New Biz

What I Wish I’d Known Before Building In Web3 | by Franz Schrepf | Aug, 2022

My rollercoaster ride in Cryptoland

Photo by Younho Choo on Unsplash

I’ve lost money in crypto.

No big deal.

The real issue: I didn’t understand how.

Everybody around me seems to be killing it. So I decided to create my own NFTs, currency, and DAO to learn about what I was missing.

Web3 is the shining castle on top of a hill. The promised land where everything has value, is decentralized, and on-chain.

But the castle is Disneyland: great in pictures, but chaotic, with long lines, and full of children spending ridiculous amounts of money on animals wearing clothes.

Yet when the crowds are gone and the shops close, there’s still some real magic happening in Disneyland.

But I’m getting ahead of myself.

Welcome to Cryptoland! I’ll be your guide.

Scarcity. NFTs are scarce. That’s what gives them value.

This one is a skull! Looks rare!

Just that it isn’t.

The biggest difference between my NFTs and Bored Ape Yacht Club?

Marketing.

BAYC is an incredible project, but not for the reasons people think. The art, the celebrity following, the continued “innovation” around their Apecoin and Otherside land sale? A masterpiece.

It captured the zeitgeist like no other project. Yet how long did you think it took to actually mint the NFTs?

1 hour? Maybe a week for the website?

Minting NFTs is incredibly easy. Kids can do it. Kids are doing it. Most projects have no devs. Think about that next time somebody posts “DevS dO SMt!?”

Art NFTs will continue to be part of pop culture. The value will gravitate toward the top though, and these projects are like the Van Gogh and Monet’s of our time. Even then it pays to be skeptical. It’s still an art market which uses the same marketing tricks like exclusivity and wash selling as the OG art market.

Fortunately, not all NFTs are Art NFTs.

Innovations like soulbound NFTs and anonymity using NFTs could open up entirely new use cases. Property rights, privacy-oriented identification, verification of open-source projects. You name it.

Because that’s what NFTs are for: they help us establish trust online through ownership.

We just need to evolve from the apes first.

Until then, the superpower of NFTs is an old craft in a new cloak: marketing.

What the hell is a token?

99% of people don’t know.

I didn’t know.

So I invested in both coins and tokens. Same same. Only that they are not.

Coins operate their own blockchain and maintain a community of developers and validators. This takes a lot of effort.

Creating a token on top of a blockchain? Five minutes.

Most consumers don’t understand the difference, creating an arbitrage opportunity: pretend you’re a serious project without having developers on your payroll.

Most market sites don’t help either. Look at this list. Can you spot the tokens?

Maybe if you squint real hard… (Coinmarketcap)

Only one click deeper there’s a subtle hint:

Of course, not all tokens are scams. Not all coins are good projects.

Tokens might be used for governance of a DAO, or payments within a DApp. Still, it’s worth paying special attention to who’s behind a token. They might be 12 years old.

Coins require at least some investment and effort. The recent LUNA crash shows that it pays to do your research prior to investing in any currency.

Decentralized Autonomous Organizations (DAOs) don’t work the way you think they do.

Yes, members can vote.

It takes a lot more to create a productive organization though.

Most DAOs I’ve seen are one of the two:

  • Fully decentralized. Fully dysfunctional.
  • Partially centralized. Community-driven.

Successful DAOs operate similar to startups where a core team executes on the DAOs vision and roadmap. The main difference: the community owns a piece of the organization, votes on some decisions, and holds the team accountable.

As such, DAOs operate more like public companies.

Which is incredibly impressive.

The logistics behind an annual shareholder meeting are eye-watering. DAOs can conduct these votes on short notice, anonymous, and in a secure way. No need for intermediaries like banks to chase up every shareholder.

Successful DAOs aren’t fully decentralized and that’s okay. It has never been this easy to allow large groups to vote and collaborate effectively at scale.

And that’s all that matters.

Speed and scale.

Your DAO in action!

Disneyland can be a magical place. Web3 can be, too.

Within a few short cycles, we might live in a future where NFTs are used to establish trust and not clout. Coins are used for payment, not speculation. And DAOs are used to run organizations rather than to run a DAO itself.

As we get there, here are some closing thoughts:

  • NFTs will be an incredibly useful tool to establish trust online. Until then, NFTs thrive through great marketing.
  • Coins and tokens are not the same. Dig into any project before investing. At a minimum make sure it’s not run by three 9-year-olds on top of each other in a trench coat.
  • DAOs are not fully decentralized. Once we accept this fact we will see a future where community ownership becomes the norm, not the exception.

Crypto Disneyland is one big rollercoaster, full of ups and downs and loops that make you want to throw up.

Make sure to wear your safety belt at all times.

And don’t forget to enjoy the ride!