A Web3 Community Formula for Brands
A Web3 Community Formula for Brands
Two weeks after Paris Blockchain Week I'm still buzzing. We are experiencing a new super-cycle that is user-powered and community-centric. Here’s what it means for brands.
“It’s the first time in my life I’ve seen Hollywood to be more excited about a technology than Silicon Valley.”
This statement from Benjamin Bouygues, Ventures & Innovation Director at Kering, stuck with me. Why?
It implies that Web3 is not only a new technology paradigm for the next Silicon Valley unicorns, but also a cultural phenomenon.
Web3, the first digital layer of trust for the internet, is sparking a cultural revolution and transforming the relationship amongst users, assets, and businesses.
Let’s dive in.
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NFTs: cultural artefacts
So, where do we start?
We always start with technology. Blockchains, NFTs, you know the drill. And we’ve been there, done that. Thousands of NFT collections on many different blockchains have been created, billions of digital items traded. But what’s next?
“We need to look beyond PfPs,” said 0xb1, an elusive NFT ‘OG’ known only by the Twitter handle 0x_b1. “We don’t need digital zebras”, he added.
What does “beyond PfPs” mean? The mass market, with millions, if not billions of users collecting, trading, and valuing digital items they own.
For that, technology has to extend functional value with cultural value. It has to feel personal.
Some of us might remember Tamagotchis, the digital pets popular in the 1990s. They were small egg-shaped handheld devices with a digital screen that displayed a virtual pet that the user could take care of. The pet required attention, such as feeding and playing, and neglecting it could result in its virtual death. Tamagotchis were a cultural phenomenon and likely the first time, technology truly felt “personal” for millions of users.
What does this mean for Web3?
A hypothesis I have is that its basic currency, namely NFTs, need to become more personal, filled with cultural value.
Steve Huffman, Reddit CEO, for example, sees cultural value in creating personal connections:
“The format is irrelevant; it’s about being connected to other people in whatever format is most relevant to you.”
And he wasn’t the only one hinting at what “cultural value” could mean.
Suk-Jae Chang, CEO of Cocone Europe, a 15-year old Asian pioneer in digital avatars and fashion, spoke about the significance of creating meaning beyond the digital item itself.
Cocone’s avatars, often customizable, are designed to represent the user's personality, interests, and preferences. The platform has over 4m monthly active users and has sold over 16bn digital items.
Cocone comes from a time when iPhones came up and people could suddenly keep digital avatars on a tiny screen in their pocket. They’ve experienced how suddenly people started “caring” about virtual goods on their phones.
Suk-Jae Chang called Cocone’s approach in designing products the “ICE Principle”:
ICE:
I = Identity: Similar to a physical object, every digital object should have an identity.
C = Connectivity: Connectivity should exist not only between me and an item, but also between virtual and physical.
E = Empathy: Empathy augments the item beyond its function with help of storytelling and culture. This eventually creates the intangible value it needs to be sustainable.
Another way of creating cultural value is to connect virtual and physical. Even though most of what’s happening in Web3 is mostly virtual (until now), I sensed a growing emphasis on adding real-life elements into Web3 user journeys.
“At the end of the day, the people who use it are living in the physical world,” Suk-Jae Chang said.
0xb1 spoke about the trend towards tokenizing real world assets, i.e. connecting digital and physical:
Anything with value deserves to be tokenized. We need people to see NFTs as an assets that has underlying value.
This would mean that Porsche, for example, wouldn’t just release pictures of Porsche’s as NFTs, but “an actual PDF with all the relevant information immutably stored on it”, he said.
Eventually, NFTs codify, financialize, commodify cultural artefacts.1 They will become the technology for a new internet of cultural assets.
Now, let’s take this a step further.
A paradigm shift towards communities
I’ve written extensively about Web3 not only being a new trust layer for the internet, but also a cultural movement that grows in communities.
NFTs turned into collections, collections turned into communities. Today, you’ll see tightly knit groups of like-minded people identifying themselves as “Punks”, “Pens”, “DeGods”, “Moonbirds”, “Apes”, or other famous community brands. Each community has its own culture and lingo.
Yuga Labs, the creators of Bored Ape Yacht Club, said:
“We see ourselves as temporary stewards of IP that is in the process of becoming more and more decentralized. Our ambition is for this to be a community-owned brand, with tentacles in world-class gaming, events, and streetwear.”
Ryan Zurrer, founder of Dialectic, recently tweeted:
“Communities will be to the 2020s what platforms & marketplaces were to the 2010s & apps were to the 2000s - some of the most valuable assets on the planet.”
I think he’s right. But why is that?
Let’s start again with technology. Thanks to blockchains, we’re experiencing a shift from centralized to decentralized trust. Bitcoin was the first application of this, enabling true digital scarcity and digital ownership (“true” means without relying on centralized intermediaries). With NFTs, users can now own stuff and take it with them, across platforms.
Joe Lubin, Co-Founder of Ethereum and CEO of ConsenSys, called this “the foundations of a new supercycle that is user-powered and community-centric”:
The paradigm shift will usher in decentralization as the overarching organizing principle that empowers and yet knits together composable human systems and communities in a loosely coupled manner.
The paradigm shift adds newly developed horizontal coordination mechanisms to the vertical strands of traditional top-down control to form a more effective and robust social fabric.
We are just starting to understand the implications of this. What does “owning” something actually mean?
To “own” something means I possess it, and someone else doesn’t.2 It's exclusive and makes me stand out and unique. It also gives me more agency in the projects, communities and ecosystems I participate in. Ownership turns into a tool of self-expression, the basis of identity. In contrast, in a world of abundance, where everyone can own everything, nothing will be valuable.
Identities build and form communities. Communities create culture, culture reinforces communities.3
Eventually, this means:
If: NFTs —> Vectors of identity,
Then: Owners of NFTs —> Vectors of culture,
And: Group of NFT owners —> Communities driven by culture.
For the first time, community and culture can be built on a digital, decentralized layer of trust and owned by the users.
What does this mean for brands?
The community formula for brands
Iconic brands are cultural. Cults are driven by communities. Communities are fueled by culture.
Community and culture behave in a multifaceted, complex, dynamic system. They don’t happen overnight and need constant nurturing. This is why many of the Web2 brands that enter the space are struggling with engagement beyond an NFT drop.
Meanwhile, branding hasn’t changed since Web3 took off. Branding is a set of techniques designed to generate cultural relevance and the most successful brands are still inherently cultural.
Let’s look at two examples:
Starbucks embodies the culture of a “third place”, inspired by the warmth, connection, a sense of belonging you’d find in a typical Italian coffee shop. In Italy, sipping expressos at a coffee bar is culture. Walking into a Starbucks anywhere in the world allows you to become part of that culture too.
Bitcoin embodies the libertarian beliefe that technology is a tool to give more power to people. It stands for decentralization, openness, and privacy. Bitcoin is first and foremost a cultural movement, beyond its technology.
Web3 tech builds no communities. Communities are built on purpose and culture. It has always been like that.
But Web3 augments communities by enabling digital ownership through a decentralized layer of trust, and thus enabling new forms of utility.
Here’s a framework putting all this together:
Culture, purpose and utility are reciprocal. Think of them as activation engines. It is possible for communities to exist with only two or even just one, but they will be weaker. I’ll write a separate piece on all the different elements and existing use-cases.4
Future brands will be built around the purpose, utility and cult around them, with ownership built in. Brands and communities will collaborate for shared growth and value creation.