Why do We Collect Things? Love, Anxiety, or Desire: Progressive Decentralization in Crypto Applications

Why do We Collect Things? Love, Anxiety, or Desire: Progressive Decentralization in Crypto Applications

Introduction:
People have various motivations for collecting things, whether it be out of love, anxiety, or desire. In the UK, approximately one-third of the population engages in some form of collecting. This behavior can be attributed to the endowment effect, which suggests that we tend to value things more once we own them. Additionally, psychoanalytical theories propose that collecting may be a result of unloved children seeking comfort in accumulating belongings. Furthermore, collecting can also stem from existential anxieties, as the collection becomes an extension of our identity, living on even after we do not.

Progressive Decentralization: A Playbook for Building Crypto Applications:
When it comes to building crypto applications, progressive decentralization is a key concept to consider. Andreessen Horowitz, a prominent venture capital firm, emphasizes the importance of community ownership in crypto projects. However, they caution that starting with a wide token distribution may attract speculators rather than genuine users. It is crucial for crypto applications to have a working product before launching a token, as ownership without functionality holds little value and fails to retain a loyal user base. Launching a token too early may also lead to compliance issues. In order to determine the success of a crypto application, three components must be present: product/market fit, community participation, and sufficient decentralization.

Product/Market Fit:
Similar to traditional startups, the earliest stage of building a crypto application requires a great team, lean development, tight execution, and quick learning. It is essential to address any concerns or complaints from users, as it indicates that people care about what has been built. Transparency regarding the level of control within the application is vital. While some level of control is necessary, it is important to communicate clearly about where control exists and how it is being managed.

Community Participation:
In order to foster community participation, providing economic incentives is effective. A fee-per-call business model, similar to API micro-services like Twilio or Stripe, can be implemented. By distributing a portion of the fees to active contributors, the community is aligned with the success of the project. However, it is crucial to introduce fees only once strong network effects are established, ensuring defensibility through switching costs. Crypto protocols should aim to cover relevant costs without seeking excessive profit, as this incentivizes community contribution.

Sufficient Decentralization:
To achieve sufficient decentralization, the core team must relinquish majority ownership of the application and mitigate platform risk. This can be achieved by ensuring the product is community-owned and operated. Retaining a certain number of tokens allows the company to benefit from fees and growth while still prioritizing community participation. Failing to formalize real community involvement may result in a lackluster community with low participation rates and heavy reliance on the founding team.

Actionable Advice:

1. Prioritize building a working product before launching a token in crypto applications. Ownership without functionality fails to attract genuine users.
2. Communicate clearly about the level of control within the application and address user concerns promptly. Transparency is crucial for building trust and maintaining a loyal user base.
3. Implement economic incentives, such as a fee-per-call model, to foster community participation. Distributing a portion of the fees to active contributors aligns the community with the project's success.

Conclusion:
Understanding the motivations behind collecting and the principles of progressive decentralization in crypto applications provides valuable insights into human behavior and technological advancements. By recognizing the importance of product/market fit, community participation, and sufficient decentralization, developers and entrepreneurs can build successful and sustainable projects that prioritize user needs and foster a strong and engaged community.