In the era of attention economy, why are on-chain communities important?

Original author: Joel John

Original compilation: Luffy, Foresight News

During the ICO craze in 2017, we witnessed the explosion of on-chain communities. People send ETH through Web3 projects in exchange for newly issued tokens. Financial primitives, such as tokens, are powerful tools for building communities because they provide people with shared purposes, goals, and interests. But a year later, when the prices of these tokens dropped, the community was shaken. Now, were seeing a resurgence of this trend in memes.

Three eras of Web3 motivation

Most airdrop campaigns in Web3 are simply mechanisms to combine future incentives (tokens) with current community participation. Once a token captures the appetite of users, a group of people will flock in.

In 2020, as NFTs in games such as Axie Infinity and NBA Topshot began to rebound, the market recognized new primitives for building communities. Instead of issuing tokens, you can launch an NFT with a supply cap. As long as there is some form of scarcity, NFTs will be worth more.

Benefits will once again unite communities and thus value. Yuga Labs and Animoca Brands are two companies that have created billions of dollars in value through these primitives. Artists like Beeple have made life-changing fortunes through on-chain representation of their art and content.

As tools evolve in the Web3 industry, I believe the community will benefit by integrating NFTs and tokens into their workflows. Ive been exploring how this model would play out over the past few weeks, and this post is my answer.

community and scale

In a 2014 article, Ben Thomson deciphered a huge paradox facing newspaper publishers. Their advertising revenue is as high as it was in the 1950s. This is because what they lose in local distribution (print media) they make up in global audiences. The problem is that every publisher on the Internet now has the same advantages.

Thomson points out a key problem with todays Internet:

The Internet is a world of abundance, and its important to have a new power: understanding that abundance, indexing it, finding the needle in the proverbial haystack. That power lies with Google. So while the audiences advertisers crave are now spread out across an unlimited number of publishers, the readers they seek to reach have to start in the same place – Google – and, therefore, that’s where the ad dollars go.

You can see this changing in the community. In the 1900s, your grandfather probably attended the local church and had a favorite sports team and dinner date spot. By 2024, his Gen Z descendants may be active on 50 Discord servers, watching TikTok highlights and barely leaving the house for dinner.

We once formed our identity based on the tribe we belonged to. Today, we derive our identities through countless chats or Reddit subreddits, and the pixels on our screens now form the basis of our identities.

While newspapers receive more revenue, they have less influence over where that money flows because of their reliance on Google. Communities have more members, but due to platform dependency, they have less say over when they can participate.

On Twitter, you can hope to reach 100,000 users with a single tweet, but youll be competing with a hundred other people for the same attention. On Telegram you can run a large community with 50 other chat groups and use just as many pings. So while youre now part of more communities, youre unlikely to feel drawn to any one of them. The Internet gives you scale, but at the cost of distraction.

Blockchain enables the flow of value between communities and members in a way that today’s Internet platforms cannot. They can create open reputation correlation graphs that anyone can participate in. As Web3 native social networks emerge, this will be a key factor to keep in mind.

Let me explain, today’s communities have a hard time identifying or motivating their most active members. The primary incentive today is status or rank. This mechanism comes into play when people work in close proximity, as in the military. But for pixels on the Internet—such as “mods” on Reddit—this approach doesn’t work. If these contributors are mapped on-chain, brands can launch communities directly without going through a platform (like Reddit or Google).

This may seem far-fetched, but I do observe signs of this. In the last cycle (2021), audiences used NFTs to identify themselves as core believers. For example, you can mint NFTs of your favorite authors on Mirror.

source:Tianqi on Dune

Imagine again, what if NFT can be rewarded just because you read a piece of content? What if NFTs could be minted directly from the feed? Frame by Farcaster has been asking this question to their approximately 400,000 users.

Feed connection chain

Frame allows users to conduct on-chain activities (such as collecting NFTs) directly through the feed. Creators can subsidize minting activities. For example, I was looking at some of our content using LensPost last week and noticed that it allows creators (like us) to pay on-chain transaction fees.

Previously, users had to go to a third-party platform to mint tokens. Even if creators subsidized it on Ethereum, the cost of scaling this model would be tens of thousands of dollars. Last week at Base we spent about $5,000 subsidizing 10,000 minting events.

In other words, we can create a social graph of 10,000 people engaging with our content for less than 50 cents per user. Why is this important? Once users engage with content through reliable on-chain proof (by holding NFTs or tokens), you can bring value to your audience in a variety of ways. And historically, this kind of community connection has been platform-dependent.

We could break away from Telegram and lose the entire community there. You no longer rely on a single platform to engage with or provide value to your audience.

Why is this important? If your audiences are mapped to wallet addresses, you can measure their skills and financial interactions. Granted, there are privacy implications with this approach, but it’s a way to measure the value of your audience. Suddenly, you’re no longer talking about the number of likes, views or retweets, all of that can be gamified. You can meaningfully measure your audience’s balance, transaction frequency, and transaction size.

For micro-niches, this approach is a gold mine because:

• You can objectively prove community engagement.

• You can verify community participation through transaction history.

• You can also see where these members are also transacting to build better brand partnerships.

But measuring the value of your audience this way is a double-edged sword. On the one hand, you can think of ways to incentivize community members: through (token) airdrops, or NFTs that provide access to early products. On the other hand, it makes the product vulnerable to vampiric attacks.

Communities must not only devise ways to motivate and engage users, but also build a culture that keeps users staying longer. Future community managers must design incentives (in the form of tokens, NFTs, or SBTs) and understand the dynamics of community members.

Note: I’m talking about the crypto-native community here. I doubt that financial incentives alone can convert members of one football club into die-hard fans of another.

What would that look like? To answer this question, I looked at the analytical data available on large NFT collections like Bored Ape Yacht Club. In the past, the best way to find the balance of an asset in an NFT-linked wallet was to query it on a platform like Dune. This has changed, and there are already solutions for observing wallet behavior.

The screenshot below from Bello provides a good breakdown of the type of information that emerges when building a community around on-chain primitives.

For example, the median net worth of Pudgy Penguin NFT holders’ wallet balances is approximately $171,000. They were active for about two years on average. NFT holders tend to be most active on Fridays, and based on past on-chain behavior, the best option for an NFT released today would be to price it at 0.231 ETH.

According to Bello, approximately 1.63% of BAYC holders are active on Lens, while 1.76% are active on Farcaster. BAYC holders have retweeted approximately 34,000 times on Farcaster. These are key data points that can be used to structure on-chain activity.

Dont get me wrong: Web2 has perfected the mechanics of collecting user data over the past decade. What interests me is how to calculate the actual net worth of a community based on its on-chain behavior. Why is this important for micro-niches? Suddenly, you have a tool to break the historical relationship between platforms, creators, and audiences.

Previously, you had to pay a fee to platforms like Meta or Google because they aggregated the channels through which you could interact with your audience. In my opinion, as protocols like Farcaster mature, this relationship is about to be broken, as data that has historically been in centralized databases will now be public.

We can quickly map out the most active users on the chain and be able to see users whose interest types intersect. For example, today you can track Bored Apes users who completed over a hundred transactions on Uniswap last month. As the community goes on-chain, players who have read game theory articles from Farcaster creators can be searched on the Ronin Network.

Being able to mix and match interest segments among community members will result in composable communities.

What does this mean for creators? Driphaus offers some clues. They organize active users on Solana and allow them to collect NFTs from their favorite artists. Instead of collecting rare NFTs that have a limited supply, users on Drip typically collect NFTs that are unlimited. Users can subscribe to their favorite creators on DripHaus for $1. 30% of this is allocated to Driphaus, which generates considerable income for the artist.

The table below is originally from a Driphaus seed stage deck shared by Vibhu on Twitter. It does a good job of analyzing the differences in content across platforms and chains.

Last month, 60% of creators on Driphaus earned more than $1,000. According to a tweet from Vibhu (Drip founder), the average donation amount on Driphaus is $0.05. While microtransactions and NFT minting are interesting, what interests me more is how value flows back to users. For example, once an artist has a sufficient audience base, they can whitelist the wallets of those audiences so that they can participate in new product launches as early as possible.

Or creators could try to offer these users airdrops from brands they work with. Part of Pudgy Penguins’ recent rise is due to airdrops received by its holders.

Dance with creators

Driphaus are interesting because they enable creators to curate their communities with relatively little effort. Creators are increasingly important in the context of growing communities, as great content is where attention is focused on today’s internet. We know each other through similarities with our favorite bands, authors, or movies.

Communities built using on-chain primitives are composable. This means users can interact with each other and create value for the entire community. Community interaction today is largely top-down. In other words, they require creators to constantly come up with new forms to provide value to audiences. But what if viewers themselves could coordinate on behalf of creators?

At scale, it allows the community to actively participate in the creation of content.

None of this is news, but I mention it now for a reason.

• Like the feed on Farcaster, it allows algorithmic discovery of on-chain content.

• Primitives like soul-bound tokens allow for permanent recording of user engagement.

Taking a step back, you used to be able to create content and issue NFTs on Mirror. But content discovery still relies on social graphs on third-party platforms such as Twitter. Now, this shift is driven by crypto-native audiences gathered on Web3-native social networks.

In turn, these feeds allow users to mint or donate directly without leaving the interface: commercial interactions between creators and audiences can occur with the click of a button.

Being able to pay creators is not powerful in itself. In 2019, you can tip creators on Medium as little as $0.10. The difference is that now you can collect wallet details and create new user experience sets while letting algorithms enhance your content. In the past, you either relied on algorithms (on Twitter) or financial suites provided by platforms like Mirror. Todays tools like Warpcast combine on-chain primitives with very large audience subsets. This means you can open access to content to wallets with specific characteristics. For example, I might just publish a study on the top 1000 wallets that interact with Uniswap.

Why is this important? Because as a creator, you need to know what audience you want to attract. Will wallets with niche skills (such as building and running complex machine learning models on Numeraire) be more valuable to early adopters of niche tokens? If a creator has been writing about artificial intelligence, he might want to incentivize the former to be able to mint their own tokens.

In the past, niche communities were dark pools of attention. As a creator, you know very little about the people who are engaging with your content. If you have a history of wallets, and those wallets have credentials in the form of SBT, you can prove your audience is more valuable with verifiable evidence.

An early version of this can be seen on YGG today. Players who play YGG integrated games can earn Soul Bound tokens by completing the Guild Advancement Program (GAP). Currently, around 220,000 holders have SBT, which is used to mark their skill level in games such as Pixels Online and Axie Infinity. Why is this important? YGG has taken some of the earliest steps toward creating an open graph of verifiable skilled user base.

Whenever a new game launches, they may target players who have spent countless hours coordinating resources and providing feedback, or risk being scammed by anonymous wallets.

beyond community

What I’ve painted so far is a vision of a future where niche communities built around verifiable identity and proof of engagement with creators will lead to better outcomes for everyone involved. This future may be coming much sooner than we think, as news feeds like Warpcast now allow you to mint on-chain primitives like NFTs.

But it still involves the relationship between the creator and the audience. This vision is already reflected in the products.

For example, you can view the historical behavior of the Layer 3 user base and the most commonly used products. Third parties using Layer 3 to drive users do not need to demonstrate the proficiency of their users. You can simply check the users wallet address and view their history. In fact, you can use Airstack to get a complete list of its users and their on-chain handles. Businesses trying to target these users dont even need to negotiate with Layer 3. This is a huge added value for Layer 3 users. Once their reputation is established, any product can provide them value without relying on Layer 3.

At the same time, users have every reason to remain loyal to Layer 3, as it is the curation engine for discovering and sharing huge on-chain opportunities.

Likewise, Boost Protocol creates a permissionless protocol around the user. Last month, they released a tool that checks users’ gas spend on chains like Optimism, Arbitrum, and Base, and allows users to mint passes. The pass is ranked based on the users Gas expenditure. Boost Inbox is a tool that allows products to pinpoint users who have spent a specific amount of Gas.

I dont think its far-fetched for the protocol to have additional authentication layers, like Gitcoins upcoming Passport feature. As I write this, Boost Protocol has approximately $180,000 in its coffers and 47,000 Boost coin holders.

I think the arrival of commercial incentives will change the way we think about the word community in Web3. If you can validate the quality of your user base and its engagement, then a community that does it well will gain value. We may still be several quarters away from seeing fully on-chain media brands scale. Unlike traditional media networks, these media networks will be able to verifiably quantify how much economic activity their audiences perform.

In an era when attention is scarce, financial incentives will help engineers focus.