Onchain Principles: Network first. Economy second.

At Bunches, we have a few principles that are foundational to how we think about bringing the chain to consumers. Whether we're thinking about decentralizing moderation or designing our utility token, these principles are our system of thinking that help us keep first things first.

So far, I've published two, with a few more to go. You can read about growing the pie and infra not internet at these two links.

This week, I'd like to cover the next principle that talks about how we think about how the social era's marketplace and network effects impact building onchain applications. Namely, I'd like to tackle how we at Bunches think about the cold start problems that remain in consumer crypto: network first, economy second.


Network first third. Economy second fourth.

Identity. Community. Network. Economy.

I have a confession. There's a little bit of clickbait in the title. Let me explain.

At Bunches, we've identified four steps to building an economy. Network and economy are the third and final steps, respectively. We'll walk through each of them in some detail below, but I first want to give some context as to why this principle matters to us.

On both Farcaster and Twitter, there have been lots of talk revolving around some flavor of launching a coin in order to find PMF or as a precursor to launching a product.

Proponents of this approach will argue some flavor of "launching a coin will help us find PMF and then we'll build a product for the people we gather".

In most cases, this will lead to disaster.

It's the onchain equivalent of "they will come and then we'll build it" ... which is just as wrong as "build it and they will come".

Shout out to field of dreams. But I'd rather have a field of deliveries.

The counter-reaction by some has been some flavor of "products shouldn't launch a coin until they reach full scale and have nothing else to do".

This will also lead to disaster.

It's the onchain equivalent of "don't start a new curve until you've fully tapped out your existing curve" or "don't think about monetization until you reach scale".

As with most dipolar arguments, the reality is somewhere in the middle. But as founders and builders, we have to be methodically thoughtful on what we're building, for whom, and in what order.

Our order (for right or wrong, better or worse) is as follows:

  1. Identity: part of an individual that they would claim as essential to who they are

  2. Community: a gathering of individuals who share an identity

  3. Network: a community equipped with tools for creation, curation, and culture

  4. Economy: a network who is exchanging value around their shared culture


Identity

Webster tells us that identity is "the distinguishing character or personality of an individual". However, since individuals often have multiple identities that are context-dependent, I'd make a slight correction to that: identity is a distinguishing character or personality of an individual.

Identity is a part of an individual that they would claim as essential to who they are.

Why is this important?

Because fundamentally network economies are social structures. They are comprised not of ephemeral digital entities, but rather real flesh and blood persons on a phone, keyboard, or mixed reality headset.

People matter. Don't lose sight of this fact.

Onchain is about people.

It's about that person's freedom. Their ownership of digitally scarce things.

Onchain is not about financial transactions or innovative technology.

Transactions and technologies are simply means to the end of serving people.

If you want to build an economy, you have to start with a network. And starting with a network means starting with an identity and bringing people of like identity together into a community.

The first step to building an onchain network economy is either discovering or selecting an identity of your target market. Ideally this identity is one that is underserved, shared by many, and hugely impactful to the individuals who hold it.

Facebook did this with college students.

Dribbble with designers.

Farcaster with web3 builders.

This is how the business of sports works, where they monetize IRL fandom.

It's how modern Western politics works, where people self-identify as left, right, center, or otherwise and transact accordingly.

Growing identity into a network economy is how religion works, where people wear the proverbial jersey of their faith of choice.

Identify an identity to build for.

In order to build an economy, one needs to first identify identity.

But here's a new thing introduced by the chain: one of the craziest properties of NFTs and memecoins are that they are able to create identity out of thin air, simply be prefixing a word with a dollar sign or existing as a piece of digitally unique art.

And then people begin to self-identify with Cryptopunks, Bored Apes, $degen, $higher, or $ENJOY.

And they want to find each other. To congregate. To converse.

And out of shared identity, emerges community.


Community

To be honest, there are very few things to be said about community that hasn't already been written about over the last few years. Community has dominated the thought zeitgeist, and there are a ton of wise things floating in the ether.

But there are a lot of foolish things floating out there, too.

For those wondering where to get started, I'd recommend Squad Wealth (heavy emphasis on onchain communities), Greg Isenberg's Substack (if you can tolerate the constant in-your-face monetization, there are gems amid the nosie) and this podcast hosted by Fred Erhsam (where Blake's thoughts on cultural communities in particular are insightful).

For more old school thought, check out Bowling Alone or the slightly newer-school Get Together from Stripe Press.

But fundamentally, community is the result of a shared identity's gravity.

There's an almost magnetic quality about a sufficiently established identity.

When the identity is powerful enough, it wants ... needs ... to be shared.

Sports fans have stadiums, gamers have Discord servers, churches have congregations, and political participants (and furries and M:TG fans and pen collectors) have conventions.

Sufficiently substantiative identities have weight. They want to find themselves in others.

The desire for conversation, camaraderie, belonging, information exchange, or simply sharing a mutual passion for the identity are all reasons that communities emerge.

And this doesn’t change if you’re talking about digital or IRL communities.

Shared identity leads to community.

Then increasingly, as these communities grow in complexity and in size, they inevitably want tools.

Tools to gather, to communicate, to organize, to create common culture, to accomplish a stated communal mission.

And so networks emerge out of sufficiently sized communities.


Network

Identity becomes community. Community becomes network.

Shared identity leads to community.

Engaged community leads to network.

Whereas communities want to be together, networks want to do together.

They want to chat, post, create, curate, collect, engage, grow, and most other verbs you can think of here.

One major difference between a community and a network are the (forgive the computer science speak) are the number of edges between nodes. To put more plainly: there are more connections.

In a community, people gather around a shared identity, with the identity in the center.

In a network, people use the shared identity and community as a means for interaction.

Networks are communities plus interactions.

There are many startups to be had simply by identifying communities of sufficient size and importance who want tooling for interaction.

Again, Bunches for sports fans or Dribbble for designers or Zora for onchain creators.

Similar to community, there are tons of resources out there about building and cultivating networks.

Contrary to what some may have you to believe, knowledge from the last phase of the internet definitely carries over to the onchain era.

After all, the chain is new infra, not a new internet.

The lessons from social don't just magically go away because the chain now exists.

Here are some great resources on networks and network effects.

First, if you’re new to thinking about network effects, you could do worse than starting with nFx’s resources: the Network Effects Bible, the Network Effects Manual, and their archives.

And then there’re the classic reads: Cold Start Problem, Blitzscaling, and Zero to One (though the chapters on 1 to n are the most pertinent for this topic).

But my personal favorite and one I recommend the most consistently is Modern Monopolies. It’s lesser known as it’s not coming from “celebrity thought leaders”, but it’s a fantastic and accessible overview to the space.

But as more and more interaction happens within the network, more and more content, connection, and culture are created within the network. Which in turns provide value.

And as the network begins to create value, the network begins to desire to capture this value.

And thus an economy is born.


Economy

Caveat: not all value (and therefore not all economies) are financial.

As networks create content, connection, and culture, they create value.

At this point, it's important to also note that not all value is financial in nature. In today's world you could even argue that social capital (attention, reputation, influence) is just as (if not moreso!) important as financial capital.

No matter the underlying type of value it's still created within networks.

And eventually this value leaks and the network seeks to capture it.

At this point, the network begins clamoring for tools to capture and circulate value...which inherently means that an economy emerges.

This is where the infrastructure that is the chain truly shines.

The chain is extraordinary at capturing and circulating value in our modern digital world.

It's literally why they exist.

After all, this is why blockchains were initially invented: to solve the computer science (and economic) problems of double spending, immutable ledgers, and how to move value between entities that may not have full trust in one another.

And don't forget that no matter how big or small the economy, it's all about serving the network, the underlying community, and fundamentally the individual people who make up the community.

After all, if a memecoin launches but no one transacts it does it even have market cap?


OK...but why does this matter?

As we've seen, we can generate a shared identity via tokens of all kinds. These tokens (memecoins, NFTs, etc.) leads to shared culture in community and some semblance of value is created as people pump bags or projects. This value is then often captured via the tokens themselves.

But now we see the issue: the value created is the shared identity. It's circular.

The value isn't created for or by the identity...it is the shared identity. This is exciting for a while...but in most cases this economy inevitably collapses in on itself.

Or a black hole of value capture, with your mint acting as the event horizon.

When the shared identity is also the same as the captured value, it's akin to dividing by zero.

But for a while, it's really exciting to watch. As tokens moon, they seem like successes.

As builders, in our excitement for these "successes" and for the technology, we can put the proverbial cart before the horse (the economy before the other steps), which doesn't quite work.

If we don't think about identity, we're not building for something essential.

If we don't think about community, we're not building for people.

If we don't think about networks, we're not building for created value.

Here's the good news: the chain can help fast forward the four steps, and you can go from identity to economy nearly instantaneously...especially if the captured value is intrinsic to (but not the same as!) the shared identity.

But these four steps can't be skipped. Only fast forwarded.

And each step is compounded by scale.

If you want to build an economy from six people it's nearly instantaneous. Particularly because in most cases you know the other 5 participants.

But if you want to build an economy for the millions of global sports fans, you can't skip steps.

Building the network has to come first. And then the economy.

But we're almost there. Stay tuned. 🧢


Want to learn more, or just chat about this? Ping me! I primarily hang out on Farcaster these days, so feel free to send me a reply (thinking in public is great!) or shoot me a direct cast there.

Otherwise, thanks for reading! 🙏

Feel free to collect, tip, or otherwise share this content with others you think would appreciate it.

Onchain Principle: Infra not Internet.

At Bunches, we have a few principles that are foundational to how we think about bringing the chain to consumers. Whether we're thinking about decentralizing moderation or designing our utility token, these principles are our system of thinking that help us keep first things first.

Last week, I covered the first of these principles, grow the pie. In that post, I write about our thinking around our target demographic: users who aren't yet onchain. We're focused on bringing net new users to the chain, and in that article I discuss some of our thinking around how to do that.

In continuing the series, I'd like to cover the next principle that talks about how we think about the chain itself. It's pretty simple, and may seem obvious: infra not internet.


New Infra not New Internet.

The chain is infrastructure.

Rhetoric can get insane.

We all do it from time to time.

You're trying to make a point, and so you exaggerate it a touch. A smidgen. Just a little bit.

But before you know it, what started as a pebble of truth has rolled down a hill of lies, and is now a minivan-sized boulder barreling towards a worldview.

And that, friends, is how the pebble of "the blockchain is a shared immutable database" becomes the boulder of "the blockchain is the new internet and may end up replacing the world wide web as we know it".

The chain is a tool, not the goal.

The chain enables extraordinary new experiences like verifiable ownership, secure and decentralized coordination, and the financialization of all kinds of assets.

But it's a tool, not the trophy. It's a means to an end.

Let's unwrap the truth: the blockchain is new infrastructure for a new internet.


Infrastructure Shouldn't Be Seen

Those of us building in consumer often remember this when faced with the friction-filled experiences of other onchain apps.

I, for one, get itchy.

If the new internet is comprised entirely of onchain experiences like today's dapps, I'm sure that a general audience will stick with the old.

Sure, the internet has some friction already: infinite logins (spread across providers like Google, Apple, Facebook, and phone number), two-factor authentication, captchas...

...but it doesn't compare to the agony of gas fees.

Or a WalletConnect failure.

Or needing to switch chains.

Or waiting 10 seconds for an onchain action to complete.

Or clicking every sign message like it's an onslaught of GDPR banners.

This isn't the new internet. This is new infrastructure posing as a consumer experience.

Let's not even talk about bridging, shall we?

To be fair, the world wide web went through this period as well.

Remember the AOL dialtone?

Or telnetting into a MUD server to play a game?

Or the pain of watching video online because of lag & latency?

But the consumer experience progressed, and this pain introduced by infrastructure was able to be abstracted away into the internet we know today.

The handshake represented by AOL's dialtone still exists. Just beneath the surface.

Connecting into a server to play a game still exists, but you don't have to issue the command yourself. It's done for you, on your behalf.

And video is an integral part of the internet today, whether talking Hulu or Youtube, TikTok or Netflix, Twitch or Nebula.

All due to improved infrastructure. Networking hardware is now everywhere, hidden. Operating systems became network aware at layers beneath apps and the desktop. And the cloud infrastructure of providers like AWS, Azure, and GCP help abstract some of the pain away of running datacenters in closets.

Nerds.

But here's the funny thing about infrastructure: no one cares except builders.

Consumers don't care if you're deployed on AWS, Google Cloud Platform, Microsoft's Azure, or a datacenter that you own and run.

They don't care on which chain your smart contracts are deployed.

They don't care about the protocol you're using to connect a wallet.

Consumers only care about frictionless experiences that this infrastructure enables.

With one exception.

The only time that the cloud gets mentioned or discussed by general users is in a negative case.

Seem familiar?

Similarly, Farcaster recently went bonkers discussing Optimism as a bottleneck. The chain is infrastructure that enables consumer experiences.

Infrastructure should be out of the way as much as possible. It shouldn't be famous.

When infrastructure is in your face, including the chain, it's a sure sign that innovation can be had.


Consumer in the front, crypto in the back.

So what does this mean for how we as builders should think? Mullet apps!

Familiar Web 2 experiences to the consumer, with the chain under the hood powering new ownership, coordination, and financialization experiences.

Infrastructure shouldn't be seen, and we're the ones who have to hide it.

As an example of this philosophy, frames are a really good step forward of what's possible in the space. By abstracting the wallet and connection away, great strides are being made in the realm of new experiences that the chain enables.

And frames are just the tip of the iceberg.

At Bunches, our wallet generation happens under the hood as well.

And I can't wait to show you what we're working on next. 😏

But here's a sneak peek at an onchain action.

I believe in the chain.

I believe in builders.

We just have to realize that the chain is infra not internet.


Want to learn more, or just chat about this? Ping me! I primarily hang out on Farcaster these days, so feel free to send me a reply (thinking in public is great!) or shoot me a direct cast there.

Otherwise, thanks for reading! 🙏

Feel free to collect, tip, or otherwise share this content with others you think would appreciate it.

Onchain Principle: Grow the Pie

At Bunches, we have a few principles that are foundational to how we think about bringing the chain to consumers. Whether we're thinking about decentralizing moderation or designing our utility token, these principles are our system of thinking that help us keep first things first.

Over the next few posts, I'd like to walk through each of these principles, and how they impact our decision making, starting with our first principle: grow the pie.

Grow the Pie

Consumer apps for onchain natives on the left. Onchain apps for consumers on the right.

At Bunches, we're huge fans of the great consumer founders and companies in the crypto space. Apps like Warpcast and Zora are serving existing crypto users extraordinarily well by bringing consumer experiences to onchain natives.

There will undoubtedly be some growth due to these efforts, but I do often wonder if it's going to be the primary "front door" for the next million, hundred-million, billion users to the wide world of crypto.

The question that we're constantly asking ourselves at Bunches is how do we bring net new users to the chain.

Put another way: how do we grow the pie?

For starters, I believe that the target audience of the asset-first NFT/memecoin explosion of 2021-2022 is saturated. That is, if someone is looking for a quick way to make a buck or to find financial alpha, they're likely already onchain.

The next influx of users will come from utilitarian use cases couched in language & experiences that they're familiar with (more on that later and in subsequent Principle posts).

Digital ownership applied to assets that are not financial in nature.

In our estimation, underexplored areas include DAOs, games, non-financial collectibles, etc.

I love that builders and traders are flocking to the space.

But we also have to ask ourselves about the general public.

What about the "normies"?

Yes it's early.

Yes there's still so much to build (that's the point!).

So in expounding on this principle of "growing the pie", let's take a look at the state of things today.

No Good News without Bad News

Anecdotally, it feels like we've flatlined for 12 months.

But not just anecdotally. Quantifiably as well. Let's take a look.

Here's a graph of active Ethereum addresses (as opposed to "total" addresses that so many people love to tout, which are just generated key pairs and not very useful in examining usage):

This isn't the curve we were hoping for.

And here's a look at new Ethereum addresses:

Obvious spikes during the ICO and NFT booms.

The general public wants real use cases and stuff to do with the chain beyond profile picture collections and Shiba Inu related propaganda...as cute as they are.

Yes, developers are excited. And the people hungry for the “thrill of the chase” are still here. But outside of Bitcoin ETFs and crypto growing as an asset class (alongside your real estate and mutual fund holdings), is there anything for the general public to latch onto?

Does the general populace really care about L3s, inline minting experiences, or seamless in-wallet bridging and swapping?

This might not be what you want to hear...

But....no. They don't.

That's the bad news. But now, for the good news.

The Good News

This isn't a call to pack it up and go home.

This is a sober look at the state of growth.

It's a call for hope...and to build.

Problem solvers solve problems.

To problem solvers, to designers, to builders, bad news is opportunity.

The activity I see in the space is extraordinarily exciting.

I love what I'm seeing from projects like Receipts (onchain attestations for real world work), Blackbird Labs (onchain loyalty for restaurants), and ETHGlobal's Packs (bundles of IRL/URL assets).

There's so much to build for the next wave...and it's already happening.

I love the excitement in the space, and it's an honor to build alongside everyone seeking to grow the pie.

I suspect over the next few months we’ll see more “Trojan horses” at the application layer.

Which means more net new onchain users.

What We're Building

We’re building one of these trojan horse applications (what Dan Romero calls a "mullet app" - web2 in the front, crypto in the back) for sports fans.

Our mullet app plays hockey.

Currently, we're serving well over 200,000 sports fans on Bunches...the majority of which have not yet been exposed to the chain, much less are active users on it.

We're changing that, by bringing chain-enabled experiences to consumers on our existing network....starting with community ownership (every Bunch is essentially a consumer-ized DAO).

Our approach combined with onchain native approaches really does feel like the early web, where you had consumer experiences for web-natives (websites, email, usenet, etc) while other companies brought web-native experiences to consumers (search engines and digital commerce, for example).

Eventually these two sides merge into a cohesive experience (like the Internet we all know today).

Bunches will support frames.

Others will build on top of our onchain fandom data.

And so on.

I firmly believe that this two-pronged approach is how we collectively not only grow the pie, but better serve the pie over time.

Together, we succeed. And build something special.


Want to learn more, or just chat about this? Ping me! I primarily hang out on Farcaster these days, so feel free to send me a reply (thinking in public is great!) or shoot me a direct cast there.

Otherwise, thanks for reading! 🙏

Feel free to collect, tip, or otherwise share this content with others you think would appreciate it.

#principles

Consumer Tokenomics

In this post I’d like to cover some of the things that we're thinking about at Bunches as we're designing a fungible token for onchain consumer utility.

To be clear, we are not designing a token as a financial asset for onchain consumers, and so a lot of the thoughts that are here shouldn't be applied if that's your use case.

Our use cases involve sports fandom and reputation, both of which are what I'd refer to as "soft assets" (as opposed to hard financial assets). That said, they're still quantifiable assets that can accrue value from multiple parties who can be aligned with a single onchain utility token.

Economic ≠ financial.

Utility tokens in this way don't necessarily represent financial assets to be transacted, but they are economic assets that quantify non-monetary value within an ecosystem.

For the record, just because our use case is sports fandom & reputation, I hope this post could be helpful for a range of soft assets across verticals: reputation as a contributor, cultural alignment, shared ownership in a non-treasury good, governance power, social capital accrued via follower graph strength, etc.

The considerations here really only apply to fungible tokens (ERC-20), but there may be lessons that can be abstracted to non-fungible tokens (ERC-721) or hybrids (ERC-404, ERC-1155) as well.

Disclaimer: this post is not intended to be a comprehensive look at designing utility tokens in general but rather is a look into how we’re designing a utility token at Bunches intended to quantify sports fandom. I truly hope it’s helpful to others thinking through similar use cases.

Supply Size

Let’s open with a broad blanket statement that is almost categorically false, shall we?

Increasingly, I’m convinced that consumer utility tokens should be infinite in supply.

For technical purposes, unlimited or infinite means 2²⁵⁶ - 1, as that's the largest value that totalSupply, which is an unsigned 256-bit integer, can be set to in a contract that meets the ERC-20 standard.

Unlike a financial system where there is a fixed money supply (M0, M1, M2, etc) controlled via a monetary policy by the issuer (the US Federal government, BRICS, the Bitcoin standard, etc.), consumer systems are comprised of infinite, non-zero-sum value exchanges.

Put another way: there is no theoretical limit to social capital (n² relationships, where participants can be infinite). Or reputation scores. Or power as implemented in governance.

In cases where soft assets seem to be limited, it’s only a practical limit (for instance, a social network can only be as large as the number of humans on Earth) or an infinite limit confined to an arbitrary scale (Uber driver and passenger scores - surely not all 5-star drivers are truly equivalent!).

I’m of the belief that the quantifying mechanism (tokens in this case) should mirror the value which is being quantified: financial or otherwise.

This is the point where farmers and flippers are both staunchly in disagreement. They behave and believe that the only way to build value is through systematically-imposed scarcity; they often assert that a fixed, limited supply leads to an increase in financial value and therefore a better system.

And that’s ok. I just disagree.

But even if you are in agreement that a token quantifying soft assets should be unlimited, it doesn’t mean that there aren’t drawbacks.

We absolutely should be thoughtful around the economics, even for soft assets. We need to take into account the fact that there may in fact be financial value at some point in the future.

Just like in the real world, hard assets may be traded for soft assets.

Avoiding the devaluation of soft assets is just as important as it is for financial assets.

Put another way, inflation is generally bad.

We can't just set the supply to an arbitrarily large number and call it a day.

Deflationary Utility

The biggest drawback of an unlimited utility token is not that it’s more difficult to financialize, but rather that such a large supply risks devaluing the thing you’re quantifying.

If there’s an unlimited amount of reputation, what does it truly mean to be in the top 10%? It could just mean that you’ve been around longer than the next person. Or that you’ve curated more cultural assets. Or that you’ve amassed more governing power simply by not exercising it.

So how do we handle inflation? By building deflationary properties into the token.

There are two main tokenomic mechanisms that we can use to control an unlimited supply token, one of which you may be familiar with and another that may be new.

TRANSACTIONS

The first mechanism that can be used to throttle supply is perhaps the most obvious: transactions themselves. This is also the most familiar, as it’s what Ethereum uses to control its own utility of compute power.

By building deflationary (“burn”) mechanisms into the usage of the token, you have some control over the supply as it’s used.

Whether it’s the actual spending of the token to perform an action or it’s a blanket expense to perform any transaction, building deflationary mechanisms into transactions are a clear way to control a token with infinite supply.

I won’t belabor this category, as you’re most likely already familiar, but here are a couple of examples:

  • Voting to kick a user “spends” your reputation

  • Proposing a change to a DAO uses your governance token

  • Burn fees for every transaction (similar to Ethereum)

DEMURRAGE FEES

I was recently listening to Stripe Press’ fantastic infrastructure podcast, Beneath the Surface, and the episode with Ryan Peterson (of Flexport fame) sent me down a shipping container rabbit hole.

Did you know that if a container sits for too long in port or on chassis without being moved, the owner of that container is charged a fee?

This fee is called a demurrage fee, and applies when the logistics network starts to choke due to the inactivity of a single actor. As it turns out, demurrage fees are also a concept in traditional, real world fiat currencies that require storage: precious metals, paper, etc.

That is, when resources are being accumulated and are underutilized, costs are incurred by those not using the resource.

This demurrage fee concept can also apply to social & utility tokens.

Like international goods, soft assets like culture, power, and reputation are meant to be in motion.

Soft assets are meant to be in motion.

In a thriving economy, value is circulated not hoarded.

If someone “hoards” reputation or governance or culture, and it sits underutilized, those actions eventually choke the network, which is meant to be constantly active.

So build demurrage into the system. If someone sits for too long, they get charged fees. Interest, if you will. And those tokens slowly drip back into circulation.

One caveat here: you have to be aware of the incentives that demurrage introduces into the system. Will people contribute in low-quality ways in order to avoid demurrage? This kind of dynamic has to be mitigated

Initial Token Allocation

At Bunches, we've opted to build a product and network first. And an economy second.

People > assets.

Therefore, another category of questions we're working through internally is that of kickstarting our economy: what's the entry point for users?

There are two ways to think about this: start the user at zero, and they earn their way as an actor in the system or start users on an equal playing field, and they gain or lose status as an actor in the system.

We're leaning towards the latter, where users start with an initial reputation score/balance, and can then earn or lose based on in-app behavior. Why?

Frankly, because this is the behavior we want to see in the world regarding social capital.

I believe that if you go around not trusting anyone until it's earned, your human experience is going to be lacking.

Assume reputation until proven otherwise...but when proven otherwise, there should be a steep cost.

Defending Soft Assets

Sybil attack. Two words that strike fear into the heart of tokenomists all over the world.

Maybe even more so.

The stakes are arguably higher with soft assets.

In a world where people aren’t seizing the network for financial gain, they want power or infamy or cultural control.

And often easier. There is no need for a 51% attack if you have a sufficiently large minority that you control on a cultural platform.

You could say that this is what’s happening on many social networks, with Meta and Twitter being overrun with pseudonymous spam accounts and fake news.

Simultaneously, eclipse and Finney attacks are much more impactful when the very thing being quantified and exchanged isn’t money but information. A “double spend” of information is trivially executed compared to a double spend of currency.

How then should we defend consumer networks?

You can’t.

~fin~

Just kidding.

The short answer is similarly to how you defend financial networks from similar attacks.

Ensure costs to attack are sufficiently high enough to deter malicious actors.

Run tests and model usage with malicious actors. Adjust costs accordingly.

Perform identity validation within reason (phone > email or username login as a start, for example).

Use onchain social graphs as a trust proxy.

Utilize proven Sybil-resistant methods at the point of use (SumUp for content voting, EigenTrust for peer-to-peer reputation, etc).

Each one of these in isolation isn’t enough. But together they provide layers of protection for your network and for consumers.

What's Next?

Well, we're obviously implementing a lot of these ideas and thoughts at Bunches. Maybe I'll report back with learnings or lessons. Or you'll just see it onchain. ;)

Want to learn more, or just chat about this? Ping me! I primarily hang out on Farcaster these days, so feel free to send me a reply (thinking in public is great!) or shoot me a direct cast there.

Otherwise, thanks for reading! 🙏

Feel free to collect, tip, or otherwise share this content with others you think would appreciate it.

Decentralizing Moderation

I was recently speaking to the leadership team at a Fortune 500 about our work at Bunches (obviously they loved it 😏), and the largest category of questions was about a singular topic: moderation.

From Twitter's – I refuse to call it X – struggles with brand friendliness to Farcaster's growing pains to the philosophical debates of free speech vs. cancel culture, content policing is the topic du jour of many in the user-generated content (UGC) space.

Navigating the thorny fields of moderation is without question the number one issue facing consumer platforms today. The question isn't really "if" (yes, you should moderate in some way) or "when" (start as early as possible), but "how".

Rather than describing a methodology in the abstract, I'll talk about how we've tackled moderation at Bunches this far, and how we plan on evolving in the future.

On Bunches

Bunches is the social network for sports fans. Alongside single player experiences like scoreboard, there are group chats for discussing leagues, sports, teams, and even players.

With nearly 250,000 users and growing rapidly, our UGC is one of our most valuable assets...and one of our biggest risks, as moderation is one of our biggest challenges.

Go visit a random Instagram sports meme account comment section and you'll get a small taste of the content issues were facing. Or imagine your favorite pub, where people are a little heated and tipsy...but then make everyone pseudonymous. It's not civil. It's not pretty.

Welcome to sports in the digital realm.

Discussion about a rival user's family. Racial and homophobic insults and slurs. Constant innuendo not suitable for some younger audiences. Off-topic rants. Spam comments and scam invitations.

The list goes on.

Our Current Approaches

Currently, we do what most people would do in our situation...and in some cases, we take further steps than some would otherwise take:

  1. We have an allowlist/whitelist and a denylist/blacklist of words, insults, and links. We systematically check every message for these lists and moderate appropriately.

  2. We have implemented an AI automated image recognizer to detect pornographic or otherwise inappropriate imagery.

  3. We have user-centric tooling for blocking users or messages and managing what you see as an individual user. Users can also report individual messages, which are then reviewed manually by our team (via integration with a dedicated Slack channel).

  4. Systematically, we can moderate messages (muting them for being "off-topic") and Bunches team members can soft- or hard- delete messages altogether.

  5. Bunch owners can kick/ban users from individual group chats (Bunches), and Bunches team members can remove users from the platform at large...including banning on device ID (which is far more reliant than IP, which a simple VPN gets around).

Other Viable Approaches

This is absurd, to be honest.

Larger companies like ByteDance and Meta handle moderation with scaled-up versions of the above: throwing more tech and more people at the problem. These teams and systems handle moderation platform-wide across users and content.

Other companies like Reddit and Discord distribute the problem of moderation through administration and isolation: each server or subreddit is isolated from one another, with each fiefdom having its own moderation team that reviews and decides on content.

Either way, platforms to date have centralized the power of moderation to either platform-wide teams & systems (such as ByteDance and Meta) or to moderators in isolated communities (such as Reddit and Discord).

The problem with this is that moderation can fail in one of two ways: moderation attempts and systems fail either because of abandonment or abuse.

Abandonment

Moderators under-use their power. They fall asleep on the job (sometimes literally), or content sneaks through during "off-hours", or moderators have inconsistently applied rules, or automated moderation systems go down for a period of time. In any case, the responsibility of moderation is vacated by the centralized authorities in charge of it. This abandonment of responsibility leads to a noisy platform, distrust in moderation systems, and an opinion by the user base that the platform is incompetent.

Abuse

Moderators over-use their power. Content is removed even when it technically follows the laid out rules of the platform, moderators exercise personal vendettas against users via their power, or entire communities have their voices silenced via malicious individuals, misaligned algorithms, or buggy code. This abuse of responsibility leads to a dying platform, distrust in moderation systems, and a contentious relationship between platform and user base.

Alignment: A Better Way Forward

Whereas centralized approaches to moderation fracture the relationship between users and platforms, decentralized moderation can align users and platforms.

Something that we're pursuing here at Bunches is what I believe will be a better way: decentralizing moderation to users themselves. I explain what this could actually look like below, but first the why.

I've said this many times, but o is nnot fundamentally a financial technology. web3 is fundamentally an economic technology. Tokenization is a phenomenal tool for aligning incentives between two or more parties who don't trust one another. After all, this was the primary problem that crypto originally solved (at least probabilistically).

In a world where both abandonment and abuse lead to a distrust in moderation systems and a fracture in the relationship between platform and user, aligning incentives around content moderation seems like a crucial problem to solve for consumer platforms.

By creating shared ownership, platforms can also share the responsibility of moderation.

What This Could Look Like

STEP 1: ESTABLISH ONCHAIN REPUTATION

The first step is for the platform to determine and ideally quantify high-quality contributors. This could be done in a variety of ways, and can include both first-party and third-party data, but at it's most basic form you identify users who are creating and consuming content in a meaningful way. Questions to ask around this identification: Who sends the most messages? Who posts the most original content? Who reacts, likes, replies, or comments the most as a lurker or consumer of content? Whose social graph is high quality and growing? Establishing a rules engine for reputation is the zeroth step; implementing that rules engine via an on-chain mechanism is the next.

This can be done via tokens of any kind (or even other onchain mechanisms like attestations), and again can include both on-platform and external data (this is up to the platform to define), but identifying and quantifying contributors is the goal here. An example of this in action is something akin to Yup's Yup Score (docs here), but perhaps more specific to the content platform.

STEP 2: PROPORTIONALLY ALLOCATE POWER BASED ON REPUTATION

Once reputation is established for your user base, build moderation tools that require consensus from X% of relevant users.

While the rules for consensus may differ from platform to platform, no single user should have the authority to moderate a message or user. Perhaps you'd want to base the threshold for consensus on the total reputation that has access to the content. Perhaps you'd want to base the threshold on reach of the content, or that have a social connection to the original author, etc.

There are probably many permutations of the mechanism that would work, and experimentation would be necessary to get it right here on a per-platform basis.

STEP 3: AUTOMATICALLY ENFORCE MODERATION BY CONSENSUS

Once consensus is reached for a moderation action by relevant users, the platform itself has to enforce the collective action via code (and smart contract when appropriate). There should be no additional human input required. If the threshold is met, the action is taken.

This immediacy accomplishes two things: it shows that the consensus mechanism has immediate effect and it shows that the users (not the platform's moderation team or algorithm) control what content is seen or distributed.

A PRACTICAL EXAMPLE

On Bunches, I've been toying with some of these concepts, and we have enough data internally to proceed with what I believe could be a very interesting model for consumer web3 companies like Bunches, Farcaster, Lens, etc.

In practice, this could be as simple as an upvote/downvote mechanism, weighted by the reputation score of each voter. If a threshold is hit (either in absolute terms or as a ratio), a moderation action against the content or against the user is taken.

The key is making these actions clear, easy, and intentional. Users should not accidentally ban a user, delete a message, or time someone out. Nor should users have to read pages of documentation to figure out how to do so.

What's Next?

Well, we're building this at Bunches. It's a real problem, and I believe we have a real solution for it.

Want to learn more, or just chat about this? Ping me! I primarily hang out on Farcaster these days, so feel free to send me a reply (thinking in public is great!) or shoot me a direct cast there.

Otherwise, thanks for reading! 🙏

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#moderation#consumer#web3