Content Coins Won't Help Creators
They aren't novel, they aren't innovative, and they aren't going to work
Some context
Some dude or group of dudes named Satoshi Nakamoto invented bitcoin in 2008. A few years later, Vitalik Buterin thought that it would be cool if you could create applications on the blockchain, and thus, he invented Ethereum. His original motivation for getting into crypto at all?
“I happily played World of Warcraft during 2007-2010, but one day Blizzard removed the damage component from my beloved warlock’s Siphon Life spell. I cried myself to sleep, and on that day I realized what horrors centralized services can bring. I soon decided to quit.”
And that sentiment has basically been the driving mission of crypto: transfer power from centralized servers to decentralized entities. We’ve seen it with money, AI, physical infrastructure, and, perhaps infamously, with the creator economy.
We’ve tried it with NFTs. With tokenized access. And now, Zora is trying it with content coins.
Intro to Zora
Zora describes itself as an “onchain social network that reveals new opportunities to create, connect, and earn from your online life. With Zora, you can rediscover the power of the internet through crypto and help enable a more equitable system for creators and traders.”
The app itself has a familiar vertical photo feed, except each photo has a trade button and a market cap, there is a running counter of coins being bought and sold in the top left corner, and a list of top coins sits on the right side. So, while Zora is accurate in saying it's an onchain social network, I prefer to describe it as Instagram on crack.
The aforementioned market cap and trade is very important, because it’s what turns an otherwise regular photo into a mystical and virtous content coin.
What the hell is a content coin?
This is the million dollar question. Jesse Pollak, the founder of Coinbase’s blockchain Base and the guy who really started this whole content coin craze, defines it as such:
For those not yet fluent in crypto founder bullshitanese, he is saying a content coin is a memecoin attached to a piece of content. There is no other way to describe a valueless coin associated with an otherwise valueless piece of content.
If you say it’s not a memcoin, it’s a content coin, dummy, then I offer this rebuttal. What is the difference between this
And this
The first is the dogwifhat memecoin, a memecoin that, you guessed it, is just a dog wearing a hat. The second is the Base Is For Everyone content coin, a content coin associated with this picture that says Base is for everyone. So, I’ll ask again, what is the difference? What makes the latter a content coin instead of a memecoin, when neither of them have any intrinsic value or value prop beyond mimetics?
The answer is of course nothing. They are both just memecoins. The only reason Base and Zora call them content coins is because the ethereum-aligned crowd has spent the last two years shitting on memecoins. So, they have tried to rebrand them as content coins.
The content coin thesis
The logical next question is, if memecoins already exist, why do we need content coins? To answer this, we’ll refer to the writings of Jacob Horne, Zora’s founder, and old friend Jesse Pollak.
According to Horne, the internet has a “fundamental problem.”
We have yet to find a way to solve the tension of information wanting to be free and the fact that information is expensive to produce, distribute and consume.
Content coins can solve this problem by creating a value system that complements information.
The more widely spread and traded, the more valuable it can become. Creators capture value in the coins they own. Platforms capture value when they show the right coins to the right people at the right time. Consumers capture value by owning the coins for the content they find important, fun and useful to them. It’s a win-win-win.
And, as an added bonus, but it can help us cut through the internet’s noise.
This is a new paradigm where information and value converge to create information markets. These markets give us a crucial new tool to help us organize and sort through an increasingly infinite sea of content in an adversarial environment. This will not only create more aligned incentives for content production and distribution, but at the highest level helps us discover the most important and valuable things on the internet. At their best, free markets are truth machines, and now we get to apply them to the internet itself. It's not just the price and marketcap, but being able to see who is doing what and with how much. These are valuable signals to help us make sense of what to pay attention to.
Pollak hit on similar notes in his reasoning.
As for why anyone would buy these things, he offers two segments.
So, in summary, a content coin looks like a memecoins and trades like a memecoin, but it’s actually not a memecoin because it is created by “creators” and doesn’t have to be bought with the intent to make money. And the goal here is to return value to creators, ultimately fixing the internet’s fundamental problem of information both wanting to be free and being expensive to produce.
It’s a virtous mission, but I don’t think content coins are going to help creators. On the contrary, I think they will ultimately fail and possibly hurt creators for five reasons:
Coins of content don’t have any intrisic value.
People don’t collect just for the sake of collecting. Ultimately, the number has to go up.
Coining everything results in extreme dilution.
Introducing speculation changes the game for creators in a likely negative way.
Zora’s token launch and Jesse’s tweets are rubbing people the wrong way.
Now let’s go through these in more depth.
Coins of content don’t have intrisic value
What makes the Mona Lisa valuable? Or Starry Night? Or a Faberge egg? Or a cryptopunk? Or a 1/1 CSGO skin?
It’s the fact that only one or a few people can have it at any given time. They are scarce. So, just by the laws of supply and demand, they are valuable. A lot of people want them, not a lot of them are available, thus, they are very expensive.
Content coins will have a harder time reaching escape velocity in this manner. If you buy a content coin of a popular tweet, you don’t own any part of the tweet. You simply own a coin associated with that tweet. You could be the only one with the coin, or there could be a million people who own the coin. Either way, none of you actually own the content. Again, what you are really doing is buying a memecoin attached to that piece of content, and, as such, these coins have memecoins like supply.
This doesn’t mean that any given content coin can’t become valuable. Memecoins, despite often having total supply coins in the hundreds of billions, frequently become valuable. But, this is going to be much harder for content coins because of extreme dilution.
People don’t collect just for the sake of collecting
The idea that content coins are going to be some kind of collectors item is utterly ridiculous to me. Collecting is rarely done for the love of the game, and, as I said above, it’s not like these content coins are a 1/1 Pokemon card or stamp or whatever. They are just pictures of tweets that anyone can buy.
Most people, ultimately, want a financial return, and this is true for everyone when it comes to crypto. A good example to illustrate this is NBA Topshot.
NBA Topshot offered people a way to trade content from the NBA. Let’s say LeBron had a cool dunk in a game. The video of him dunking could be turned into a collectible that was traded on Topshot. It was a cool idea, and it absolutely exploded, with the most expensive Topshot (funnily enough, a video of LeBron dunking) sold for $230,000.
But then, it got too expensive, people realized maybe paying hundreds of thousands of dollars for a dunk I can just watch on YouTube is stupid, and the market collapsed. Suddenly, it wasn’t fun to collect anymore.
More broadly, you can apply this logic to the general NFT market. It turns out that the art looks a lot worse when it’s value is going down.
I don’t see how content coins will be any different. In fact, it will be more vicious, as there will be basically an infinite amount of coins, and coins are a lot easier to trade than NFTs.
Extreme dilution
In the absence of cash flow, memecoins are valued off attention. The more attention, the more people that buy, the more it goes up. As such, memecoins do best when they aren’t competing against a million other memecoins.
For example,
Doge reached a peak market cap of $85B.
Shib reached a peak market cap of $40B.
Pepe reached a peak market cap of $10B.
Bonk and Wif reached a peak market cap of $4B.
Pnut and Popcat reached a peak market cap of $2B.
GIGA reached a peak market cap of $800M.
You can see the trend here. Doge got so big because it was the only memecoin. As time went on, and more and more memecoins came into existence, attention became fragmented, and the ceiling was lowered.
This will be true for content coins. Zora explicitly wants to coin everything. This mass dilution will kill any hope that one of these things take off. And, that’s basically been the case. It’s been a while now, and the top three coins on Zora are only valued at $3.7M, $433K, and $402K. For those not in crypto, these are absolutely embarrassing numbers.
Unfortunately, it doesn’t seem like Jesse grasps the fundamental relationship between dilution, attention, and coin valuation, likely because he isn’t a trench warrior.
Speculation is probably negative for creators
Even if there was some small financial incentive for content coins, I don’t think many creators would find the juice worth the squeeze. As I discussed in my article on crypto developers, having a coin attached to you introduces a host of responsibilities and consequences that most sane people wouldn’t dare to touch.
Let’s say you’re a creator who makes a few thousand bucks off each sponsored Instagram post. You could plausibly make a few bucks extra if you made your posts content coins. But now, if you do, you’re reputation is now tied to the value of your content, because, remember, nobody in crypto collects just for the love of collecting. So, now you have degens bothering you about the coin value. Pestering you to post more. To stop launching so much content that dilutes the coin they already hold. Before you know it, you’re being harassed like professional athletes are from sports gamblers.
Why the hell would you put yourself through that for a few extra bucks?
Here’s the truth about coins: the only reason people release them is because they want to get rich off them. Right now it looks the max payout is about $28. Nobody big dealing with this headache for the reward of a mid NYC lunch.
Zora’s token launch and Jesse has given people the ick
It pains me to say this as someone who is actively building on Base, but Jesse is extremely cringe. These tweets sums up the sentiment nicely.
People are simply not buying what he’s selling. And, to make things worse, the way the Zora token launch was handled makes him look extremely shady.
Zora announced two snapshots for their airdrop.
In English, that means anybody who was active in these two periods would receive some free Zora tokens. Now, you might be wondering why wouldn’t they just do one long snapshot from January 1, 2020 to April 20, 2025. The answer is that Snapshot 2 is the time period Jesse was screaming on the timeline about content coins. So, that’s shady strike one.
Shady strike two is that 65% of Zora’s “for fun only” token is earmarked for insiders.
Shady strike three is that Jesse works for Coinbase, and Coinbase is invested in Zora. So, Jesse, even if he’s not a direct insider, is most definitely at minimum insider-adjacent. This gives him a lot of incentive to pump up Zora, which he did with content coins.
It looks like it paid off.
I anticipate Zora’s token to be basically down only, and because sentiment for apps is tied to their token prices, I think the sentiment around Zora will be extremely negative. Add in the disgust most people feel toward Jesse, and there isn’t much room for hope here.
Conclusion
I will root for Zora to do well because I want Base to do well, but I don’t see how this even reaches a semblance of success. The mission behind content coins is decent, but the implementation is extremely flawed. These coins are doomed on creation.
Combine that with the whole thing looking nakedly extractive, and you have an absolute embarrassment for everyone involved.