Open Source Culture

Hi friends 👋,

Ever since I started writing about Web3, my friends and family have been asking me a lot more questions. Usually, these conversations are framed around cute NFTs, Dogecoin mimics, or crypto memes they’ve seen online - but this is actually a mirror image of my own learning journey. In a lot of ways, the superficial silliness is like an approachable gateway drug to Web3. You can’t go full metaverse and self-sovereign identity on someone who is only casually interested in blockchain. The packaging of education matters and pictures of cartoon apes and meme-coins are shockingly good at capturing our attention.

This has all reminded me of the importance of a beginner’s mind; the idea that we should approach every topic with a clean mental slate and a healthy dose of curiosity. We should be kind to ourselves as we learn new topics, and not be afraid to revisit old concepts we thought we understand. I was going to make next week’s article non-Web3 related (to show you that I’m more than just a one-trick pony), BUT you’ve inspired me to dedicate next week’s article towards revisiting Web3 from the ground-up. At the end of the article, there will be a survey for you to fill out with your top questions - and I’ll make sure to answer them all.

As always, thanks for taking time out of your day to read Future Proof. I’ve been amazed so far by the power of writing online. Posting an article is like sending out a news bulletin to your network, showing everyone the topics you’re interested in and the problems you’re thinking of. Hitting publish is an open invitation for discussion, and I’m grateful to have connected with others in my network who are on their own Web3 journey (and soon to be other topics I promise!). I hope these articles can continue to be educational and entertaining for you all. So without further ado…

Let’s get to it 🚀

A common question I’m asked is “What do your friends in crypto do?”, and the strange thing is I actually have very few ‘friends in crypto’. It’s a fascinating realization. I’ve been part of so few IRL discussions regarding much of what I write about, but somehow I find myself with devout beliefs on where Web3 is going.

Usually, our opinions form as a result of our direct environment. It’s the conversations we have and communities we are a part of that have the strongest influence on us. For all of history, this has meant our schools, workplaces, and cities. In spite of this, it’s hard to describe how immersed I feel in the Web3 community, as though I’m part of some digital nation. Each time I read ‘gm’ it’s like a secret handshake sent across the internet from another member of my tribe. I know that on some level they are a believer like me.

That’s why I think Web3 is a paradigm shift in how we form digital communities. I think people are armed with new ways of establishing feelings of belonging and shared identity. And I’m convinced this is something entirely new, something that Facebook, Twitter, and LinkedIn haven’t been able to give us. This thought first crystallized in a tweet reply I made earlier this week.

Web2 networks are purely a digital extension of the connections we’ve made in the real world. It’s really Web3 networks that experience their entire life-cycle online and thus are truly digitally native.

In a way, Web3 is what we were promised at the advent of the internet: a feature-rich digital world where identities and communities can move online. It’s only right now in this curious sliver of time that our abilities and rights as digital citizens far underperform what we can do in the physical world.

I think that’s all about to change, and it starts with our ability to form meaningful online communities. Much like we’ve learned to build code-based products, we’ll need to learn to build code-based societies. We’re creating an entirely new technology stack for digital connectivity as we move toward a future based on open source culture. At the heart of open source culture is the notion that we can all participate in the creation of the digital future. Today we’ll attempt to understand what this new era has to bring by exploring:

  • The emergence of digital identity groups
  • The meme gradient theory of community value
  • Differing schools of thought on community formation

The emergence of digital identity groups

Belonging to a community is essential for humans, instinctual even. We first used cohesion for survival but it stuck because coexistence leads to deeply meaningful bonds and boosts in productivity. For most of human history, we’ve formed communities based on physical proximity, but geography is only correlated with shared identity, not the cause of it.

The internet dramatically changed the nature of connecting with others, and in the process gave rise to a concept that is entirely separate from the notional idea of community. This is the identity group, a set of people whose inclusion is not bound by physicality, but by ideology. Communities are who you go to high school with, but identity groups are who you sit with at lunch. Members of an identity group connect over the premise that they are ‘made of the same stuff’ and that everyone aligns on a few important dimensions.

Now identity groups aren’t native to Web3, or even unique to the internet at all. Today’s strongest identity groups are also our oldest - those premised on race, religion, and sports teams. And this isn’t a coincidence.

Pre-internet, people bounced around like molecules in a liquid state; mixed together in a heterogeneous soup of values and beliefs. Identity groups were limited in their scope and scale due to the constraints of geography and trait-discoverability. Groups could only form around the broadest attributes as individuals had no way to scalably communicate their thoughts and opinions to the world. Real life offered quite a poor ‘search layer’.

The opinion soup of the pre-internet identity-scape.
The opinion soup of the pre-internet identity-scape.

Then came the internet. And with it, the ability to properly enumerate your opinions. Posting online became an entirely novel way to share your uniqueness with the world. Many people put their full dimensionality on display, making it easier to be found by like-minded others. As our social networks cataloged great and greater swathes of our communities, it became feasible to form identity groups around the most granular of topics.

The internet allows identity groups to form around shared expression and belief.
The internet allows identity groups to form around shared expression and belief.

Though the advent of blogging and tweeting was a great boon to the formation of identity groups, such groups are not without their flaws. The digital groups of today suffer from a lack of structure and permanence. To date, the best outcome an identity group can achieve is to catalyze their movement into IRL activism in the hopes of bringing about meaningful change. We’ve seen climaxes of activism that move millions onto the streets, and their success shines in the mark they’ve left on our culture. But all movements inevitably suffer a loss of momentum as public attention shifts and peripheral members of the collective disband. Digital communities are yearning for better form factors.

Can disruption be playful?

Rallying together for a common cause is just one way identity groups form. Over the last few months, we’ve seen countless identity groups created over a much simpler, perhaps juvenile, shared belief. This belief can best be described as: “Wow, these JPEGs sure look cool!”.

It’s easy to dismiss the current NFT landscape as incapable of meaningful action. I get it. What impact are all these internet monkeys going to have on the real world? But the playful wrapper of NFTs is precisely what makes them systematically underestimated. In a canonical 2010 post riffing on disruption theory, Chris Dixon wrote:

This is one of the main insights of Clay Christensen’s “disruptive technology” theory. This theory starts with the observation that technologies tend to get better at a faster rate than users’ needs increase….Disruptive technologies are dismissed as toys because when they are first launched they “undershoot” user needs.

What could appear more toy-like than the current NFT landscape? Their whimsical nature completely obscures the innovation underneath. Tokenization directly addresses the two shortcomings of digital collectives: lack of structure and lack of permanence.

Verifiable ownership solves permanence because members of an identity group can now exist in a precise and measurable form. An NFT community IS its 10,000 token owners. No more and no less. If any owner feels uncertain about belonging to this particular group, they can list their token on an exchange and trade ownership into stronger hands.

If enough token holders feel the community is misaligned, even more tokens will be listed and the price of the group’s tokens will trend towards zero. A flatlining price is a signal that the very premise of the identity group was invalid. Community tokens are an embodiment of group formation through the lens of market forces.

The path to an established community…

There is no riskier time for an identity group than immediately after its initial formation or in Web3, after its token distribution. Once formed, a digital collective is merely an empty shell with a dream. It’s up to the community to use their 10,000 tokens as a platform for the community to build a desirable culture and narrative.

In CommUNITY Economics, we talked about exactly this. We explored how NFTs create a method for harnessing cultural energy into what we call cultural batteries. NFTs allow groups to store culture, much in the same way that art and music become representational stores of culture. But in the past we took for granted that such a process exists, using a posteriori evidence by way of the BAYC community. So let’s take this time to dive deep into what you can DO with that battery, and how it gets charged with energy. After all this time surfing through Web3, I think I have an answer.

is paved with memes

Memes? Yes, memes!

Memes are the cornerstone of any community. They are the currency of cultural value within an identity group. Nearly every definition describes memes as elements of culture or as ideas and behaviors that spread from one person to another. Some memes are public and permissionless, like those we see on Twitter and Reddit. Others are private and meant only for a targeted audience.

Essential to the idea of memes is the rush of dopamine you feel when you ‘get it’. This is an evolutionary response that pushes you to stay on top of the dynamic nature of group culture. This feeling is a neural reward for understanding something fundamental about society. But not all memes are made equal, and the best ideas are not uniformly distributed. Cultural power naturally flows to individuals and groups that can generate, taste-make, and gatekeep the best ideas. These communities tend to thrive and attain ‘insider status’. It is the goal of all communities to become meme-rich. (P.S. for a great article on memes, check out Nathan Baschez’s How Memes Control Everything)

If identity groups are the empty vessel, then memes are the object to be stored within. So it goes without saying that the most valuable communities have the highest meme gradients.

Meme gradient theory is simple: The value of any community is proportional to the value of the memes trapped within it. Society tends to have a background level of meme density, where all the public domain memes get passed around. Every now and then a new meme format or especially hot take will surface, and those closest to the source benefit from a temporary cultural edge. If a community can reliably prove they generate valuable/sought-after memes, they become culturally influential almost by definition.

The most valuable communities contain the greatest concentration of memes.
The most valuable communities contain the greatest concentration of memes.

This gives us a new lens to assess the price activity around the hottest NFT communities. Is buying a Cryptopunk a means to acquire a trendy profile picture, or is it a limited availability ticket to the most influential identity club in Web3? Bored Apes aren’t just handsome digital primates, they are an invitation to engage in the hidden alpha of gated discord channels. Especially because the financialization of NFTs and tokens means that cultural alpha directly translates to financial alpha! The meme-affluent Punk 6529 describes this concept perfectly through the lens of Cryptopunks:

Imagine the same concept applied to any other industry. How would you price any of the following?

  • One of 10,000 seats at a forum of private equity’s most influential leaders
  • Lifetime membership to a community of 10,000 of the tech industry’s top taste-makers
  • The opportunity to rub digital elbows with the 10,000 most visionary scientists

It just so happens that people are willing to pay A LOT to belong to a community of Web3’s strongest believers?

This $9.5M offer on a mid-tier Cryptopunk was rejected. The token holder **would not sell **(💎🙌). To them, the value of maintaining their Cryptopunk identity and membership far surpasses any price.

Memes of greater importance

All of a sudden NFT prices start to seem a lot more reasonable. As intellectual spectators it’s our duty to see past the wrapper, to view the undercurrents rippling beneath the surface. This is a new organizational structure for digital communities and online movements.

The outsider’s view is that NFTs are used to attain clout in the crypto-world. But insiders know that NFTs are a method of tokenizing any of society’s cultural intangibles. In Tokenize Everything, we explored how tokens can be used to give owners an interface to a multi-functional online world. NFTs specifically are a token used to capture the fuzzy je ne sais quois that gives value and meaning to art, music, fashion, and culture.

Take for instance, the recent HOUSE OF HALLE and HOUSE OF TIARA PartyBids. PartyBid is a platform that allows large numbers of individuals to pool funds in a group bid on a single digital asset. The organization of the HALLE and TIARA bids was an effort to reclaim cultural artifacts that represent communities of color. After their successful bid, all fund contributors were issued $HALLE and $TIARA tokens in proportion to their contribution to the pool. These tokens continue to operate as a means to connect these communities for further collective action.

Schools of thought on community formation

So let’s say you’ve already issued your token to a group of holders, thus creating an identity group. And we’ll take it one step further and assume you’ve captured a meaningful quantity of early believers/adopters. What do we do now?

Now we build.

This is where Web3 communities have a choice. The path to building a sustainable community typically forks in two different directions. These are best described as Top-Down and Bottom-Up approaches to community formation.

  • Top-Down Communities: Top-Down groups typically have a leadership team that determines and executes on long-term vision. Roadmap decisions are processed by leadership in response to community feedback. Leaders engage the community by offering rewards for completing challenges that promote social media presence and increase the token utility (e.g. making token-gated web apps). Over time, Top-Down groups have an organizational hierarchy with roles populated by community members that have made outstanding contributions (i.e. one of my PFP communities recently appointed a Community Manager). Value accrues to token holders and the founding team. Early DAOs, PFPs, and most decentralized apps operate in a top-down structure. Many have long-term goals to become Bottom-Up to validate their communities as self-sustaining.
  • Bottom-Up Communities: Bottom-Up groups rely on cultural and market forces to define their roadmap. They rely heavily on community experimentation to create an ecosystem of apps that add value to their token. As a result, the most important actions taken by founders are engaging with the community and injections of inspiration. Most of the value in these communities is ‘up for grabs’ as anyone on the internet can create the next hot app and get in on the action. Mature DAOs and decentralized apps are Bottom Up.

Perpetual culture machines

We’ve spent quite some time already exploring Top-Down communities in our analyses on PFP groups, so I think it will be far more worthwhile to open your eyes to the madness that is the Bottom-Up world. Far and away the most interesting Bottom-Up community in Web3 is Loot. We can understand the primary concept of Loot by reading their OpenSea description:

Loot is randomized adventurer gear generated and stored on chain. Stats, images, and other functionality are intentionally omitted for others to interpret. Feel free to use Loot in any way you want.

If you’re wondering what this looks like, you’re probably thinking too hard:

That’s right. Just a list of items. No art, no statistics, not even a set of rules for how to play. This is the bare minimum you need to create the game, but not the game itself. And the community went wild…

AI-generated pixel art. GPT-3 generated backstories and quests. You name it. This community has thrived using Bottom-Up principles. Its success is so great that spin-off community projects like LootRealms (8000 procedurally generated maps like the one displayed above) have traded over 1.2K ETH ($4.48M) in volume.

Users don’t own Loot bags for the purpose of identity signaling - Loot bags are the key to unlocking virtual worlds and experiences. Most of which have yet to be made. There’s even a website, Loot Watcher that indexes and acts as a search layer to discover new projects. The best projects thrive when they find resonance and engagement in the Loot community.

Loot currently trades at a minimum floor price of 4.2 ETH ($15.7K) with over 69.6K ETH ($260M) in volume. But fear not, as all users can own ‘synthetic loot bags’ just by owning an Ethereum wallet. With synthetic loot, creators can make the decision to open their experiences to the masses - all the while maintaining and adding value to the ecosystem as a whole.

Bottom-Up development is a perpetual culture machine. Done right, a universe of lore and intellectual property can be generated in a matter of weeks. This is Web3’s superpower: Iteration as fast as the community can code, creativity and divergence at the speed of GitHub pull requests. This is only possible when community members feel a sense of ownership and identity over their participation.

This type of decentralized community engagement could one day be a competitor to our largest and most talented game and movie studios. Let’s see Disney and Valve compete with the self-funding, self-organizing force that is online communities.

I think we know how this story plays out.

The internet always wins.

What a beautiful and exciting world to live in.

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With gratitude, ✌️


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