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🌱 The Ability To Go Public On Day 1 Is A Trap

There’s a throwaway sentence in 🌱 Flow is betting that the best way to succeed as a crypto company is to build like they are not a crypto company:

Most crypto projects are “public” from day 1. From the day they have a token launch, they’re a public company with investors that expect returns.

It’s an under-discussed consequence of blockchain. When you launch a governance token, you are going public. And what does it mean to go public when 50% of your investors are also 100% of your user base? Mixed incentives.

Steem.it and Medium are good examples of the impact of these mixed incentives. Both are platforms where the eyeballs and clicks your work gets dictates if, and how much, you get paid. Cue short, vacuous click-bait on Medium. Cue short, robot-upvoted confusing posts on Steemit.1 The fact that Steemit runs on three different tokens speaks to how difficult it is to pay-per-click and create a good product.

Another great way to glean the impact of going public so early is to look at product forums. I recently came across Yup.io, a global bookmarking system, where if other people follow your bookmarks, you get paid. They currently have 18k users, 142k bookmarks, and have paid out $550k in rewards. They also have a Yup token, which basically means Yup has gone public at 18k users.

Here’s what users are talking about on the forums:

This is the concern I’ve found related to YUP token. Apparently it does not have much of use case other than staking and maintaining influence. But these two are not enough to sustain healthy price and market for YUP token. My proposal is to give YUP a use case by collaboration with NFT platforms to buy/sell NFTs in YUP, creating merchandise store, etc. which will eventually create demand for YUP. Any other ideas to provide YUP a new use case, comment it down.

Is that what you want your users and your board2 focused on at such an early stage? I doubt it. It makes me wonder if 🌳 Flow is right in locking down who can buy their tokens for now.

Update, Fri Jul 23 2021: Packy McCormick recently brought up the same point in his article Infinity Revenue, Infinity Possibilities

Jiho pointed out the paradox in building communities at scale: The community needs to be small first to work when it gets really big. That’s what makes Axie hard to copy – if you build a competitor now, you’re going to attract the kind of people who want to find the next Axie, not the kind of people who are actually interested in moving gaming forward.

Update, Fri Nov 19 2021: @imdanielallan touched on the personal impact of these feelings on Mirror. A musical artist who launched a token successfully, he’s suddenly confronted with the idea that his “shareholders” may be more investors than fans. As he puts it:

Do people value my music - the very vehicle that got me here - or are they more interested in this experiment and less the artistic effort that went in to the songs?

Update, Mon Jun 27, 2022: Axie Infinity, the best-known “play to earn” game to date, is suffering a boom and bust cycle of its own. In this Bloomberg piece, they comment on how Axie has started downplaying the “earn” part of play-to-earn.

Before being recruited [as the new head of product], La had written a post on his personal blog entitled “Is Axie Infinity sustainable?” He concluded that the game’s economy would ultimately fail if all its players continued to think like investors. “Axie Infinity first and foremost needs to be a game,” he told me.

This validates for me how money can corrupt a product if done wrong. At some point I may want to do a revamp of this piece with all the new examples that have come up.

Inspired by: Yup.io forum

Related to:

  1. It’s worth noting that I’ve not gone on Medium or Steemit in years due to these issues. It’s hard to tell how much better Steemit has gotten as the majority of their posts are not in English. But I feel my point remains. Let me know if I’m missing something. ↩

  2. After all, launching a governance token basically means you’ve gone public and made your user base your board. ↩

Don't want to do that? @ me on twitter or mastodon

Every post on this blog is a work in progress. Phrasing may be less than ideal, ideas may not yet be fully thought through. Thank you for watching me grow.