Lesson 4. Hype
This lesson has been crafted by Dev Majesty, a respected voice in web3 known for her insights into tech, marketing, and community dynamics. You can follow her work and stay updated with her latest content by connecting with her on Twitter. We are excited to have her as the creator of this lesson, bringing you valuable knowledge on how to navigate the often-turbulent waters of Web3.
The Reality of Hype in Web3
This is the next 100x. This project is going to be revolutionary. All the cabals have shared it. Chances are, if you’ve heard statements similar to these, you have fallen into the psychological tactic of “hype.” To better understand why this tactic works effectively within Web3, we have to first understand why Web3 harbors the perfect environment for hype to front run all other marketing tactics. Web3, for reference, is defined as an idea for a new iteration of the World Wide Web which incorporates concepts such as decentralization, blockchain technologies, and token-based economics.The scene of this digital frontier moves at light speed with metas changing seemingly by the second. Then, add something like “hype,” which burns bright and fizzles quickly, and you have the perfect storm.
In the ever- changing market nestled within cryptocurrency ecosystems, we find that due to this constant change and innovation of technology with seemingly limitless boundaries coupled with the ability to remain anonymous, users are able to push out whatever they want, wherever they want and when they want, with, as little consequence as possible. One can see how this could pose significant dangers. No aspect of blockchain ecosystems are exempt from the dangers that lurk from bad actors and masterminds utilizing tactics to appeal to a large number of users, to execute their grand plans. Layer 1(L1) blockchains are in a race to be the next big thing and NFT(Non- Fungible Tokens) projects over-inflate promises of value that haven’t been created yet with potential earned funds from pre-mint to execution. So then this poses another question- How can users avoid falling prey to massive potential losses of time, money and effort?
Common Tools and Practices That Drive Hype Without Substance
How can you spot subtle tools/practices used to drive “hype?’ When users first step into any degree of blockchain ecosystems, it can be rather intimidating, especially when there is so much to learn. It’s like stepping into high school the first time as a freshman- you internally feel you have a walking target on your head. Just remember — even those who are quite seasoned do not know everything. The space is always changing, tech is always improving, so good news is — you will never have a shortage of things to learn. Let’s familiarize ourselves with some common tools that are used when seeking to generate hype. Scarcity, exclusivity, FOMO (Fear of Missing Out) — any sound familiar? These three are collectively some of the greatest tools a bad actor can utilize. It’s as if our own mind is used against us! Many, in the past, will limit availability- spots, tokens, allocations for a dev net, etc.- and this triggers an almost immediate response in us that inclines us to feel like we just have to have it and we’ll go to any length to get it, whatever IT may be, even if we have little to no knowledge of what IT is.
This overwhelming feeling of urgency then becomes solidified with aggressive marketing like sponsored posts being shown via your algorithm, posts from influencers promoting the product(they are incentivized to do so regardless if they even like the product), as well as whale manipulation. In strategically having larger influencers shill for them, it creates a massive funnel of users who will join in hopes of a juicy return. A lot, if not most, of this manipulation happens behind the scenes where whales will coordinate with each other to artificially pump whatever they are trying to create mass excitement for, therefore, resulting in a draw in of new investors or interested users to attract a quick appeal just long enough for whales to extract value and increase further demand.
In some cases, celebrities or well-known individuals will pay for a flashy or super high quality/professional website and integrate the heavy usage of buzzwords like “metaverse”, “DeFi”, “AI powered” — subtle indicators of an attempt to distract from the lack of substance by linking their “product” to the value of the asset by means of technology-themed jargon or choosing something popular in the eco at the time. This can carry over in their vague whitepapers or roadmaps promising highly unrealistic “returns and/or value.” Constant rebranding, delayed timelines, endless beta phases but no viable product raise even more flags. Many will even go as far as manipulating themselves into showing off a fake community- with low quality and/or little engagement but high numbers. They will populate themselves as much as possible with paid shills and bots in an attempt to stimulate some real interest by playing on our visual association. We’ll think, “oh, they have 20,000 in their community, they are most likely going to have a high floor price”- and we would be WRONG.
One of two notable examples of this is Astrals, which was an NFT backed by a very popular celebrity. This person’s success was leveraged to stimulate “hype” but the end result was no real viable product or actual involvement of said celebrity, and the price quickly plummeted resulting in the failure of the project. Similarly, the launch of Jungle Cats around the time of the popular series on Netflix called “Tiger King,” one of the main characters leveraged the timing of a surge in NFTs as well as the virality of their temporary fame to stimulate interest and promote a product that was not viable. It received heavy marketing and exposure, but dried up due to price plummet and lack of interest.
A cliche rule of thumb is- if it’s too good to be true, it probably is.
The Hype Bubble: More Awareness ≠ Better Product
As we have discussed, deceit exists in the real world and Web3, but awareness is key. I am using the analogy of a bubble in relation to “hype” here, because eventually a bubble pops. We are now readily aware popularity most definitely does not equate quality or long term success for a project. In fact, in many historical cases, it was quite the opposite. Let’s take a dive.
I remember how excited I was for an up and coming project called “Knittables.” For me, at that point, I had been in the ecosystem for some time and felt I could, very confidently, invest my time, money and efforts into getting whitelisted to mint/purchase this NFT, maybe even a few. So many things were a green flag: a doxxed team, partnerships with big names, extremely high- quality animated art. Sadly, for me, and many, many others- their bubble eventually popped. The feeling of your heart dropping when you see “A Letter from the Founders” (which historically indicates an announcement from the project, stating it will soon come to an end or a major re-direction which, many times, ends up being a net-negative for the project) is a feeling I can’t quite explain. It’s likened to the feeling when your boss has to have a chat with you and you know something bad is coming. After constant rebranding, redirecting, relaunching and restructuring, project interest from users fizzled out, and the company stopped producing anything in regards to their product.
Reminiscing on the “Lily NFT” project was yet another example. The art was high quality, and due to its diverse appeal, having male and female traits, it resonated with all types of users calling themselves the “Lotus Gang.”. Grandeur plans to turn it into a legitimate brand by way of teasing some relevant utility. However, delayed timelines, redirection, and a “we are pausing development,” this unifying project soon turned to sadly yet another failed business model.
The Scope of Hype: From Shitcoins to L1 Blockchains
So where do “shitcoins” fall into this story, considering we have only mentioned these marketing tactics in the NFT realm? Think even bigger. These schemes are typically highly strategized to attract even more people and much more money; But now, how come you’ll hear “rug pull” or “dead project” referred to almost interchangeably? It is super important to understand the difference between the two. A “rug pull” is an instance where a investor/founder(s) will push a company or project ONLY to close up shop, taking all the assets and funding with them, disappearing without a trace. Whereas a “dead project” or failed project, the team gradually does less and less to forward the project and it fizzles to nothing, by effect, plummeting the valuation whether via floor price (NFT), L1 chains that have since “died” with no active support or users building, or tokens that are just no longer actively being traded or supported by the projects community. They become, or are associated as a complete failure or being a money grab with eventually ending at zero. In essence, one resonates as a ponzi, and other is a failed business, however, both can result in great losses. Coin Desk really delved into this topic in this article, “Crypto Rug Pulls: What Are They & How to Avoid Them”
A common tactic of manipulation is in regards to tokens. It has been widely used for years but is now surging in popularity. A perfect example is of an individual or team leveraging their popularity to “rug” their victims in the common case of pre-sales. A pre-sale for a token is highly appealing because for the scammers- it requires minimal resources to set-up and an unrealistic promise of the potential of a high return. This popularized meta is actually what inspired the real purpose behind the greed experiment. The $GREED token was created with no clear purpose or details, leveraging hype and FOMO to entice people into taking risky actions like giving permissions to unknown websites and signing potentially dangerous transactions. The experiment was a social commentary on how greed can cloud judgment, which led to many users ignoring security practices and all rational thinking. A valuable lesson indeed.
Expanding further on these dangerous metas- scammers can intentionally exploit promises with unrealistic ideas in an aim to take advantage of the lack of legal regulations surrounding crypto. By using hype-driven marketing and exploiting FOMO by unbeknownst users who may not understand the full implications of neglecting risk assessment, it can set the perfect stage to collect funds with minimal accountability. Real world examples we can all learn from can also be found from self proclaimed blockchain detective, ZachXBT, who curated a detailed list of some of the most notorious scams in Solana’s memecoin frenzy during just a few weeks earlier this year. Check it out HERE.
L1 blockchains are not exempt from unfortunate scenarios. And while not impossible, there is much more effort required in building a complete scam of an L1 so in many scenarios, many L1s end in failure and are not necessarily intended to be a scam. This failure can occur for a plethora of reasons. Lets look at the examples of Tezos, Aptos and Sui. Though each one respectfully boasted a bright future in the beginning- advancement gradually slowed in stark contrast to their initial hype. This resulted in many investors losing interest. Sadly, if there is a lack of interest, there will be a lack of users- and a lack of users disparages investors to continually fund a “dying chain.” It’s not impossible for an L1 chain to defy the odds of being written off as a complete failure, but it takes a dedicated unicorn to break away from being stigmatized and grouped together with the plethora of L1s that “died” and made their ascent to the graveyard of forgotten chains.
Beware of the Buzzword…
So we have delved into the surface of scams and scenarios to air on the side of caution, but how can one actively protect themself? The answer to this question is very broad, but a great place to start is by creating subconscious red flags for yourself that help you air on the side of caution with new projects, chains or tokens. A notable mention is to beware of buzzwords; we mentioned this earlier, but, repetition for emphasis. Buzzwords are strategically used in marketing tactics to appeal to people because they often ignite people’s psychological and social triggers which directly influence people’s perception. Buzzwords play on social proof, emotions, persuasion, memorability, credibility-boost and they can help simplify something that may be otherwise difficult to understand. Buzzwords are not always used negatively, but when overused to compensate for a lack of substance in a product, it can lead to these “hype” trends, with no delivery of an actual, viable, and long term product or solution. Here is an article with 10 commonly used crypto-themed buzzwords, that users should be aware of so they can individually determine if a team boasting a product with the use of any of these, is actually living up to their claims and not loosely trying to appeal to trends.
Due Diligence aka DYOR: The Power of Asking the Right Questions
Growing up in school, my teachers year after year, repeated the same statement- there is no stupid question. This same principle absolutely applies when doing your due diligence in a potentially promising project, token or chain. But now, what are the RIGHT questions to ask? The right question will not lack in purpose.
Here are some examples of questions to ask yourself when going through the direction of a project:
- Basics: Is the team transparent and doxxed? Do they have a thorough whitepaper with clear, concise direction and estimated timelines when goals should be reached to accomplish their larger goals? Do they have long term goals? Is their jargon too hard to understand? Are their responses repeatedly vague?
- A deeper dive: What problem are they seeking to solve? What is the utility of this product? Does the team have ample background or experience to execute their goals? If a token- what is the tokenomics structure? How is this being funded: VC backed, token sales, grants? Are there any active or proposed integrations or partnerships? How are they advocating for security in their product? What is their approach to governance (This is important in regards to all decentralized projects)?
- An even deeper delve: Do they have legitimate legal representation? Are their partners credible? Is their communication purposefully opaque?
Take advantage of the plethora of resources (some, I included at the end of the lesson) that you have available to you like X(Twitter), credible articles, forums, even cross referencing LinkedIn profiles. Being able to effectively DYOR before heavily investing in anything within these realms, is a critical element of risk assessment. Evaluate their fundamentals, utility, capability and vision to ensure their growth can be sustainable in years to come BEFORE making a decision.
Analyze a Hyped Project
Briefly expanding on enhancing your analysis processes- what happens when you can’t stop seeing a project, and ALL your friends have WL and you’re feeling massive FOMO, but you arrived to the party late and launch is around the corner? These instances are the scenarios people most often find themselves in, meaning we are more often pressured to make a rash, uneducated decision because everyone else is. A perfect example is the case of “Crypto Undeads.” They were overhyped by a lot of big and, even, respectable players in the ecosystem. Yet, their direction for sustainable growth was extremely vague. This was one of many tell-tale signs and they eventually “died,” controversially due to a “lack of planning” as some have said or just a plain case of “they chose money over community.” Whatever the actual case, they have dissipated and are not actively promoting themselves or their intended utility. A sad, but, unfortunately, common story.
Conclusion: Navigating Web3 with Caution and Insight
In this wild jungle of bad actors, money and manipulation- there is, however, a silver lining- an acclaimed decentralized world that can potentially create opportunities for one to pursue financial freedom however one sees fit. This however, as we have learned, comes with great risk. We went over critical points such as the dangers of hype tactics in marketing, the power of buzzwords and how quickly narratives can be falsely created to apply buying pressure- especially amongst comrades. Do not allow yourself to fall victim to these baseless claims of being the “next big thing” or “revolutionary” with false promises of making you “rich.” Rather go forward in education, as you continue to learn of the plethora of niches and realms that exist in the wide world of blockchain and cryptocurrencies.
I now leave it to the reader to decide if that risk is indeed worth the reward; but, at least, you now have some of the tools and awareness to understand how to place who is worth your time, efforts and money- and who is not.
Exam
Congratulations on completing Lesson 4. Now, it’s time to test your understanding of the key concepts covered. Go to THE EXAM.
Please read each question carefully and select the best possible answer. And answer all 5 questions correctly to pass the test. This exam is designed to reinforce your learning and ensure you’re equipped with the knowledge to avoid common pitfalls in Web3.
For this lesson to be considered completed and to count towards your first semester rewards split, ensure you use the same wallet that you registered with (which should be visible on our leaderboard). Complete the exercise and submit it before 3PM UTC on Wednesday, 4th of September. Good luck!
We hope you found this lesson insightful and engaging. Thank you for participating in the fourth lesson of the GREED Academy, and thank you to Dev Majesty for her amazing work preparing this lesson. We look forward to seeing you in the next one.
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