Takeaways from EthCC Paris

I recently had the privilege to go to EthCC and meet with a bunch of folks in the web3 industry. From VCs to L1 blockchain founders, I was able to chat with many notable folks to learn more about this emergent market and understand the web3 communities space more. Attending my first crypto conference in the midst of what many called a 'crypto winter' was an amusing thought but no less insightful.

Price speculation is out, utility is in#

For creators/brands/organizations, NFTs are intriguing because they allow for a direct connection with their community. The potential for NFTs to be a complete e2e CRM is a game changer from their POV. Secondary sales are currently opaque to the brand. Direct lines of communication to their community that isn't dependent on any platform gives more power to the community builder. "Tokenize, Distribute, Leverage" is the motto according to Pierre, founder of Arianee, a Paris startup aiming to be the e2e web3 solution for the luxury and fashion industries.

NFTs are still the main foci of the event, but people are taking a really hard second look at what 'utility' they can provide.

What's been impressive is that while the average $/NFT has fallen significantly since the bear market, other health metrics such as Monthly Active Traders and NFTs Sold have remained relatively stable - indicating steady-state adoption and product market fit. People I spoke to didn't seem fazed by the current state of the market.

The grifters and price speculators seem to have mostly fizzled from the scene. Those that remain are still in it to find ways to build real value. In particular, there is consensus that token-gated benefits/utility is the next frontier. The NFT bubble has definitively popped as NFT collections now need to prove their fair market value by delivering tangible benefits to holders.

While the hype has certainly fallen these past few months, the people I met at the conference were still very passionate and excited to build. The platforms that successfully solve core user needs while leveraging the novel technology underneath, will succeed greatly.

Web3 communities is still ripe for disruption#

Native web3 communities use Twitter as their public voice and Discord as their private community. Everyone I spoken to have gripes about both platforms and are openly willing to consider alternatives.

I had a chance to connect with Michael Blau, aka x0r, his NFTs are what got me into the space and my first NFT was from him! His latest collection, MEV Army, was created to help educate folks on blockchain through puzzles and games. He manages a Discord community of ~8k members.

His first feedback that came to mind about Discord is the rampant scams. He has to repeatedly caution new members to disable DMs to avoid getting scammed. However, there are times where a crucial DM was missed (e.g. from Vitalik, the founder of Ethereum!) so the blanket-wide shutdown of DMs isn't ideal. Integrity and community management tools are two areas that web3 communities sorely need more help and support. The financial aspect of NFT communities inherently brings more integrity concerns.

Every few weeks, he organizes a quest to challenge his NFT holders with a blockchain puzzle to help members learn how the blockchain works. This learn-to-earn model has been helpful for him to identify his most engaged members. He issues a SBT (Soulbound token, i.e. a non-transferable NFT) as a way to recognize a member who successfully completes quest. They are very similar to a POAP (Proof of Attendance Protocol), and these markers make up your reputation in his community. He uses them as a way for him to identify his most engaged community members, but it's ad-hoc and not baked anywhere in the product on Discord. Community platforms can leverage web3 primitives like POAPs to help admins/members easily identify the most reputable members and embed these as a first party product.

Michael also tried moving to a Twitter community but quickly abandoned that idea. The distribution was simply not there and the product isn't sophisticated enough. He begrudgingly stays on Discord as there is no other community platform with proper NFT-gating support.

It’s important to remember that Discord is the de facto choice today out of necessity and not necessarily by choice. I suspect that they will not be able to make any major investments to support web3 use cases in the short-term. Discord is home to predominantly gamer communities and they generally have an adversarial position on NFTs. This resulted in major backlash from gamers when Discord CEO Jason Citron shared a screenshot of a Metamask integration. He had to backtrack and say that there are "no plans to ship it at this time".

If another community platform enters the market with (1) proper token-gating support, (2) better integrity and admin management tools, and (3) easy ways for community builders to offer tangible utility/benefits -- they can easily become the leading platform of choice. Like I observed earlier, NFT collections are now scrutinized based on the actual utility it delivers. Platforms that help NFT collections foster a sustainable market value based on utility will win.

Not everyone gets it#

I was disappointed to find out some of the premier NFT projects out there are actually not real NFTs or 'web3'. When digging into the technical implementations, you find that image assets are served from centralized servers, wallets are implemented as omnichannels which prevent interoperability, and 'NFTs' that actually live in a traditional database. After talking to multiple folks, it's a lot easier now to bifurcate people/companies that actually 'get it' and want to build a genuine experience vs those that are in it for some quick $$$.

Beware/DYOR as the space is still very early and immature! Building partnerships with other companies is essential in these early times. It would be wise to drill into their technical implementations and make sure it passes the ‘sniff test’. As it would reflect poorly to work with partners that are web3 in name only but not in practice.

Content is king#

From Cronos to Tezos to Solana, all the L1 blockchains are signing massive up to $175-million dollar deals to get content on their platform. With the large inflow of capital raised the last few years, it has been deployed quickly to sign partners into long-term deals to be an exclusive blockchain. For soccer (ahem, football), Polygon is to Liverpool FC as Tezos is to Manchester United as Cronos is to Paris Saint-Germain. On esports, Cronos is to Fnatic as Tezos is to Vitality. And so on. Blockchains aren't waiting for organic footholds to take place, rather signing exclusive deals with major entertainment partners now to secure more eyeballs/content and therefore more liquidity on their chain.

It's likely that we'll see consolidation take place as some blockchains win out over others. You’ll find that blockchains are incentivized to integrate with as many partners as possible to drive further liquidity/adoption on their chain. If your product sits on top of the content stack, consider being agnostic towards L1 chains and avoid kingmaking. Rather, focus on prioritizing blockchains that have mass appeal to maximize coverage for your audience.

Conclusion#

Overall, the energy at EthCC was electric and infectious. I left feeling more excited and confident in how web3 will play out in the long run, especially for community use cases. Token-gated communities and benefits is the hot topic at the conference as utility becomes key to demonstrating value for NFT holders.

No matter what project or company I spoke with, it was centered around building communities. Groups of people across the Internet want to rally around a single person, brand, or cause, and need proper tools to coordinate joint work or to align incentives across different stakeholders. Ultimately, NFTs are the lynchpin that binds a community together. The most genuine novel/productive use cases for NFTs imo are for building communities.

Despite the crypto winter, it was a positive environment and everyone was focused on building. Things will cool down for a while, which is a net positive long term. The recent valuations got ahead of what real utility NFTs had to offer, and the industry needs to take a hard look at what consumers actually want and start building those.