Consider NFT/Web3 projects as startup investments, except the only fundraising mechanism is equity crowdfunding and we’re ALSO the customers.
It incentivises piling into the biggest project, as investors, users and advocates, because ‘making money’ beats ‘better ideas’.
Of course in typical startup investment, incentives are better aligned to the point that seeking out smaller, more innovative companies can be more profitable than backing the obvious picks.
That is not the case in Web3, yet. Smaller, better projects are dying of starvation. The giants in Web3 are all promising that they will generate money for their investors, yet their only source of capital is those investors.
If you’re scratching your head right now, don’t feel bad.
@swombat explained it brilliantly:
Most NFT projects have by now cottoned on that they need to give “utility”.— Daniel Tenner (swombat.eth) (@swombat) November 2, 2021
But most are getting this wrong and doing it in an unsustainable way that can’t work.
Wanna be able to tell if the project you’re looking at is sustainable? Read on.
So what’s the solution?
Fairly simple. Web3 projects need to consider two things:
1) Providing a way for investors to eventually cash out which doesn’t kill the project.
2) A way to replace those investors with customers which offer the project sustainable growth. This creates and recycles capital in the ecosystem which can then be deployed elsewhere, supporting other projects.
Investors would be more likely to take smaller bets, rather than piling all of their capital into the frontrunner.
A virtuous cycle that supports innovation. There aren’t many Web3 projects I can find which have this « investors ♻️ customers » conversion figured out.
@fringedrifters is a frontrunner – I’m excited about what they are working on, and the use-case for NFTs they are building.