Storya’s Web3 Whitepaper — Market Overview

If you missed our Whitepaper Intro, please check it out here.

This section summarizes our thoughts about the crypto market, the opportunities it presents, and what the implications are for creators.

Specifically:

• THE PAST: Challenges of Web2 and the Web3 path so far
• THE PRESENT: Current situation and its implications
• THE CHALLENGES: Complex technological challenges surrounding the blockchain

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THE PAST: A THIN SLICE OF THE PIE

It is no secret that Web2 centralized platforms, from social media to publishing apps, have offered a poor deal to creators, from illustrators to creative writers to poets, to independent filmmakers.

The dominant platforms, from YouTube to Amazon Kindle, attracted creators with the size of their audience but offered very little beyond that. Monetization, the key to creators’ ability to continue, indeed, creating, was a slim chance dependent on:

1. The creators’ language: did they come from larger or smaller regional markets?
2. Existing financial capabilities: how much marketing could the creator do?
3. Added skills: how reliant were creators on investing in services needed to produce their work (for example, a fiction writer would need editing, cover design, etc)

In the absence of a large enough potential audience pool, marketing firepower, and complementary skillsets most creators have been largely reliant on luck (“the algorithm”) to establish themselves in their preferred niche.

The first step forward came with the launch of direct-to-fan monetization platforms like Patreon and Kickstarter. Those platforms provided an easier way for creators to gather a core fan base around their current and future projects and, for a small minority, make a living from it.

Yet, even those platforms did little to solve at the root any of the three key issues mentioned above. Average Patreon revenue for creators are around US$60 a month (1), hardly sufficient to allow the mass of creators to make a living from their efforts.

Enter cryptocurrency and blockchain-based technologies, like non-fungible tokens (NFTs).

It is already clear that, despite the issues affecting the Web3 ecosystem, which we will touch on, there have been some clear advantages to this technology.

So far, especially for illustrators and musicians, the ability to mint individual, limited-edition creations or collections of work as NFTs has given these creators the ability to instantly tap into people’s desire for unique digital assets, be it a profile picture for their social media, or the ability to buy music directly from their artists.

But the digital assets themselves are not NFTs’ primary appeal for creators. Successful projects have so far leveraged a combination of:

• assets
• communities
• utility

While the first stage of this market has seen assets alone being able to drive massive revenues and interest, on “simple” profile picture projects like Bored Apes Yacht Club, such interest turned out to be often speculative in nature, with buyers and sellers driven primarily by the hunt for quick returns, many of them ready to ditch the specific projects to bet on the next one.

This leads us to the current stage of the market.

THE PRESENT: SHOW ME THE COMMUNITY

As of June 2022, the cryptocurrency markets remain in a rout, with Bitcoin and Ethereum both at or near multi-year lows. However, creative initiatives in Web3, NFT collections and Metaverse projects, in particular, continue to see remarkable interest from well beyond the niche corners of creative and crypto communities:

• The National Basketball Association’s Top Shot store sells video highlights of especially compelling shots as collectible NFT trading cards.
• Entertainment company Secret Level creates NFTs of classic TV and film scenes (in collaboration with the content’s creators) that fans can buy, collect, and trade as NFTs.
• Coach, the luxury fashion brand, launched an NFT collection for the 2021 holidays, giving buyers a special bag that wasn’t available otherwise.
• Adidas recorded attendance at virtual and real-world events, like a fashion show or a collection launch, on the blockchain, and rewarded NFT holders with preferential access to new products and sales. (2)

Such projects and the many others like them seem to point to NFTs as a format that is here to stay. However, it is also clear that the speculative nature of many early NFT projects, characterized by a rush to both invest and cash out on the hype surrounding the NFT medium as a sort of “get rich quick” scheme is, fortunately, coming to end. This leaves creators with the real task of leveraging NFTs for what they are: a useful additional tool at their disposal that can, in many cases, offer more control over monetization, community, and project-building efforts.

THE CHALLENGES: THE LINE GOES UP (AND DOWN)

Despite the potential of Web3-related technologies and their applications, like the blockchain, questions remain about whether they can truly reframe the entire Internet user experience as we know it. Among the key issues debated:

• the environmental impact of transactions on certain blockchains
• the slowness of blockchain transaction
• the weak link between actual assets and blockchain records
• the potentially high transaction costs
• the security and privacy risks of visible wallets and their contents
• the difficulty of navigating the specific Web3 technologies such as wallets, cryptocurrencies, and smart contracts
• the lack of intuitive and well-integrated UIs for blockchain users

…to name just a few.

We will be delving into each of these issues, and their potential solutions, in articles beyond this whitepaper. We do not believe such issues should be ignored or swept under the rug. Yet, we do believe that at least partial solutions for many of the above issues can already be found within the compromises currently available (e.g. use of blockchains with minimal environmental impact). We also believe it is a disservice to creators around the world to dismiss this entire field entirely without properly weighing both its pros and cons.

Sources:

1. Our calculation, based on https://blog.patreon.com/the-first-ever-patreon-creator-census and other data.
2. https://hbr.org/2022/05/how-brands-are-experimenting-with-web3