Memes > Utility

Last week we shared our thinking on why we view DAOs as consumer products. In this post we’ll go a layer deeper and explore why we believe good token design requires the thoughtful navigation of something we’re calling The Meme-Utility Spectrum.

Cultural and consumer projects launch tokens to attract early believers, encourage collective experiences, and store the value of their shared belief and excitement. To effectively do this the tokens need to be imbued with meaning.

This meaning comes from two fundamental places – the tangible utility (access, benefits, services) that holding the token provides, and the intangible memetic value (status, association, belief, provenance, memory) that it captures.

The Utility-Meme Spectrum recognizes the fact that these two foundational pillars of meaning are actually competing with each other for attention. The more defined utility an object has the less effective it is at capturing belief in the underlying meme, and the better an object captures the mimetic value of a project the less effective it is as a utility.

We already live in a world with more tokens than we have the attention for, and the gulf between the volume of tokens and number of valuable tokens is only going to continue to grow. To stand out from the crowd we believe early-stage project tokens need to skew heavily towards the meme-side of the spectrum.

A good way to illustrate this concept is by comparing CryptoPunks and Nouns. At the surface they’re both PFPs in the style of pixel art, have the potential to be historically significant, and are important status and belief symbols in our ecosystem. But in practice they sit in very different places on the utility-meme spectrum and as a result are valued and coordinated around in very different ways.

CryptoPunks are pure meme. There’s no utility unlocked by owning one, no treasury, no cashflows, no roadmap. There’s just the shared belief in the stories that are being told around them and their associated cultural relevance.

This makes it difficult for a potential buyer to value them in a definitive way.  And that’s ultimately proved to be a feature. It has allowed the collection to stand on its own, with no external dependencies, and store the value of the immense attention and belief it possesses. An important part of the ownership experience is participating in justifying their massive price tag.

Nouns also started very skewed towards the meme-side of the spectrum, but for different reasons. People were captivated by the broad “propagate the meme!” mission and the elegance of the mechanism. Imaginations ran rampant with what was possible.

Having an elastic substrate that facilitated emergent narratives proved to be wildly effective at aggregating early capital, attention, and community. The trust people had in the founding team set an important foundation, and their captivating ownership experience has carried them the rest of the way.

Perhaps unexpectedly, one of the unique benefits Nouns has over Punks, the multi-million dollar treasury and the utility of being able to participate in spending it, has pushed Nouns towards the utility side of the spectrum over time. While a Punk continues to represent a meme, a Noun is now often seen as a “share of the treasury”. Where once the value story was driven by belief and imagination, now the Net Asset Value narrative has taken hold and auction prices are decreasing as a result.

This is of course natural – belief ebbs and flows. The goal is to leverage tokens to attract early believers and overcome the cold start problem that all networks face, and the Nouns meme effectively did that. They now need to use these resources to deliver on their promise and build long lasting network value.

Punks and Nouns are useful examples because of their grandiosity, but we have many other examples among our alumni teams. Cabin, Krause House, and Poolsuite have similarly captured broad meme-spaces, and have an army of supporters that are relentlessly building to prove their shared belief correct.

We’ve also seen many contrasting examples where tokens with over-described utility have suffocated any hint of excitement. Lists of benefits don’t capture imaginations, memes do.

Ultimately for a token to be valuable and useful to a project it needs to mean something to a growing number of people. The narratives that spread this meaning are something that every token creator can influence and design for. While there’s certainly no recipe for creating culturally relevant tokens, we believe that building with an understanding of The Meme-Utility Spectrum is an important part of the toolbox for trying.