Put simply, a currency is a medium of exchange: something that is given to get in return. It’s interesting to think about this in the context of NFT projects, many of which have historically used staking to reward holders with ERC-20 tokens (cough shitcoins cough) or something similar that can be redeemed against other benefits.
We now know these early primitives usually don’t perform well: inflationary tokens trend to zero over time, and as their perceived value diminishes, so usually does the core collection and brand.
We need a new kind of currency.
TLDR for those who don’t want to read this entire post:
➜ A new kind of currency: art.
➜ Regular / irregular free art drops (ERC-1155) with different rarity tiers.
➜ Claimable amount of drops depends on # of Citizen of Tajigen NFTs you hold.
➜ Each drop may fulfil a different purpose / be redeemed against different benefits.
➜ Benefits can be accessed by burning your drop, to: customize your NFT, receive signed prints,
redacted, redacted, reeeedacted and other things we build.
➜ In the future, your drop rarity may be programmatically augmented by your community contributions (we’ll be doing some things with Discord / Twitter).
This ecosystem economy is deflationary by design. There are no bad decisions to be made, only trade-offs and different rewards.
Some details follow below.
When designing an ecosystem economy in web3, an architect must consider:
1/- participation rate: the percentage of people interested enough in the economy to participate in it, through staking or whatever mechanism is in place to earn currency. This is often only discovered by surprise in real time, with little to no prior modeling.
2/- expenditure rate: the speed at which people cash in their currency for what’s being offered in return. This is often left to chance or misjudged.
3/- price-based & time-based decision making: holders have profit targets and over-time become more likely to evaluate the opportunity cost of rotating their liquidity elsewhere.
4/- rogue and bad actors: some people just want to watch the world burn. Irrational and bad actors can hold an economy hostage or otherwise materially influence others, by creating unwarranted fud, looking for exploits, and so on.
For these reasons & others we see most web3 ecosystem economies fail, stagnate, or otherwise run into issues over the long term. It’s simply not good enough to use staking to artifically reduce supply and/or to launch a shitcoin and hope for the best.
First principles matter. The simplest way to engineer an economy for success is to ensure its currency remains scarce, and in careful equilibrium against demand. This is where many passive & active staking NFTs are fundamentally flawed, having committed to an ever-expanding supply based on a single parameter: time.
By keeping currency supply scarce, and regularly providing an outlet for currency to be “cashed in” (i.e. burned) it becomes easier for an architect to adjust levers in real time, to tweak the grand experiment based on context, and to ensure currency value trends up and to the right.
SEC got you sweatin anon? Np, it’s time for a new kind of currency: free art.
Specifically, art in the form of ERC-1155 NFTs (art drops) that can be claimed & burned for other benefits, increasing the scarcity of each drop as its burned. The cadence, drop volume, and burning options keeps this dynamic interesting, perhaps even unpredictable, and presents you with options beyond the typical ‘hold or sell’.
For a burgeoning economy, a thoughtfully moderated & deflationary currency is the simplest approach to value creation.
Intermittent snapshots will be taken of wallets holding our genesis NFTs: the Citizens of Tajigen. Depending on the # of Citizen of Tajigen NFTs the wallet holds, art drops created by our founding artist Nao can be claimed via The Shelter portal on our website.
You may recall we posted ‘owning multiple Citizens of Tajigen in the same wallet will give you the best outcome’, which refers to multipliers in effect & different rarities depending on the amount of NFTs you hold.
It’s possible in the future that some snapshots won’t be announced in advance.
Our first art drop has two different rarity tiers, and will be live for our holders shortly. Details of the tiers / multipliers will be shared when the art drop goes live.
To access what comes next in our ecosystem, you’ll need to burn your art drops. Some art drops will be redeemable against specific benefits, so each drop carries its own redemption utility, and some will be combinable.
That’s it for now. Follow the signal.