How do we grow the ecosystem and make it truly self-sustaining?
- Web3 grants programs
- What if grants are a black hole?
- Massive funding masks the problem, but doesn’t make it go away.
Company Business Models
- In companies, sustainability generally means getting people to pay you for your product or service (revenue), and using that to pay for costs (salaries, office, etc). As soon as revenue exceeds costs, you are self-sustaining.
- But startups aim not only to sustain, but to grow by putting surplus revenue back into growth. It’s a positive feedback loop, a snowball.
Web1 Business Models
- The web was originally about content: one giant hyperlinked document.
- Many people tried business model of copying and pasting offline content into the online world.
- Web-native business model: treat the webpage as an application to buy things or interact with others, and take a cut.
- Ebay, Amazon
- Amazon
Web2 Business Models
- The Web2 generation brought mobile, social media, and the cloud.
- Samples:
- paid subscriptions
- transaction fees
- affiliate program
- ads
- A business model is the design for a business machine
Company Business Models
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How the loop starts?
- Amazon needed funds to get going in the first place.
- Amazon needed more funds to grow aggressively, and revenue alone was not enough.
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issue stocks, raise money from VCs…
- Issuing stock is a superpower for businesses. It pulls capital from the future into the present, based on the premise that allocating it effectively will increase the value even more in the future.
Nation-level
- Revenue = tax
- use revenue to create and grow an ecosystem
- citizen and business well-being goes up, tax revenues go up
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Full picture
- Gov issue currency, aka fiat
- In times of economic need, governments have the ability to “print more money” with the hope that the injection of cash into the economy helps to boost consumption with the goal to let the system heal itself and smooth out dips with economic downturns.
- After an economy has recovered, responsible governments slowly remove the excess printed money to restore equilibrium.
Web3 Sustainability / Growth Models
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Problem: the founding team needs to continually dip into its supply of tokens to fund itself
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How to do better?
- Revenue generation can draw on ideas from Web1 & Web2 businesses — but with less extractive rates. Importantly, the token must be designed such that its value rises as usage rises.
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there’s still one big problem: too little revenue, too late
- If rates are too high, it will either get forked and re-deployed with lower rates, or it won’t get adopted because it’s seen as too extractive.
- If rates are too low (and usage isn’t sufficient) then revenue is too low.
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A Fuller Picture
- Projects are proposed, and curated, by the community.
- Projects are funded by Network revenue, and Network reward.
- As projects do work and add value, network revenue goes up and $TOKEN goes up, and ever-more funding goes to the community.
What is the project’s expected return on investment (ROI)?
- Average ROI must be >1.0 for the ecosystem to grow.
- From an ecosystem perspective, if a project gets funding from outside the ecosystem, then it counts towards the value-add number, not to the value-spent number. This incentivizes projects to seek external funding, such as matching investments or quadratic funding.
- Value can only be added to an ecosystem if the core product being built (by core devs) has last-mile apps for users (by app devs), which users can discover and find useful (go-to-market work). It’s a chain going from core product → dapps → discovery & usage → actual value add.