MEANDERING MUSINGS

A Stream of Social Token Consciousness

In this 25-part collection, I’ve aggregated the mini-essays that I have written daily throughout January 2021 on Social Tokens.

I would love to hear your thoughts, feel free to reach out on Twitter and join the community on Discord!

Day 1: A Stream of Social Token Consciousness

In this series, I will amble down social token lane, writing one atomic essay daily to unpack learnings from the living experiment that is RNG.

The only thing I know for sure is that my perspective on these topics will shift over time. And that’s the beauty of it all: fluid mental models + diverse contributions + shared upside => vibrant community.

The Economy

  • the fair value of beliefs vs. claims
  • tokens as currencies
  • tokens as status, access and exclusivity
  • tokens as interests in a decentralized co-op
  • tokens as gifts
  • unfair “fair games” and fair “unfair games”
  • sources vs. sinks
  • exogenous vs endogenous value
  • half life
  • transferablility and the paradox of choice
  • wen uni pool ser
  • the myth of the selfless founders
  • transparency and the flexibility to adapt
  • reg matters

The Community

  • creators vs. communities
  • intrinsic vs extrinsic motivations
  • virtual zone design
  • tensions of scale
  • peak content
  • psuedonymity and culture shock
  • tokens are forever
  • few understand this
  • concluding thoughts

Day 2: The Fair Value of Beliefs vs. Claims

Every asset is driven by "narrative economics". Perception becomes reality, as:

  • shifts in belief =>
  • amplifying or suppressing shocks to supply/demand =>
  • real changes in fundamental value.

Yet, this commonality masks a fundamental distinction. Some assets are collateralized by "belief", and others by "claims". The latter is well understood and includes debt (promissory obligation), equity (residual claims to an enterprise) and real estate (title to real property). The former is not.

All belief-collateralized assets begin as Ponzis. Not necessarily from an intent standpoint but as a matter of substance: belief almost always collapses unto itself. While it is trivial to bootstrap belief-collateralized value; it is nearly impossible to sustain it. The yield farming craze in decentralized finance (defi) was the most recent example, where hundreds of millions of dollars flowed daily to the defi “farm of the day” (yams, kimchi, sushi, etc.), until it didn’t. The hotter the asset, the higher the likelihood that it will run itself into the ground.

Yet, when the chasm of sustainable belief is crossed, magical things happen. Tenuous belief has transformed into “currency”. The funny thing about currencies is that as mindshare expands, the entire construct becomes increasingly fairly valued as prices appreciate (unlike “claims”). The price of the asset itself imbues network effects. At

escape velocity, one can even manufacture additional assets (stablecoins) collateralized by little more than that fiction which has become fact (e.g., Synthetix).

The most important question, then, for anyone dabbling in belief-collateralized assets is: how to create a currency, not a Ponzi?

The answer: start from the end, and work backwards. If it’s all recursive game theory, the first question is: what reason is there for someone to hold this asset twenty years from now? By counting backwards from the future, we get a glimmer of insight into what needs to happen today.

Day 3: Tokens as Currencies

Virtual currencies have been around for a long time. Ted Castronova, Raph Koster, Richard Bartle and many others have written about contexts as varied as social networks, game economies, and virtual spaces. But don't let anyone tell you that crypto assets are just more of the same.

Yesterday, my Metamask account was hacked. I lost over $60k in tokens. It would have been much worse without that combo of luck, magic and skill you only see in the movies (but that’s for another piece). Most poignantly, I lost my virtual child: Reachy, CryptoKitty #111.

By Morgana’s magic! I am Reachy, trusted Second to the King Among Equals, born of the lake, Servant of the Catbed, and Knight of the Rollypolly Table! I am pledged in service to Derpybastard, and to my very last breath, I will defend love, freedom, and catnip!

This was my first digital collectible, and the fact that it was so coldbloodedly auctioned for 17 ETH and exiled into fiat only made the insult worse. Naturally, though, the curious part of me couldn't help but marvel at the double-edged wonder if it all. In what other context could a hacker compromise an account, auction a virtual kitty for over $18k, then send the proceeds to her account free and clear, all in a matter of minutes?

Crypto assets are a double edged sword, differing from traditional virtual currencies on at least six dimensions:

  • All-to-All Transferability: Instantiated on open blockchains, crypto assets are freely transferable without issuer consent. Anyone can transact with anyone.
  • Liquidity: Web3 composability enables crypto assets to tap into the fast maturing DeFi stack of trading, borrowing, and price discovery (~$20b of value locked on ETH).
  • Provenance/Provable Scarcity: It is trivial to track authenticity and rarity on public blockchains.
  • Disintermediation: No asset issuers or financial institutions are required for settlement, only node validators.
  • Transparency: All transactions are publicly visible.
  • Irrevocability: Issuance parameters and trades are irrevocable.

I will explore the implications in subsequent pieces. For now, I have a burial to attend. RIP Reachy.

Day 4: Tokens as Status, Access and Exclusivity

The most frequently stated purpose of social tokens is to gate status, access and exclusivity. Whether this is a good idea is a more complicated question.

Status. Entire micro-economies have been built around status games, as Eugene Wei has extensively covered in Status as a Service. A healthy competition for status is fundamental to the meta of any long term game. When status is solely a function of money, explosive competition can result, but the frenzy is rarely sustainable due to burnout in the creator-patron-fan link (see People's Republic of Desire). Conversely, status can be entirely non-monetary in nature, where "gift culture" is the appropriate lens of interpretation. The real question is: does the middle ground exist? Are social tokens fundamentally inconsistent with notions of status connoting higher, non-monetary ends?

From The Cathedral and the Bazaar: In gift cultures, “ways of gaining status other than by peer repute are virtually absent.” If what you’re trying to create is an open source knowledge collective, where “the success of a giver's bid for status is delicately dependent on the critical judgement of peers”, then is having a status that you can buy using tokens even worth having? In other words, does fungibility destroy status? My own take: until I know the answer, $RNG will remain giftable but not purchaseable.

Access and Exclusivity: Before putting up access gates for first time users, crypto communities need to take a page out of the mobile free to play book: lure them in with content first, then scale them up the experience ladder. Don’t put up access gates because you can. Save them for the exclusive “level-up” experiences later on.

It's easy for crypto power users to forget how painful new user UX can be: "Create Coinbase account, use credit card, wait two weeks to send off exchange, get Metamask, buy ETH, figure out how gas works, buy token on Uniswap, verify token balances using Collab.land, head explodes before Step 1". Roll has made ecosystem entry much easier by having token wallets integrated with claim codes. But before asking how to gate step one, I think more social token issuers need to ask: what should step one even be? The right answer may not involve tokens at all.

Day 5: Tokens as Interests in a Decentralized Co-Op

Having discussed tokens as (1) currencies and (2) gates for status, access and exclusivity, I now dwell upon their function as (3) ownership stakes in a decentralized collective. @thegrifft writes: "I'd love to see less talk about tokens (the surface layer) and more talk about coordinating value production via economic models (what we really want to happen)." There is a lot to unpack here, and not nearly enough space. And so, I highlight excerpts from my two favorite pieces on the topic:

In Leadership in the Ownership Economy, Jesse Walden et. al. provide a framework for analyzing tokens as ownership units in a cooperative. Key elements include (i) democratizing decision-making, (ii) limiting token transfer and focusing on utility, not price, (iii) allocating tokens based on network patronage, (iv) relying on financial contributions solely from members, and (v) transparent disclosure of project info.

Crypto communities are overly obsessed with early liquidity. Jumpball seed stage upside in a decentralized co-op is a better heuristic. Seed investors in Uber or AirBNB didn't expect liquidity on day 1, so why should crypto investors? Reframe expectations.

In Squad Wealth, Sam Hart et. al. highlight that, while access to the financial stack is critical to enabling social token communities, "dialing up the financial infrastructure too soon can kill the vibe." In a wonderful encapsulation of social token value dynamics, they write:

The squad economy primarily yields non-monetary forms of value. SQUAD WEALTH is a rate of 5 memes per day, it's the e-girls vacation, the TikToker hype house, the empty church your crew rented upstate. SQUAD WEALTH is when the Discord is popping off and it brings you more joy than a 70-hour-week hustle ever could. Millennials all want to quit their jobs and start venture-funded companies, squads are already on some other shit.

Spot on. The first, second and third rules of RNG are: "Do not talk about $RNG.”

Two questions remain. (1) How do these non-monetary forms of value morph into monetary ones? (2) Are the transactional roles of tokens (high velocity) compatible with their function as long-term ownership (low velocity)?

Day 6: Tokens as Gifts

At the end of the year, about a hundred folks from the RNG community gathered to ask ourselves, “What do we want RNG to be about?” Some were focused on maximizing $RNG’s speculative value, boosting short-demand value through liquidity pools and by bootstrapping utility through digital art and virtual experiences. Others were happy to view $RNG as a long-term investment in a cooperative. The most interesting mental model came from Michael Fan, who encouraged us to rethink the numeraire entirely:

In 1998, the French rap artist Shurik'n wrote “Tu sais la vie c'est pas toujours comme on veut, C'est souvent comme on peut” (you know, life isn't always the way we want, it is often the way we can). RNG Dreams should be the place where we can all experiment over whatever we want. We discuss often the metaverse here. What is the biggest value of such space if it isn't to reinvent ourselves? A chance to reroll. The idea is that anyone can offer something, a service, they want to do. On the other hand, anyone can get that service by giving some $RNG. No $RNG, no dice.

How: (1) anyone writes in a ‘phone book’ a short description of the service they want to deliver (a "dream"); (2) the one giving $RNG decides how many $RNG to give for a particular service: the one delivering the service cannot decline that exchange; (3) anyone who receives a service in exchange of $RNG has to write their ‘dream’ in the phonebook (they become dreamers).

I don’t know if $RNG will ultimately become a recognized (1) currency, (2) status symbol or (3) long-term investment. That’s OK though, as all these things are ancillary benefits. Ultimately, what I’m striving for is $RNG to become the numeraire for the exchange of that most precious resource of all: time and gratitude.

The most amazing thing happens when a small group of culturally aligned thinkers moves together: the cult becomes exponentially greater than the sum of its parts. What if Twitch bits went from being a one-sided donation funnel to a multi-variate representation of value given and value received? When dollars are deconstructed into sense, value transcends the literal. What’s left is pure potentiality, guided by free will, intuition, and a common core.

Day 7: Unfair “Fair Games” and Fair “Unfair Games”

“Fair launch” token distribution models have been all the vogue in crypto, particularly in DeFi. But are they fair? And more importantly, are they wise?

Imagine ...
--> I were starting a company today and was directed to distribute the entirety of my cap table according to some preordained formula,
--> The variables in that formula were immutable and limited to factors that could be instantiated in code,
--> No founder stake were permitted, because I would be reviled in the community if I took one, and
--> Therefore, I was directed to “earn” my stake on the same playing field as all other participants ...

What kind of game would likely result?
--> A ponzi (and eventual “rug pull”),
--> Initially distributed according to some objective but misguided criteria, such as staked balances (“rich get richer”),
--> Ultimately leading to a short half-life, driven by the project’s inability to adapt to “unknown unknowns”,
--> With the antidote (a flexible, centralized Treasury) a non-starter because it’s not “decentralized” or “fair”,
--> And a game that the best talent isn’t even playing, owing to the opportunity cost of their time.

Now imagine ... A founder comes to you and proposes to launch a “virtual Soho House”, where the earliest and highest value-add members not only get in for free, but also own 80% of the upside of the initiative. The club’s biggest fans become its owners, and in so doing collectively attempt to create “something out of nothing”. Equally crazy perhaps, but much more likely to work.

The difference: No presumption of perfect foresight, incentive alignment, and the willingness to iterate and experiment in a long-term game with long-term people.

Day 8: Sources vs. Sinks

“Thinking about economies crushes the mind ... Living in real economies crushes the soul ... Playing with economies may be a blast.” ~Edward Castronova, Wildcat Currency

Balancing supply and demand is critical to sustainable economic design. The question is how. With the rally in crypto markets, a cottage industry of self-proclaimed “token economic experts” has reappeared a la 2017. Let’s grant that supply can and should be analyticaly modelled. It’s the demand side that’s tricky: how do you create enough speculative, utility-based and transactional sinks for people to want to accumulate your supply?

Yet all this talk of “economic design” is taxing. I’m not a metagame designer, and maybe I don’t need to be. It’s not “thinking” or “planning” that gets you places, it’s “playing”. What if in our rush to qualify “virtual currency” as “money”, we’ve lost sight of our purpose: that the function of virtual currency is not ultimately to serve as a means of exchange, unit of account, or store of value, but simply to bring joy.

Scott Rigby and Richard Ryan found that there are three elements of intrinsic motivation in games, all enhanced by virtual currency: autonomy (freedom), competence (effectiveness and mastery) and relatedness (social connectivity).

In a game, success is defined in terms of how far one can progress. Failure and iteration is not only tolerated, it is encouraged (this is highly relevant to childhood education, see Ana Lorena Fabrega’s writings on the topic). Contrast this with real economies, where money imbues anxiety as every opportunity presents both risk and reward, peppered with a great deal of luck and unequal opportunity.

As Castronova writes:

When we play with an economy, we gently massage all the elements of the mind that have been honed over the millennia to weigh options, to consider costs, to accumulate resources, to give gifts and to make killings. Our minds reward moments of economic success with bursts of joy.” The consequences of this are real: “If game economies are more fun than the real economy, they will get more attention, work, consumption and investment. The systems that provide joy will survive, and those that don't will go under.

Day 9: Exogenous vs. Endogenous Value

Before all else, buy time. During the formative period of a community, the last thing you need is to race against the clock of expectation, accumulating external debt.

To self sustain, rely on endogenous sources of value, not exogenous ones. Be an export economy, not an import economy. Reframe value creation, curation and commerce to be inwardly looping.

If I wanted to build a digital art museum, I could raise capital, buy art, and hold it in a digital gallery for the community. Yet, this model relies on the continued influx of external funding sources and sustained trust in curators to earn a good return and return that value back to the community.

Consider an alternative, where the community:
(i) holds artistic competitions on a theme,
(ii) any member can participate,
(iii) the community votes on the submissions,
(iv) the winning artists are rewarded with the community token (representing upside in the community itself), and their pieces are minted as 3 edition sets of blockchain-based digital art, stamped with the imprimatur of the community,
(v) minted art pieces get auctioned back to the community in the community token, with 100% of the proceeds sent back to the artist, and
(vi) one piece remains in the community’s digital art gallery, also designed and built by the community.

This is what we do in RNG: artistic creation, curation and commerce is self-sustaining, with the only external variable being the ETH needed for minting costs. These fees too are contributed by the community, in a Dutch auction for RNG.

By creating and replicating self-sustaining endogenous loops, the community becomes antifragile to the whims of the exogenous. It’s those playful games that form the core of all the creativity to come.

Day 10: Half Life

In a token-governed community, churn is not cancerous, but unproductive owners are. Imagine you launch a community and distribute 100% of the token supply in the first month. You might be proud of yourself for conducting a “fair launch” in adccordance with the factors deemed meritworthy at the time, but 30 days later, only 5% of your users are left. How do you keep the ship afloat when 95% of the weight is excess baggage?

In programmable networks, there must be a better way.... Consider a community where token balances vest in 1 year, adjusted by a factor we can label “entropy” (when balances decay) and “reverse entropy” (when balances compound). Some examples:

  • Binary Filters: Balances earned vest in one year, subject to the condition subsequent that the user has met certain minimum activity levels over the period (e.g., Discord logins, chat messages, tips given, events participted in, etc.).
  • Linear Gradients: Balances earned are adjusted up or down by sliding scale “engagement levers”. For instance, if it’s gift culture the community seeks, periodically multiply a user’s balances by a factor between 0.1x and 10x based on how actively they have tipped others in the community.
  • Community Governance (“Lost Recreated?”): The community votes on the Top X contributors. Everyone in the Top X receives supplemental boosts to their token balances (of a magnitude linked to their ranking). Those between X and some threshold Y keep their token balances. And everyone outside the Top Y lose a portion their balances.

In essence, members continously stake themselves. With a sufficiently dynamic rebalancing, the community could liberalize the issuance of token grants, providing carrots for new and existing contributors to the network to become actively involved, while retaining sticks to ensure that those who do participate are in it for the long run.

Day 11: Transferability and the Paradox of Choice

The hardest part of investing is not identifying the things that will rise. It’s knowing how long to hold them for. In 2017, after reading about Ethereum for the first time in Arvind Narayanan’s book, I bought $10k worth at $0.97.

I transferred the holdings to a paper wallet and told myself that no matter what happened, I would hold onto the position for three years. Three weeks later, one ETH had risen to $2.25, and ... I sold it all. Life intervened, and several months later my analyst asked me, hey have you ever heard about ETH? It just crossed $100! By early 2018, it had hit $1400. You can imagine the mental anguish....

Yet in retrospect, I don’t feel so bad. Even if I didn’t sell at $2.25, I would have sold at $5. Or $10. Or $25. Or $50. Or $100. Or $500. Or $1000.

Moving from Trading to VC was one of the best things I’ve done. You never want to be two steps too early, or one step too late. I’ve found I’ve generally hopped on to trends around 1.25 steps early, held till 1 step early, then missed the wild ride from -1 to 1.
It’s the paradox of choice. Sometimes, you spot things that you KNOW in 5-10 years will be big. But you just don’t have the stomach to suffer the 95% drawdowns along the way. And so you try to hop on and off every local peak and trough, and forget that the reason you started the journey to was to enjoy the twists and turns along the way.

For causes you believe in, find a way to forcibly remove choice. It’s the “what if” that kills you.

If it’s community you want, find a way for your token to be gifted but not sold, earned but not bought. Every ounce of energy consumed on short term trading decisions is time not invested in contributing to the things that matter.

“Play long term games with long term people.” And remember that you’re not the protagonist in the play, you’re the viewer in the audience. Nothing worth watching is ever a straight line up: the whole reason you came was to enjoy the beauty of the drama and all its ups/downs along the way.

Day 12: Wen Uni Pool Ser?

In crypto, liquidity is the ultimate KPI ... should it be? I’ve already explored the crowding-out effect money has on other motivations. With other communities trading at fully diluted market caps of up to $75m, I am often asked, when will $RNG have liquidity? You already know my answer. Yet, I can't stop anyone from creating a liquidity pool. So why hasn't it happened already?

I have the idyllic view that, if you've created something worth trading, markets will naturally develop. So long as there is demand and a place for the market to meet, liquidity depth forms naturally from the self-interest of market makers.

What's interesting to consider is why DeFi (and by extension, social tokens) might be different. Automated market makers (AMMs) enable anyone to create or contribute liquidity to a market in any two assets. Imagine a virtual scale, where on each side I post an equal value of each asset. If I set the exchange rate dynamically so that the product of the two reserve balances remains constant, I don't need to constantly worry about what the "correct" bid/offer is for each asset. Why do this? The upside is that I collect transaction fees on every trade. The downside is that, if the market moves, I have sold an option to others to "put" more of the less valuable asset to me at a stale exchange rate. So whether this is profitable is a function of whether transaction fees outweigh the opportunity cost of having sold an option. In turn, this is a function of how volatile the asset pair is (the market maker is short gamma).

Functionally, this is similar to any market making arrangement. Yet in DeFi, market makers can't dynamically adjust their spreads/fees to account for volatility. Liquidity providers on Uniswap earn their pro rata share of 25bps tx fees. If I have contributed 10% of a liquidity pool, I earn 2.5bps of all notional transacted in the AMM pool. Is this enough incentive to be short vol? Likely yes for a high volume, mean reverting pair of stablecoins, like USDC vs. USDT. But for a hyper volatile token (e.g., $RNG) vs. a volatile numeraire (ETH), probably not.

Hayden Adams has stated that v3 of Uniswap will account for dynamic vol. Until then, most projects will rely on "liquidity mining" programs that reward market makers for providing liquidity in the form of additional tokens. But should they? Does liquidity "cause" communities to become successful, or is it the natural "effect" of success? I’m waiting for efficient markets to rule the day.

Day 13: The Myth of the Selfless Founders

“Never, ever, think about something else when you should be thinking about the power of incentives.” ~Charlie Munger

One of the unexpectedly controversial early decisions in RNG was the token grants we reserved at the outset: 20% for the founders of the project, 100 bps grants to up to five “Greater Dalmuti”, and 5 bps grants to up to fifty “Lesser Dalmuti”. All of these grants were issued subject to a 4y “moral lockup” (a rep from the recipient not to sell prior to 4y). Outside of this, the first 1,000 to join were issued 0.5 bps grants, and all others since have earned 0.1 bps grants.

The objection was that token grants don’t square with ideals of decentralization, where everyone should have the right to earn their stake with equal opportunity. In “fair launch” regimes, this applies to founders, insiders and everyone else.
This line of thinking has always struck me as incredibly misguided. Coming from a venture background, I usually have the opposite concern: that founders and key employees have sold too much of their company early on, leaving them too small a stake to ensure the project remains top of mind. There have been many examples of companies that we otherwise would have invested in, but didn’t because outsiders held too much of the company.

Communities, whether decentralized or not, don’t build themselves. They require continued time, attention and focus. As I wrote in Reflections on Community, Raph Koster was right when he said the entire calculus shifts when you realize it’s a marriage you’re entering into. Would you really want your long-term partner to have zero skin in the game?

Andre Cronje’s rant in Building in Defi Sucks Pt. 2 was spot on: this idealized notion that “Your success belongs to your ‘community’, but your failure is 100% your own” leads to an outcome where founders have 0% upside and 100% risk. You can imagine what’s likely to happen to a project like that.

The upshot: don’t be shy about incentivizing founders and key contributors (and ignore the objections from all the haters), and leave a sufficiently flexible Treasury to adapt to all the things you didn’t know you didn’t know on day one.

Day 14: Transparency and the Flexibility to Adapt

In those formative first days, there were thousands of messages and many a sleepless night exchanged over Lootcord, a Rust themed fighting/looting bot in Discord. Naturally, one of the first $RNG pools I declared was a 6000 $RNG pool for the game.

Within a few weeks, the community realized that the pool was massively outsized relative to rewards for higher value pursuits, and unfairly gave a structural advantage to those who had been playing the game before the competition started. And so a vocal contingent proposed cutting the Lootcord rewards in half.

I found myself swayed by these sentiments, until an 11th hour appeal from one of the leading clan members convinced me that going back on our promises would end up costing us in the long run. Judgments of right and wrong are very much a function of the time horizon being applied.

We ended up sticking with the original prize pool, but the outcome instilled a few valuable lessons early on:

  • Over-disclose intentions. Debate is healthy, and the community will appreciate the effort at transparent dialogue. Even if you end up being completely wrong, you’ll get a lot of slack, as long as you’re applying good intentinos.
  • Stick to a long term budget. Provide transparency into issuance dynamics and supply caps. But don’t be shy about actively shifting allocations across categories as new information materializes: it’s a sign of a healthy community.
  • Budgets/plans are likely to become stale within a quarter. So keep your word, but have it cover a short period of time so that you have the flexibility to adjust as you go along.
  • It’s better to undershoot than overshoot budget. But if you’re consistently undershooting, the productive outputs that you expected to materialize haven’t, and throwing a bigger budget at the problem isn’t going to solve the problem.

If then the issue is inadequate intrinsic motivators, how will you get people to care in ways that don’t involve money?

Day 15: Reg Matters

In Securities Law: Social & Community Tokens, Reuben Bramanathan highlighted five factors token communities should consider: distribution, vesting, returns, usefulness and control.

In RNG, we have been intentional in staying on the extreme “low risk” end of the spectrum. Steps we've taken to mitigate the risk of security characterization include:

  • No public sale, with tokens received as random tips for good deeds performed. It's called RNG for a reason! (Distribution)
  • Tokens only available to community members, not investors/speculators. (Distribution)
  • 4y no-sale reps for all founders and material token grant recipients (>5 bps of issuance). (Vesting)
  • No promise of revenue flowing back to tokenholders, whether through "buy and burn", open market repurchases, or direct distributions to holders. (Financial Returns)
  • Immediate utility for tipping, channel access, art auctions, poker and other events, with the goal of expanding access to non-financial benefits over time. (Usefulness)
  • Community-led creation, curation and commerce (e.g., RNG art auctions). (Control & Contribution)

Features we may consider in the future but which are on unhelpful on margin and have thus far avoided include:

  • Exchange listings and liquidity mining rewards to encourage DeFi liquidity pools
  • Hold to Play rewards (token grants to members holding certain roles)
  • Sales of RNG for ETH for discretionary art acquisition

Once the community has achieved a tipping point of decentralization (i.e., if the founding team permanently abandoned the project, it could still be carried forward by others), it can take a more “middle of the road” stance on regulation, with the spirit of a decentralized co-op. Until then, we are going to stay on the extreme “right” side of the fence.

Day 16: The Way of the Economy

So what have we learned? That matters of economy are multi-faceted, and for every path taken or not taken, there are stories told and stories left untold. I don’t profess to know what “success” looks like, but I know how I want it to feel: like building sand castles in the sun. Nothing lasts forever, it’s the memories and friendships that linger. And so, perhaps, the best prescription is to stop analyzing, channel our inner Lao Tzu, and breathe it all in....

The Way never does anything, and everything gets done.

The way you can go isn’t the real Way. The name you can say isn’t the real name.

The unwanting soul sees what’s hidden and the ever-wanting soul sees only what it wants.

To do the work and let it go: for just letting go is what makes it stay.

To give birth, to nourish, to bear and not to own, to act and not by claim, to lead and not to rule, this is mysterious power.

The five colors blind our eyes. The five notes deafen our ears. The five flavors dull our taste. Racing, chasing, hunting, drives people crazy. Trying to get rich ties people in knots.

Need little, want less. Forget the rules. Be untroubled.

Be broken to be whole. Twist to be straight. Be empty to be full. Wear out to be renewed. Have little and gain much. Have much and get confused.

Not showing themselves, they shine forth. Not justifying themselves, they’re self-evident. Not praising themselves, they’re accomplished. Not competing, they have in all the world no competitor.

The great square has no corners. The great vessel is never finished. The great tone is barely heard. The great thought can’t be thought.

To know enough’s enough is enough to know. You do nothing and nothing’s not done. When you do not-doing, nothing’s out of order.

Live long by looking long. Lie low to be on top.

Day 17: Creators vs. Community

On Dec 4, one of my favorite content creators (Nat Eliason) announced a paid community and members-only hangout. I immediately joined, as the idea of meeting other like-minded Nat fans seemed like a high signal opportunity. The early days were promising, but within a few days the content slowed to a trickle. It became difficult to sustain the critical mass that would justify continued engagement. On Jan 14, Nat announced he was ending the experiment, as his heart just wasn't in it.

Now what was remarkable here was not that the experiment didn't work. Rather, it was how easy it was for Nat to reverse time: he simply refunded all membership fees, and that was that. It got me thinking about how impossible it would be for me to do the same even if I wanted to. As Venkatesh Rao has noted: "The blockchain is irreversible social computing." And I didn't even sell any tokens!

As I wrote in From Nothing to Something with RNG, I started RNG as an experiment to explore a simple premise: that for all the talk about the creator economy, most creators seemed to be focused on the "how can we monetize" question, rather than thinking about how to reframe the creator-collective relationship entirely. Why couldn't value be generative, not extractive? Social tokens, I reasoned, were the missing magic fairy dust for incentive alignment. Just one month later, I adopted a more nuanced viewpoint in Reflections on Community that I’ll elaborate on tomorrow. It’s not tokens are a fad; but ... it’s complicated.

The hype around social tokens is just starting to take off. Soulja Boy tweeted yesterday, "Thoughts on me creating my own crypto?" We are in the early days, and I am still a strong believer that they will eventually usher in the next wave of the creator economy.

Yet, once money is involved and reputation becomes irrevocably staked, degrees of experimental freedom become rapidly constricted. If you do take the plunge, just realize one thing: it's a marriage you're entering into. And if it doesn't work, the past can only be forgiven, not forgotten.

To quote Rao, "You’re working with the digital equivalent of spillable milk that cannot be unspilled. Only cried over."

Day 18: Intrinsic vs. Extrinsic Motivations

In a cyclical bull market, it’s easy to believe that token-based incentive alignment “creates” community. It’s just not true. I fear many crypto “communities” are soon going to feel the impact of Buffett’s saying, "A rising tide floats all boats, only when the tide goes out do you discover who's been swimming naked." Raph Koster identified this issue early on with RNG:

Community exists because of what they share first: values and interests. Money is a way to reduce friction and improve trust between people who don't share values, interests, and the like. Money exists so you can engage in exchanges with people you do not know or trust or like. Communities exist for the exact opposite reason. You do not build a community around a currency. You build a currency around connecting communities.

This is not really an "organic" community, by my definition. Organic communities don't have external incentives (tips) to shape behavior, they are purely internally motivated. If I had to analogize to real world communities, this is less like a community springing up naturally at an intersection and more like a company town. Or a conference.

Another way in which it hasn't behaved like an organic community is that it's built out of multiple interests long before that would have organically happened. The core interest unifying everyone is basically forms of cryptocurrency, but that's a very big tent, and we basically have subcommunities here of game players, thinkers, funders, makers, etc etc. It's not yet an ecosystem, it's a crowd, because the relationships between these haven't formed.

One structural thing contributing to that is the proliferation of channels. There's no clear "town square." Every human community on earth is organized around a water feature and a town square. Without that place, different groups do not intersect naturally. When we build virtual worlds, we generally structure them with a single onramp aiming at that square....

Frankly, I myself am unclear on why the community exists -- meaning, as an entity, what it's communal group identity is, what it's for; instead it feels like there are many reasons. But for governance, you need to know, you need to know your ethos, your raison d'etre. It's why your users are here.

Why are your users here? Amazing how difficult that question is to concretely answer. Those that can’t will inevitably fail.

Day 19: Virtual Zone Design

From A Pattern Language:

In a metropolis the individual is confronted by a vast tableau of different values, habits, beliefs and attitudes. Whereas, in a primitive society, he had merely to integrate the traditional beliefs, in modern society each person has literally to fabricate a self, for himself, out of the chaos of values which surrounds him. Faced constantly with an unpredictable changing social world, people no longer generate the strength to draw on themselves.

The potential of the virtual is that it enables us to “become”, permitting us the freedom to “be”. With proper zone design.

  • Telegram channels are a messy hodgepodge.
  • Discord communities are ghettos of groupthink.
  • It’s Reddit Place you’re looking for (“mosaic of subcultures”)

Telegram (Heterogeneity)
In the heterogeneous city, people are mixed together, irrespective of their lifestyle or culture. This seems rich. Actually it dampens all significant variety, arrests most of the possibilities for differentiation, and encourages conformity. It tends to reduce all life styles to a common denominator. What appears heterogeneous turns out to be homogeneous and dull.

Discord (Homogeneity)
In a city made up of ghettos, people have the support of the most basic and banal forms of differentiation -- race or economic status. The ghettos are still homogeneous internally, and do not allow a significant variety of lifestyles to emerge. People in the ghetto are ... isolated from the rest of society, unable to evolve their way of life, and often intolerant of ways of life different from their own.

Reddit Place (Mosaic of Subcultures)
In a city made of a large number of subcultures relatively small in size, each occupying an identifiable place and separated from other subcultures by a boundary ... new ways of life can develop. People can choose the kind of sub-culture they wish to live in, and can still experience many ways of life different from their own. Since each environment fosters mutual support and a strong sense of shared values, individuals can grow.

Day 20: Tensions of Scale

“I am, at the Fed level, libertarian; at the state level, Republican; at the local level, Democrat; and at the family and friends level, a socialist.” ~ Nassim Taleb

Social tokens have this interesting tension that most other crypto or financial assets do not have, between: the need to “infect” others with its narrative to increase token demand (higher R0, bigger community) vs. the “affinity loss” suffered when communities grow too big too fast.

There are thresholds above which a community fundamentally changes its character:

  • Dunbar’s number (around 150 people), above which it is difficult to maintain stable social relationships
  • The point at which coordination becomes practically difficult, likely between 500-1,500 people
  • The point at which individuals can no longer have any effective voice without effective governance, above 5k people

Compounding the problem are the differing expectations between extrinsically motivated members (in it for the money) and intrinsically motivated ones. These diverging interests must be managed, or the community will break. Geographic boundaries are a must. Not just to separate the extrinsics vs. intrinsics, but to create multiple homes to accommodate the diversity of interests among the intrinsics.

Herein lies another delicate balancing act:

  • Having enough neighborhoods for members to settle in the subgroups they identify with without being overwhelmed by noise, while also being encouraged to try new things, versus
  • Having so many neighborhoods that none of them achieve that critical mass of activity and bonding over shared values and interests that make people feel they have to come back.

The trick is to create multiple neighborhoods, while hosting communal events that foster a broader sense of group identity. There’s just one challenge: in a dynamic virtual world, all “solutions to scale” are unstable equilibriums.

Day 21: Peak Content

Even after recently culling my list, I find myself subscribed to over 100 newsletters on Substack (all of which I wish I had the time and focus to read). My appetite to pay for another newsletter is constrained less by the marginal $10/month (although the bill quickly adds up across the stack!), and more by the guilt I find myself riddled with in knowing that there is amazing content I’m already subscribed to and am just too mentally scattered to read. It’s no wonder I spend so much time scrolling through Twitter and LinkedIn. It’s more relaxing to delegate curation to the algorithmic gods than to manage my own Sisyphean journey to stay up to speed.

As more content creators migrate their audiences away from Substack/Medium to their own sites and communities, the problem will only compound. I can’t rely on a quick scroll through aggregated feeds anymore. Instead I feel compelled to go visit their sites, check the community message boards to feel the pulse of the discussion, and repeat for every other “super creator” (Colossus, Stratechery, The Generalist, etc.). And this doesn’t even include the Super Gateways that are Slack and Discord, where I am subscribed to over 10 and 40 communities respectively, including the one I am most personally involved in managing (RNG).

I am reminded of my recent experimentation with mobile F2P games. As a gaming VC, my usual practice is to try a broad range of titles for short periods to get a sense of what’s trending. In contrast, over the last week, I made a concerted effort to go deep with a couple of well-known F2P mobile titles like Clash Royale and Tennis Clash. It was amazing to experience that combination of accessibility, depth and monetization that these titles have achieved. Yet I could not help but think, if games like this only become truly engaging once you’re in it deep (battle pass and all), then perhaps the trick in a world of content abundance is that less really is more. How many can you realistically subscribe to?

Is the future of social tokens one where there can be multiple winners with >$100m market caps? We are in the earliest innings of this game, and I find myself overwhelmed with the number of opportunities out there. What is the equivalent of “Game Pass” that gets you deep access to all of the top experiences for a single subscription, shared event calendars and all? If communities are rides, what we really need is Disneyland. And no, Discord is not Disneyland.

Day 22: Pseudonymity and Culture Shock

Early on in the community building process, I had a rule that everyone’s Discord nickname had to be in “[Full Name] | [Org]” format. The idea was to provide social context, and to encourage real-world civility in virtual interactions. It was a pain to enforce but we were the better for it: those formative first days felt like an exclusive summit, with a group of friends diving head first into a collaborative social experiment together. If we were pseudonymous to each other, the experience would have been completely different.

As Raph Koster notes:

Because of the disinhibition inherent in computer-mediated communication ... you kind of already get the effect that you would by giving everyone alcohol. You could think of pseudonymity (using a fake name, but consistently, so it acquires a reputation) as being buzzed, and anonymity (no connection between a name and a reputation) as being drunk, in terms of the effects that it has on people.

It all shifted rather abruptly when we announced our first collab, with the WHALE community. When you mix a pseudonymous community with one based on real-world identities, you end up with culture shock. It doesn’t mix at all, and unless you create a structure where each group can settle into its own, you risk alienating both groups....
I believe the benefits of bringing real-world identity to virtual interactions outweigh the drawbacks. When crypto is involved, however, the question is more complicated. While I have continued down the “fully disclosed” route, I respect the intentions of anyone who wants to stay pseudonymous.

The concern is security. If real-world identities are segmented by token balances, you’ve created a group of easily identifiable targets for nefarious deeds. In a world of freely transferable bearer instruments, it’s hard to argue that association of real-world identity with our virtual ones is a good thing. In this context, it makes all the sense in the world that WhaleShark is pseudonymous. The Vault’s holdings now exceed $20m, and crypto is a bearer instrument. Given the potential for targeted hacks / personal security risks, hardware wallets, multi-sig arrangements, time-locks, and other security measures are critical. But perhaps they aren’t enough. You just can’t be too careful.

Day 23: Tokens are Forever

For years it was popular to consider tokens as “non-dilutive capital”: a way to get something for nothing. This trend has manifested itself in new forms in the current cycle, largely in the form of governance tokens that represent advisory perks but no real claim on cash flows. I doubt they last long.

Social tokens too may seem like mere fluff, with ambiguous drivers of “value” but no hard claims to anything. Indeed, if equity is the benchmark, tokens fail, and equity/tokens rarely mix well. But what if the game were constructed so that there was no equity to invest in, only tokens?

Imagine the legal fiction we call Epic Games doesn’t exist, but you have all the same individuals behind the game operating as a loosely affiliated band of creators. They agree to band together under a decentralized organization and develop Fortnite. In tandem, they create a virtual currency called V-bucks, with a fixed supply of 10 million. V-bucks can be used in the game for skins, and as tokens, they are not limited to the game environment, but are freely transferable outside of it. The creator band retains 20% of the V-bucks for themselves on standard vesting schedules and distributes 80% to players for free (not sold for fiat) over an asymptotically decreasing supply schedule based on value-add criteria, such as engagement, tournament pools, bug bounties, etc.

Now imagine you’re a player, love the game, and not only wanted to earn V-bucks, but buy more as an investment. Because V-bucks are tokens, they can be traded just like any other currency across exchanges. Some will want them for status, others for utility, others for investment, and others for exchange it to fiat to earn a living. An entire metagame has developed on top of the game itself, nobody is control, and everyone can participate.

Finally, add one twist. Instead of a band of creators, posit a single creator. Once issued, that creator’s reputation becomes irrevocably and inextricably bound to the experiment. Unlike startups which are expected to fail and have a persona separate from their founders, social tokens have no runway and cannot fail. Unlike startups which are a time limited experiment resting on belief, social tokens live as long as their creators do. It’s one hell of a way to ensure something gets going. The stakes have never been higher.

Day 24: Few Understand This

So begins the home stretch. This, the penultimate mini-essay.

Nearly every social token community lives in Discord. For newbies, it’s a hot mess of clutter and confusion. There are zero visual cues of where you’ve landed, why you’re there, and where you are supposed to go. A visual map linked to the channel directory would go a long way (Neopets figured this out in the 90s!). Instead, it’s modern-day IRC with a heavy dose of clutter: verification steps, access gates, tip bots and wallets, incessant pings, and sound effect overload. It adds up to one of the least friendly onboardings imaginable.

Once you get over the initial mess, though, the platform becomes very sticky. The accessibility of multiple communities in a single interface makes visiting any community outside of Discord feel like a major chore. And the integration of live audio, video, text, tipping and memes is nothing short of magical with the right audience.

Yet, for all its potential, Discord is primarily a live chatroom on steroids. As Raph Koster writes, “Chat is never enough.”

“You build a social environment, maybe theme it a little bit, and sit back and expect people to turn it into a vibrant community. But nothing happens. It doesn’t catch fire. It doesn’t ever form the nubbin of a community. The key lesson, however, is that “pure chat” worlds have always hit audience limitations in large part because they were less social than the games were. Think how many social worlds you have seen with no minigames, no scarce resources, no large-scale tasks, and no sense of teams or tribes.”

Live chat is terrible way to organize a community around goals, games, and groups. Projects, votes, and initiatives get lost in the noise. It’s an uphill battle to ever find anything, and if you weren’t there when the conversation happened live, you’ve likely missed it forever.

I’m hopeful of a not too far distant future where the range of activities that can be conducted directly on the platform will be vast and wide. Until then, one can’t help but wonder: why for every step forward must we take two steps back?

“Few understand this.” Contrary to the crypto refrain, that’s not a good thing.

Day 25: Concluding Thoughts

In a world dominated by split-second Twitter takes and populist pseudothink, it has been gratifying to have had the time to reflect on how far we’ve come, and where we might head from here. The wild events of the last week, from GameStop to Robinhood to Doge, all seem to demonstrate that everything we thought we knew, we never really knew at all. What is the value of deep thinking on any topic, if fundamentals can be usurped by the mob’s flavor of the day?

Yet I find it’s times like these that, more than ever, it’s important not to subscribe to the passionate extremes of the day, but to maintain a refrain of cautious optimism. Wisdom is rarely found in fortune cookie tidbits on Twitter.

Tech, social and finance are all blending into a superglob of potential energy, bounded only by time and energy. The million dollar question is how to convert that energy into lasting, self-propelled locomotion. I don’t have all the answers, none of us do. Maybe we’ll never get there ultimately, but I know one thing: it’s the friends and experiences we gain along the way that matter. In that sense, we have nothing to lose: by living the life of shared reflectivity, we’ve already won.