During the DeFi summer of 2020—long ago in the Web3 era—the “degens” meme emerged to describe Web3 enthusiasts who were yield farming on systems with high percentage annual yield (APY) and high probability of failure. It’s a playful term that also reveals the greedy and self-serving side of the industry.
In the first two years of the decade, driven by headlines, soaring prices and FOMO, thousands of traders entered Web3 with the intention of making a quick buck. And despite a sharp sell-off this year, crypto has continued to go mainstream. There was Super Bowl commercials. News from banks using decentralized finance (DeFi). And yes, negative press about all the bankruptcies.
Unfortunately, with the implosion of custody systems like BlockFi and FTX, many people have lost money. It’s really bad for the people who got hurt and destructive for the space.
Kevin Owocki is the CEO and founder of SuperModular and co-founder of Gitcoin. This article is part of Crypto 2023.
Ever since Satoshi solved the Byzantine generals problem in the Bitcoin white paper, there have been boom and bust cycles in crypto that resemble natural systems from an evolutionary perspective. In times of plenty, thousands of new projects blossom. In times of scarcity, projects fail. The survivors will be the dominant species of the next boom (as visualized in this poster I created).
Survival of the fittest is a simple but powerful mechanism observed in the Web3 ecosystem – the fittest best match the markets’ preferences. It could explain why Degens, who seem more interested in short-term gains than long-term success, find themselves at an impasse. It turns out that purely selfish behavior is maladaptive in Web3 (as it is in many places in nature).
In fact, the industry now known as Web3 has always had a side that was about more than greed and profit. Crypto is a tool for building collaborative organizations and sharing resources—the long-term trends that have always motivated participants.
The story goes on
Recently, there has been increased awareness and focus on how blockchains, distributed systems with decentralized buy-in, support public goods. Public goods are things we all rely on (like open source software or privacy research) but are difficult to maintain and fund.
See also: The Next Step in Web3 Development: Regenerative Finance | Crypto 2023
Another term for this is “regenerative economics,” the idea that money can be used to incentivize communities to solve systemic problems. Even when open source projects fail, the practice can benefit others—when everyone is moving along the same axis toward social betterment. Innovate, iterate, evolve, repeat.
Therefore, even in the pits of crypto winter, 2023 is ripe to become the year of rain.
to rain swords
Degens came to Web3 looking for a financial boost. Regens are those working or building in the regenerative crypto-economy. They have a long-term view of how Web3 can be good for the world, but not just in a financial sense.
Regens see how financial systems could be designed to serve as conduits for greater human prosperity in the service of all human needs. My friend Gregory Landua, co-founder of the Regen Network, argues that humans have eight basic needs that could be expressed in terms of forms of capital. Beyond financial capital are our social, material, living, intellectual, experiential, spiritual and cultural needs.
Also See: How DeFi “Degens” Fund the Next Wave of Open Source Needs | opinion
Programmable money allows us to program our values into our money. Crypto has what it takes to create systems that are just as extractive and fragile as the existing financial system. When a Degen trades, he is playing a zero-sum game – the tokens leave his wallet and go into the opponent’s wallet and vice versa. But Web3 can also create more positive summary logs that expand resource capacity over time.
The journey to regenerative crypto-economy
There is a common thread that connects many people in the rain ecosystem. They used to be swords! Lured by the promise of better economic conditions for themselves and their families, they entered the ecosystem to make a profit.
Over time, however, they became excited about the promises of collective action—often through the direct experience of contributing to or using a project. Their attitudes and incentives changed. This is intentional, built into the structure of cryptoeconomic systems. For example, Decentralized Autonomous Organizations (DAO) allow people with a common mission to come together and pool resources – all involved are at least partially united in their values and commitments.
See also: The one word that defines Ethereum’s goals | opinion
By joining such a community, you learn to manage risk and manage volatility. They think differently about capital allocation. But sometimes it takes more than that to keep track.
(Kevin Owocki/SuperModular)
Many Regens are ex-Epees who made this journey during the last cycle in 2017. And that’s partly why I’m so optimistic about the future of regenerative systems. There are thousands upon thousands of people new to crypto who have joined Web3 in the last year or so, and they are now probably on the second step of the journey (i.e. in bad shape). You’ve made mistakes and learned from them, a knowledge base that can be used to take a more pragmatic approach to the next market cycle.
The window is here for Web3 newbies to move on to step three – find community and discover crypto’s regenerative use cases. From there they will build the next cycle of projects, many of which will be positive and impactful to the world.
The effects are already there
People sometimes say to me, “Hey Kevin, this talk about regenerative cryptoeconomics is great, but are there examples of theory in practice?”
Rain is not just talk. It happens! In fact, Alejandra Borda and I wrote an entire book listing 100 different examples of projects where people are using crypto to transform the world.
To name a few: Proof of Humanity, Celo, Kolectivo, and Gitcoin (the crypto-based crowdfunding protocol I created) all do a good job.
2023: The Year of the Regency
In this down cycle, we have an opportunity to filter the noise out of the signal and rediscover our purpose. Through decentralization and peer-to-peer technology, we can build a fairer, more equitable and less extractive financial system. We can bring more democratic, more organic financial tools to the masses.
As individuals, we can find a community, join a DAO, and build projects that could serve as the foundation for the next Web3 era. It’s the year to build projects that are democratic, pro-social and net-positive for the world.
To regain its legitimacy, the Web3 ecosystem must find ways to direct capital, attention and talent away from the projects with the best Ponzi nomics and towards the projects with the most lasting positive impact. We don’t want this because we want crypto to look good for the world, but because we want crypto to be good for the world.
Many of today’s mainstream crypto projects have positive externalities. For example, OpenSea, the largest non-fungible token (NFT) exchange, has enabled thousands of artists to monetize their work and generate new forms of income that are less profitable than their Web2 counterparts.
Lens Protocol, a Web3 social media platform that is making crypto buzz amid Twitter changes, is enabling people to own their data and take their social media presence from site to site. Web3 Social Media has the potential to disrupt tech giants. (Disclosure: I am an angel investor in the Lens Protocol.)
Proof Of Humanity, a registry of 18,000 Sybil attack-resistant identities, uses UBI tokens to pay people a stipend. Gitcoin is a crowdfunding platform that funds $72 million worth of public goods and has recently released a suite of protocols that allow others to crowdfund their communities. Kolektivo is a set of protocols that enable local communities to create, fund and manage their own regenerative economies.
See also: Who is building the Ethereum public goods? | opinion
Web3 carbon credit systems like KlimaDAO and Toucan Protocol enable better, faster and cheaper carbon credit trading. While carbon credits aren’t perfect, Web3-enabled schemes like Hypercerts allow users to reward projects with observable results. Additionally, beyond climate concerns, hypercerts can be used in impact areas such as education, healthcare, AI security, and open source software.
2023 will be the year of rain. We will not only rebuild and regenerate the Web3 space, but also our communities and ourselves.
If you want to get involved in the rain space, you should buy the books “ImpactDAO” and “Greenpill” in the Gitcoin store. Use the code WEB3_CAN_REGENERATE_THE_WORLD for 100% off the digital editions of both books.
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