The Evolution of Pay-to-Surf Models and Progressive Decentralization in Crypto Applications

The Evolution of Pay-to-Surf Models and Progressive Decentralization in Crypto Applications

Introduction:

In the late 1990s, the pay-to-surf (PTS) business model gained popularity as a way for companies to share advertising revenue with users who watched promotional content online. However, the dot-com crash led to a decline in this model. Today, the concept of pay-to-surf has evolved, with companies like Brave offering a better orchestration of this model. At the same time, the crypto industry has introduced the idea of progressive decentralization in building crypto applications. This article explores the commonalities between these two concepts and how they shape the future of online interactions.

Pay-to-Surf: From Promise to Challenges:

PTS companies initially attracted users by promising to share advertising revenue. However, they faced challenges such as fraudulent attempts to defraud the company and an influx of spammers. This forced many companies to terminate user accounts. To survive, the few remaining PTS companies shifted their focus to a rewards-based structure. Users earn reward points by surfing the web, answering marketing emails, or shopping at specific stores, which can then be exchanged for gifts. Brave, a browser, takes a similar pay-to-surf approach but with a better orchestration.

Progressive Decentralization: A Playbook for Crypto Applications:

Andreessen Horowitz outlines a playbook for building successful crypto applications through progressive decentralization. The initial stage of building a crypto application mirrors that of a normal startup, requiring a great team, lean development, tight execution, and quick learning. However, there are three key components that differentiate successful applications on a blockchain computer from traditional startups: product/market fit, community participation, and sufficient decentralization.

Product/Market Fit:

Before focusing on community ownership and launching a token, it is crucial to ensure that the application has achieved product/market fit. Without a working product, ownership becomes worthless, and the community will not stick around. Launching a token at an early stage may also lead to compliance issues. It is essential to concentrate on product development rather than being distracted by token-related concerns.

Community Participation:

To foster community participation, crypto applications can implement an economic incentive model. A fee-per-call structure, similar to API micro-services like Twilio or Stripe, can align the community around the project's success. However, protocols must be minimally extractive, covering relevant costs rather than maximizing profit, to incentivize contribution. It may be better to introduce fees once strong network effects are in place, ensuring defensibility through switching costs.

Sufficient Decentralization:

Sufficient decentralization is crucial to transition a token from security to non-security under the Howey Test. This means that the token holder should no longer rely on the efforts of others. The core team must cede majority ownership and ensure the application is community-owned and operated. Projects that fail to formalize real community participation may end up in an uncanny valley of decentralization theater, with an apathetic community and heavy dependency on the founding team.

Actionable Advice:

• 1. Focus on product development: Before considering community ownership and launching a token, prioritize achieving product/market fit. A working product is essential for long-term success.

• 2. Incentivize community participation: Implement an economic incentive model, such as a fee-per-call structure, to align the community around the project's success. However, ensure that protocols remain minimally extractive to encourage contribution.

• 3. Strive for sufficient decentralization: Transition from a security to a non-security token by ceding majority ownership to the community. Formalize real community participation to avoid dependence on the founding team.

Conclusion:

The evolution of pay-to-surf models and the concept of progressive decentralization in crypto applications highlight the importance of community participation and aligning economic incentives. By focusing on product development, incentivizing community contribution, and ensuring sufficient decentralization, companies can build successful and sustainable platforms that benefit both users and the broader crypto ecosystem.