CONTEXT
This is a republish and remaster of an article I wrote during the NFT boom of 2021-22. Throughout the article, I highlight some updates that have occurred since then in callouts like this one.
I also believe this article to still be largely relevant, considering the bull market we're likely entering and the uptick in cultural financialization we're seeing on platforms like Zora and Farcaster (both of which I love).
I don't want to be a pessimistic town crier or "chicken little", but rather want to soberly point at truths.
I hope this reads as humble encouragement for everyone building in the space.
Our decisions have impact and will have consequences.
A recent conversation with a well-known VC, a dinner conversation in Miami, a dinner conversation here in Nashville, and a tweet from Aaron Wright has really hit on one of the great philosophical divides that I’ve seen in crypto. Everyone seems to be asking how everything will be financialized but I think we need to be asking should everything be financialized?
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First, it should be mentioned that I buy (no pun intended) a lot of the arguments for this financialization of media and culture: creative output will be fairly priced (assuming markets are efficient), creators themselves gain access to new forms of monetization, cultural broker-dealers will be eliminated, cultural composability will unlock a lot of new use cases, etc.
However…very few people are talking about the real downsides here...and there are very real downsides. The financialization of everything seems a little off to many, but people I’ve talked to about this haven’t quite been able to put a finger on why.
At the same time, I think it excites a lot of people for the upsides, but I’ve seen a lot of short-sighted thinking in this area.
If we’re not careful, we’ll see a similar trajectory to that of social media: lots of promise, thoughtless execution and growth, followed by a “oh no, what have we done” moment.
Congressional hearings are the last step in this trajectory.
Money, crypto or otherwise, is morally neutral.
It’s a tool. It can fund war or charity, hate crimes or displays of love.
While there is no intrinisic virtue to currency itself (USD is paper, gold is a rock, bitcoin is math)…there are virtues intrinsic to the systems in which money flows.
Financial systems tend to have a sort of gravity: they prefer money to flow in certain directions and in certain ways. There are really great treatises on this thinking, so I won’t go too deep here, but would recommend Thank God for Bitcoin as a start which takes a look at the “moral compass” of most fiat systems.
The gravity of these systems not only encourages certain behaviors and currency flows (for instance, capitalism’s tendency to pool large amounts of capital with a select few firms or communism’s tendency to pool capital at the state level) but also cultural aspects as well. In my opinion, this fact is understated in today’s conversation about crypto.
What will our world look like when everything is an asset? It just so happens that we have clues already. Fast forward 10-15 years…culture may be efficiently traded and fairly priced…but at what costs?
Here are some things that I see happening unless we remain intentional and thoughtful about the world we're creating.
The qualitative becomes quantitative.
When pieces of culture are intrinsically denominated and market-traded, art, music, creativity become about quantities over quality. Now one may say that in a world where cultural assets are financial in nature, that their quantitative value will reflect their qualitative characteristics.
But has this been our experience so far?
How many projects have "mooned" based on the quality of art versus those that have mooned via whitelist dynamics, first-to-market characteristics, or social media marketing efforts?
How many copycat projects have arisen…and done financially well in the markets…simply because they’ve replicated successful projects and others are looking to cash out after aping in?
How many creator coins have been purchased because of true fandom vs. financial speculation?
It’s important to note here that the quantitative aspects to which we pay attention doesn’t just include price. How many holders, rates of change, who else owns a piece, and more are all data points that people pay attention to more than the cultural projects themselves.
Now imagine these dynamics at scale.
When there aren’t less than a million ENS domains, but hundreds of millions.
Now…these facts alone aren’t enough to doom the financialization of everything.
After all, more creators being paid for their work is certainly better than not.
Update Since Original Post
There have been some positive developments in this area at the protocol level: Zora and Optimism rewarding creators simply for creating makes a ton of sense to me, and could be a path forward to scale without running into some of the issues I highlight here.
But the qualitative becoming quantitative leads to a much more nefarious outcome…and one that I don’t believe we are thinking about enough.
The subjective becomes objective.
As culture moves more toward being valued quantitatively rather than qualitatively, something else will happen: we will lose subjectivity as a cultural characteristic.
Markets prefer to be efficient, and they tend to be more efficient when the things being traded are completely transparent and judged by the same metrics.
When valuing cultural artifacts, fewer people will ask questions like “what project do I appreciate” or “what project brings me joy?”, instead asking questions like “what projects are undervalued?” or “what’s a good project under $1000?”.
Artists will start creating for speculators, which has led to the convergence of art to the same median (how many punk or ape derivatives do we really need?). Collectors will collect not because of pure enjoyment, but rather because of financial speculation.
And speculation is the enemy of creativity.
Update Since Original Post
User-centric actions like Warpcast's tipping mechanisms (whether Warps or $DEGEN 🎩) and "collecting" on platforms like this one (Paragraph) or Lens are interesting ways to keep creations subjective while rewarding creators for purposes other than speculation.
This move from what do I value to where do I find value will homogenize society…and ostracize creators. As a society, we’ll lose the subjective nature of art in favor of watching numbers fluctuate…particularly in capitalist contexts where people are conditioned to idolize up-and-to-the-right charts and green text.
The financialization of culture may mean the financialization of people.
Let’s stop and ask a simple question: what do we mean by “culture”? Culture is an emergent property of society: culture is what people do. But it’s also a self-reinforcing property. That is, what people do creates culture. But this emergent culture then influences what people do. It’s cyclical.
Which means something extraordinarily significant when we begin talking about the financialization of culture.
This leads to another inconvenient truth: when the fabric of society, our culture, is financialized the threads of that fabric, interpersonal relationships, become financialized as well.
This is especially true as onchain social comes alive.
The financialization of culture may mean the financialization of people.
What does this mean?
Simply put: relationships become transactional in nature.
We see this in microcosm already. When someone DMs you to invite you to ape in to a new project or join a whitelist or to socially engineer your private key, they are disregarding you as a human being. They don’t value your time or your efforts, they are acting in a transactional manner. “This is what you can do for me and in return, you may get some economic value.”
Follow for follow. Collect for collect. Behave for airdrop.
Crypto spam is the system working as designed…whether or not we like it.
Update Since Original Post
While there have been some strides made here (XMTP's consent list, Farcaster's increasing focus on spam, etc.) and other projects that are too early to tell if they're going to be successful (Nomis, Karma, etc.), this remains a major issue for onchain identities and activity.
Granted, it hasn't been solved in Web 2 either.
Identity becomes economic in nature.
Western culture is basically already at this point, and the financialization of everything will merely complete the transition from communal identity (in religion, in family, in nation) to economic identity.
Even today, in most circles, "who are you?" is an equivalent question to "what do you do for a living?". I've already seen glimmers of this in various communities: "who are you?" or "what do you do?" becomes "what do you own?".
"What's in your wallet?" is no longer Capital One's slogan, but a primary question for self-definition in an overly-financialized world ... crypto or otherwise.
Now ask yourselves, what this could do to the fabric of society?
If constantly comparing ourselves to Instagram models and picturesque, curated lifestyles leads to a breakdown in mental health, won't consistent FOMO and wallet comparisons do the same?
What this means is that people who are unable to proudly point to extrinsic ownership will begin to have their intrinsic identities eroded.
Insecurity will set in as wallets aren't holding the latest blue chips.
As people around them succeed economically and financially, FOMO will give way to FOBNE: fear of being not enough.
While sadly it's already occurring, it's only a matter of time until crypto-related suicide becomes a commonplace thing.
Author's Note
This is not a fundamental flaw with the chain or crypto or financial assets in general. It's a fundamental flaw in human nature: we love to put our identity in things extrinsic to ourselves...most of which aren't worth putting our identity in.
Some (admittedly pithy) truisms:
The projects you've missed should not break you.
The projects you've got in on should not make you.
You are not your account balances, for better or worse.
You are not your wallet's holdings, for rug or blue-chip.
and most importantly:
You are not what you own.
Caveats: What I’m Not Saying
I’m not saying that nothing should be financialized. Quite the opposite. But when everything is financialized, the goods and services that should be often have their value diluted.
I'm not saying that cryptocurrency and smart contracts have doomed society. Again, the opposite. I love the promise that crypto and the chain offer to society. The crypto space brings market dynamics to places that really need it…and increases the efficiency of already existent markets. In most cases, I agree with Aaron’s tweet mentioned at the beginning of this article. Bringing tangible value to culture is a really good thing in many cases.
I’m not FUDing. I'm personally extraordinarily bullish on the space. I work in the space. I own tokens of all shapes and sizes. I'm building tokens of all shapes and sizes. Similar to the advent of the world wide web or social media, I think it's a massive step forward, but definitely comes with its pitfalls. I’m not a pessimist by any means, but definitely strive to be a rational realist.
I'm not saying that everyone in the space believes that everything will be or should be financialized...but from my experience many do.
So what happens when everything becomes a financial asset?
Overall, I sincerely and truly hope that I'm wrong here, and that I'm missing the trees for the forest.
By learning from past mistakes of waves like the mobile revolution and the advent of social media, I fully believe that we as builders can head these things off at the pass...if we identify the potential issues ahead of time.
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.
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