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On Monday, Grammy Award winning artist RAC used a token to sell a limited edition cassette tape of his new album. On Wednesday, Reddit announced it was expanding its "Community Points" beta— an experimental feature which distributes token rewards to the site's most active users— to two subreddits with 1 million users each. Both of these projects are built on the Ethereum network and leverage the ubiquitous ERC20 standard.
As someone who first found crypto in 2012, it's amazing to see experiments like this actually happening. Are we on the cusp of massive mainstream adoption? Well...no. Probably not. But there's no doubt that something interesting is happening here.
In this edition of Build Blockchain, we'll explore these two token projects, how they work, and what they might mean for Ethereum and all of crypto.
Fractionalized Nostalgia
RAC is the stage name of André Allen Anjos, a Grammy award winning electronic music artist. He recently released a new album entitled BOY. Along with the album's typical streaming release, RAC announced he'd be selling a nostalgia inducing collectible edition cassette tape. Only 100 will be produced.
What makes this move so fascinating is the way in which he chose to sell the cassettes. RAC, who is apparently "super into Ethereum," launched the project on Zora. The platform allows creators to sell tokenized collectibles. Here's how it works.
Zora mints a custom ERC-20 token representing a future claim on a limited edition physical good. The newly minted tokens are placed in a liquidity pool in the Uniswap decentralized exchange, and the price algorithmically adjusts coinciding with demand. Users can buy and sell the tokens freely, and it's even possible to own fractional amounts. To receive the physical tape, users must "pay" with exactly one token. There is a one year window to make your claim.
In this case, the token created was called $TAPE, and the total supply was capped at 100. The starting price for the token was $20 USD, but within a few hours of going on sale, it had skyrocketed to nearly $1,000. At the time of this writing, the price has fallen again, and is "only" $465 USD. Link.
Are there aspects of this mechanic that could stand to be improved? Absolutely. Cooper Turley did a good job enumerating some of the limitations of the $TAPE sale in piece for DeFi Rate. It's worth a read as a reminder this is just an early experiment, and there's much left to learn. Link.
Overall, though, I find this absolutely fascinating. There are so many threads one can pull on here. It represents a novel way for creators to monetize their work and deliver value to their biggest fans. It's a case study on the use of tokenization to enable the fractionalized, liquid trading of physical goods, which, in theory, this enhances price discovery. It's also a way in which crypto broadens its audience, taking another small step into more widespread usage. Link.
Community Points
Speaking of more widespread usage, Reddit's decision to expand the beta test of their "Community Points" program is also a step in the right direction. Community Points are subreddit specific ERC20 tokens that are issued to users based on their contributions. They've previously been tested on smaller, Ethereum specific communities, but this week Reddit rolled them out to two large subreddits: r/CryptoCurrency and r/FortNiteBR. Each has about 1 million subscribers. Link.
Interestingly, Reddit has taken a very "crypto native" approach to this project. For example, the Reddit mobile app now allows users to generate their own crypto wallet. Users control their own private keys, and tokens are issued directly on Ethereum. For now, they live on the Rinkeby testnet.
The tokens have a declining distribution schedule, and they can be traded freely like any other token. They can be burned to claim special items on the platform, such as badges and custom emojis. So how does Reddit think it might monetize the project? The company receives 20% of each token distribution. They'll be rewarded only if the tokens themselves accrue some value.
Frankly, I'm impressed. This doesn't look like a half hearted attempt to "sprinkle in some blockchain" just to generate hype. It's clear someone at the company has been paying attention to past experiments in the Ethereum ecosystem. I'll be interested to see if the project continues to expand, or if it remains a small
Even more interesting to me is the way Reddit is framing the project. The introduction to Community Points, stylized as a slideshow of mini comics, explicitly references the walled garden of censorious centralized platforms, and calls on Internet users to "reclaim their rightful ownership of the frontier, and rebuild stronger, more independent communities." Link.
If you read last week's edition of the newsletter, you know they are speaking my language here. I'm genuinely gobsmacked to see a site like Reddit using language like this just a week after writing something so similar. Link.
To be clear, there is no way anyone at Reddit was influenced by my newsletter. Instead, it shows someone at the company recognizes the zeitgeist of the internet right now, which my writeup last week was also tapping into. There is widespread dissatisfaction with the concentrated power of the big tech platforms. Increasingly, people sense that the bottom-up power of the internet is being held back by the stranglehold of centralized entities.
Whether Reddit is actually capable of offering a more open and decentralized alternative is very much up for debate. They're a large, centralized platform themselves, and they too have a history of censoring certain kinds of post. Regardless, just the fact that a major social network is choosing to frame itself this way, and trying to leverage crypto to do so, is a huge development.
The Slow Slog To Mainstream
During the 2017 bubble, partnerships 1/100th as interesting as these were trotted out with great fanfare as evidence of mass user adoption. Unsurprisingly, that adoption never materialized, and three years later the market barely notices these two announcements. Perhaps that's because, in isolation, it's easy to write either one of them off. RAC's $TAPE token is "just a stunt." Reddit's Community Points program is "just a beta test."
Sure, that's true. These specific projects may not amount to anything in the long run. But in the context of all the other activity happening in crypto, and especially on Ethereum, I think these projects are significant.
I've long held that mainstream adoption of crypto will be less like the rapid "hockey stick" growth many are hoping for, and more like an imperceptible infiltration that happens over the course of a decade. Each little bit of infrastructure makes it possible to build more interesting things. Each minor UX improvement shaves a bit off the barrier facing would-be new users. Each new project that leverages crypto expands the universe of people who are comfortable with the technology.
Adoption will happen in concentric circles. Adjacent digitally native communities— like Fortnite gamers or electronic music superfans— will find reasons to incorporate cryptonetwork primitives into their existence. This will continue slowly but steadily, and like the proverbial frogs in the pot, we won't realize what's happening until the water is boiling. Then, sometime in the next ten years or so, we'll wake up to realize decentralized cryptonetworks have become a ubiquitous part of our digital lives.
I hope you enjoyed this issue of the Build Blockchain newsletter. To receive these in your inbox every Sunday morning, subscribe for free.