Progressive Decentralization: A Playbook for Building Crypto Applications and The History of Non-Fungible Tokens (NFTs)

Progressive Decentralization: A Playbook for Building Crypto Applications and The History of Non-Fungible Tokens (NFTs)

Introduction:

In the world of cryptocurrency and blockchain technology, two key areas of focus are progressive decentralization and the rise of non-fungible tokens (NFTs). Both concepts play a crucial role in the development and success of crypto applications. In this article, we will explore the common points between these two topics and provide actionable advice for building successful crypto applications.

Progressive Decentralization:

When it comes to building crypto applications, one of the fundamental principles is progressive decentralization. This approach involves gradually shifting control and ownership from the core team to the community. However, it is important to note that launching a token and pursuing community ownership too early can lead to a community of speculators rather than real users.

To ensure the success of a crypto application, the focus should initially be on achieving product/market fit. This requires a great team, lean development, tight execution, and quick learning. It is also important to communicate clearly about where control exists, as users may be concerned about the level of control they have over the application.

The next objective is community participation. To encourage community contribution, a pragmatic and familiar business model for crypto services is a fee-per-call system. This fee stream can be distributed to active contributors, aligning the community around the project's success. However, it is crucial to introduce fees only once there are strong network effects to avoid discouraging participation.

The final objective is sufficient decentralization. This involves ceding majority ownership of the application to the community and ensuring the product is community-owned and operated. Failing to formalize real community participation can result in low participation rates and a heavy dependency on the founding team. It is important to strike a balance between community ownership and retaining enough tokens for the company's sustainability.

The History of Non-Fungible Tokens (NFTs):

Non-fungible tokens (NFTs) have gained significant traction in the world of cryptocurrency. NFTs represent unique digital assets that can be bought, sold, and traded on blockchain platforms. The concept of NFTs can be traced back to the launch of CryptoKitties in 2017, which introduced the idea of unique digital collectibles.

ERC721, a technical standard for non-fungible tokens, was introduced to track ownership and movements of individual tokens on the Ethereum blockchain. Prior to ERC721, Colored Coins served as the first form of NFTs, as they were unique and identifiable from regular bitcoin transactions.

CryptoPunks, another notable project, emerged as a unique NFT project that combined elements of ERC721 and ERC20 standards. This hybrid approach allowed for the creation of unique characters generated on the Ethereum blockchain.

The rise of NFTs has been fueled by the success of projects like CryptoKitties, which demonstrated the potential value and demand for unique digital assets. This led to the establishment of Dapper Labs, a company that secured significant funding from top investors, including Andreessen Horowitz and Google Ventures.

Actionable Advice:

• 1. Focus on product/market fit: Prioritize building a working product that meets the needs of users. Ownership of tokens is meaningless without a product that users find valuable.

• 2. Encourage community participation: Implement a fee-per-call system that rewards active contributors. This economic incentive aligns the community around the project's success. However, introduce fees only when there are strong network effects to avoid discouraging participation.

• 3. Strive for sufficient decentralization: Gradually shift control and ownership to the community, ensuring the product is community-owned and operated. Formalize real community participation to avoid apathy and heavy dependency on the founding team.

Conclusion:

Progressive decentralization and the rise of non-fungible tokens (NFTs) are vital aspects of building successful crypto applications. By following a playbook that focuses on product/market fit, community participation, and sufficient decentralization, crypto applications can achieve sustainable growth and align the interests of users and developers.

Incorporating unique digital assets through NFTs adds value and excitement to the crypto ecosystem. The history of NFTs, from CryptoKitties to projects like CryptoPunks, showcases the potential of unique digital collectibles and their ability to capture the attention of users and investors alike.

By understanding the common points between progressive decentralization and NFTs, crypto application builders can navigate the complexities of the industry and create innovative solutions that empower communities and revolutionize digital ownership.