's eighth release: "A New Creative Era," a zine that calls for a shift from the hyper-individualism of our age to a new focus on collaboration and mutual support. The zine offers an optimistic guide to the patterns, concepts, and ways of thinking that will help get us there. The zine can be collected as an open edition and purchased for delivery for folks living in the US. As usual, the drop is a manifestation of the strong culture that Metalabel has created, and the shift in priorities for creator-led businesses and squads across the globe.

Moneyed JPEGs NFT trading has gained traction in the market, but integration with other industries like gaming has been limited. Price discovery engines and lending platforms facilitate the trading and borrowing of NFTs. Joel John argues that the future of NFTs lies in creating relatable products with seamless blockchain integration. Improvement in technology, such as the ERC-6551 standard, enables NFTs to own assets and interact with applications. To drive adoption, applications must make it easy for users to engage with NFTs beyond speculation. NFTs need an application to do with it what Pokemon GO did for AR and ChatGPT did for AI. Applications like Axie and Stepn are examples of what happens when an application makes it easy for users to interact with these cryptographic primitives.

Latest on Mainstream...

First, a new draft bill (thread) from senior House Republicans in the U.S. Congress seeks to provide a path for a digital token to go from being treated as a security to a commodity. The bill would give a clear definition as to when a project is sufficiently decentralized to no longer have its tokens qualify as investment contracts.

Next, a White House proposed 30% tax on crypto miners' electricity costs looks to be dead, an apparent casualty of the debt-ceiling negotiations. Industry insiders said the tax would've driven miners abroad.

Finally, the market capitalization of USDT has surpassed its record high of $83 billion set a year ago, token issuer Tether said on Thursday. An impressive recovery since the events surrounding the "Fall of Terra".

Signal TL;DR

Uniswap Fee Reduction Vote Fails to Pass

Uniswap conducted a vote to decide on reducing fees for its decentralized exchange platform. Unfortunately, the vote did not pass, even though a total of more than 50% of UNI tokens were in favor. The fee reduction was held back due to a lack of consensus among voters, concerns about revenue and sustainability, potential technical implications, and possibly lower voter participation.

From Real to Virtual: Nike Unveils NFT Sneakers and EA Sports Partnership

Nike is launching NFT sneakers, allowing people to own limited-edition virtual versions of their iconic shoes. They have also partnered with EA Sports to include the Nike Swoosh in their games. This move shows Nike's embrace of digital assets and their commitment to staying ahead in the intersection of sports, fashion, and technology.

▹ Updates - On Web3 Identity
▹ Opinion - Governments & Public Blockchains
▹ Research - On Snapshot DAOs
▹ Listen - on ERC-6551
▹ Collab - Mercedes Benz x Fingerprints
▹ Cool - SquigSig
▹ Interesting - FEWOS NFT Collection
▹ Report - Metaverse Q2 22
▹ Wild - Bizarre Uniswap Scam
▹ Tooling - Mint HTML Editions

◎ Check out Signal  for daily top web3 social headlines

Market Trends

You may have seen a chart floating around Twitter highlighting the massive dip in crypto VC funding that has been invested in companies this year. Q1 marked the fourth consecutive quarter of declining investment activity, with startups raising $2.6 billion across 353 deals---down 78.0% and 64.4% from the same period last year, respectively. Q1 2023 also marked the lowest amount of capital invested in the vertical since Q4 2020.

While the chart itself is misleading (comparing Q1 2023 to full years on aggregate), the trend is still clear. This was to be expected given market conditions, but it remains to be seen what crypto VCs do as there are still billions of dollars left to be deployed. Some funds, like Paradigm, may choose to expand the scope of their thesis to ensure high-quality dealflow that can sustain the size of their fund.

For the Culture

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.