Exploring the iterative logic and value opportunities of Web3 applications through the lens of the Builder economy

If we place the Builder economy at the height of human civilization’s evolution, it brings about a fundamental economic system transformation: tribal society (small countries with few people, communal labor, and shared distribution), agricultural civilization (slavery, monarchy, and religion), industrial and commercial civilization (capital and politicians), science/information civilization (technology, capital, and politicians), digital civilization (user-built and shared in the blockchain/Web3 era), and interstellar civilization (unknown)…

We have the opportunity to write a new narrative chapter for human “civilization to come” with the “distributed/decentralized blockchain/Web3, Token incentive mechanism/Builder economy, and organizational governance structure of smart contracts/DAO.” We can even expect a coherent interstellar civilization after the digital civilization (only when humans complete digital evolution will they have the ability to explore the universe).

In the historical view of human civilization’s advancement, the evolution of civilization is driven by the adaptation and transformation of survivors to the environment. Therefore, in the era of digital civilization, the individual’s survival paradigm/labor value and the economic structure/production relations of the entire ecosystem will have decisive significance. We should first enter the Web3 infrastructure construction, where Builder users play a spontaneous role in the development based on interests and expertise in the digital/Web3 ecosystem, and obtain corresponding identity status and value returns based on contribution.

After The PrimediaDAO’s planning of the three major obstacles to cracking the integration of “Web3 technology and industrial life,” we conducted an interview with Safe Treasury, a one-stop asset management and collaboration platform for Web3. Safe Treasury is dedicated to providing DAO/Web3 applications with Builder users’ contributions as the core, completing the construction of users’ assets/rights and reputation/credibility, and providing users with on-chain asset management tools. It also promotes users’ division of labor and collaboration in DAO/Web3 applications and ecosystem co-construction as a case study. In the context of the advancement of digital civilization, we analyze the implementation path and systemic value opportunities of the Builder economy in the iteration process of Web3 applications.

1-Iteration

First, let’s clarify the general concept of Builder economy, such as Bitcoin mining, DeFi liquidity mining, and PLay2E practices. These all represent the rights and benefits of the contribution/data assetization of Builder users. Therefore, here, the term “Builder” is not limited to the developer community, but rather to the entire Web3 ecosystem builders, including miners, developers, creators, operators, and all those who provide valuable labor in the construction of the Web3 ecosystem and can receive corresponding rights and benefits.

1.1 Paradigm shift in the universality of survival

In the context of iteration, the best comparative effect is the content creator economy. In the Web2 era, content creators/Builders could earn income by doing what they loved and promote the monetization model of the creator economy. However, this was not enough to promote the iteration of the economic structure and provide the opportunity for a paradigm shift in the survival of the entire ecosystem of content creators/Builders. This is because it could only provide limited income opportunities- only the top 1% of creators with a large number of fans and readers could sustain their business operations. For example, 1.4% of musicians on Spotify account for 90% of revenue, and more than half of the revenue on Twitch goes to the top 1% of streamers.

More importantly, it is still an economic relationship of centralized institutions exploiting/harvesting labor- Web2 era centralized platforms take the majority share of the economic value contributed by content creators/Builders. For example, record companies and streaming platforms almost completely monopolize market share and content product distribution rights, and typical music artists can only earn about 10% of licensing royalties.

According to data from Linktree’s report, 35% of content creators in the Web2 era are unable to make a living, and 59% have not monetized their content at all. Watashi, the founder of Safe Treasury, has nearly ten years of product design and management experience in the Web2 era and has dedicated himself to NFT trading market projects and community building. He believes that Web3 is pushing the content creator economy of the Internet era towards a paradigm of laborers/Builders in the digital civilization.

Taking Play 2 Earn as an example, although it has gradually become a gimmick for speculation and trading in the cryptocurrency community, and is exiting the center stage of the Web3 application era (replaced by Web3 games and Metaverse games), it still provides a good example of a digital economic activity with personal survival paradigm utility that can be participated in by the general public.

Watashi believes that this mainly depends on the low-cost creation of value for users and the efficient circulation/trading of assets provided by blockchain/Web 3. For example, using the number of active wallets participating in the native token SLP as a representative of Axie’s user base, it reached nearly one million during its peak. Most of these users do not need to master technical or programming languages to understand and use complex financial infrastructure. However, when they can complete payments through SLP in a few minutes, Play 2 Earn is exploring the survival paradigm of Web 3 laborers/Builders in the process of digital civilization iteration.

As more and more laborers/Builders enter the user production behavior at the survival paradigm level, the convenience of asset management and services on the chain becomes particularly important. This is exactly the problem that Safe Treasury aims to solve: it reads all on-chain transactions and displays them in a more readable way; tracks all tokens and DeFi assets; supports single and multi-signature Gnosis Safe transfers; filters transactions through wallets, tags, tokens, and dates; adds financial tags to transactions in batches and can also add remarks… After completing the payment and on-chain data recording based on individual contribution of Builders/Contributors, Safe Treasury is also developing on-chain DID to establish individual reputation values and other DID elements in the community, thus empowering the Builder economic process.

1.2 Iteration of Organizational Management Forms

In the era of Web 2, centralized decision-making, contribution (salary/options) transformation, and evaluation system iteration go hand in hand. The practice of DAO/Web 3 shows that with the characteristics of decentralization, no third party, and resistance to censorship achieved through encryption technology, the form of social organization management has another way of playing- the contributions of laborers/Builders can be recorded, the settlement method of rights and interests is made public, and Builders receive corresponding value returns according to their contributions, which will inevitably motivate members to devote themselves more wholeheartedly to team building. Laborers/Builders can also participate in community governance and decision-making based on their contribution levels, which to a certain extent, avoids the subjective factors that influence centralized decision-making in the era of single-point decision-making, further optimizing the economic structure and governance paradigm based on the Builder economy.

1.3 The Necessity of Community Quantitative Mechanisms

The founding team of Safe Treasury believes that in order to serve contributors, it is necessary to trace the historical data of each contributor. This corresponds to a quantitative mechanism and the equity and permissions behind it. Smart contracts and blockchain have brought the internet into an era of ownership, where a user’s contributions can directly affect their equity calculation, and the value of a builder’s contribution in the builder economy is associated with the incentives they receive. To implement a quantitative mechanism suitable for the current community, the community needs to do the following:

1. The equity received by the builder should not be determined by the platform, but should be jointly determined by the builder and the community based on objective facts and community positioning.
2. The community itself has a clear positioning and vision, and measures user contributions with effective and sustainable metrics.
3. All user contributions and actions in the community can be stored persistently and cannot be changed, and can be proven without third-party verification. That is, user contributions need to be recorded on the chain at the appropriate time and in the appropriate manner, and after the data is persisted, offline analysis of builder contributions can be performed. This ensures that builders do not need to spend energy on their contribution records and worry about their income from contributions. Additionally, it allows for personalized recommendations, analysis of a builder’s preferred areas and strengths, and work habits to help builders participate in division of labor and collaboration more efficiently within the application.

2 — Path

Looking at the economic system in the context of technological, product, and application iterations, compared to the point/reward incentives in Web 2 applications and the token/incentive incentives in Web 3 applications, the point/reward in Web 2 applications can only circulate and consume within isolated applications, lacking the economic mechanism for investment, consumption, and trading within the application ecosystem. In Web 3 applications, users’ contributions/data/assets are attributed to Builder user DID in the form of token/NFT assets, and can be circulated across protocols and applications, and have financial functions of investment/arbitrage on the basis of consumption/payment/trading scenarios.

Each Web 3 application is an independent “small country” with a closed economic system, and the Token/coin issued is the “currency” of the application/”small country” economic system. Therefore, there will be a singularity macroscopically, and the entire Web 3 ecosystem will have enough applications/”small countries” running smoothly. Builder users will participate in the co-construction and sharing of the Web 3 ecosystem with their own interests/specialties (close to Marx’s self-development), and support a non-competitive economic ecosystem of digital civilization with “few people and mutual benefit”.

However, microscopically, especially in the early stages of Web 3 ecosystem co-construction, a non-competitive economic ecosystem will not spontaneously form. On the contrary, there are no “national borders”/boundaries between applications in the Web 3 world, and Builder user DID can be active in multiple similar Web 3 applications. Therefore, each Web 3 application needs to seize more Builder users to participate in the co-construction of its own project’s ecosystem.

Safe Treasury founding team believes that Web 3 applications need to consider how to better incentivize builder users to participate more persistently and deeply in collaboration and ecosystem building when the token incentive mechanism is not yet economically self-sustaining or when users rely on transactions for survival. Compared to the “full project token” incentive, a combination of “project token + stablecoin + fiat currency” is a better way. The value of a project token is 0 in the beginning, and it can only be continuously consolidated and pushed up in value through the collective efforts of builders. However, builders are also human and have real-world needs in the current environment. Therefore, a flexible compromise is needed to incentivize contributors. Once the value of the project itself is established and the business flywheel starts to turn, the incentive can gradually shift to a “full project token” incentive, forming a self-contained on-chain ecosystem.

Token incentives are roughly divided into two types: commitment compensation and retroactive compensation. Commitment compensation is more like a formal job, where a certain amount of time is dedicated to DAO work every week. The specific work is continuous and arranged according to the organization’s needs, without requiring individuals to produce specific results at a fixed time. Retroactive compensation corresponds to temporary work and clear work results, usually work that can be completed in the short or medium term and is easy to quantify.

Compared to traditional equity incentive mechanisms, token-based incentives for work have the following advantages:

• High asset liquidity and short time to market (no need to wait for acquisition or IPO).
• Automatic matching of market compensation (the equity value of a startup is tied to the company’s value at the previous round of fundraising).
• Rewards are more directly related to the company’s technology products and community value, and are not subject to the company’s capital structure.
• Compensation for employee welfare losses caused by external factors (capital gains, wage taxes, and local regulations) in different ways.
• Obtain basic liquidity from the lending market without triggering taxable events.
• Obtain additional token rewards through pledging, borrowing, and yield incentives.
• The token dilution process is transparent. The total token supply can be coordinated with stakeholders through a transparent approach.

The incentive methods (and their pros and cons) in the Web 3 community include:

• Retrospective bonuses (funds/tokens) given after contributors have made their contributions (flexible for DAOs, does not require long-term commitments, but contributors may have uncertainty);
• Salary flows (funds/tokens) that can encourage long-term, stable contributions, but may not be suitable for certain types of work;
• Collective rewards (funds/tokens) determined by collective evaluation of individual contributors’ contributions (decentralized collective evaluation mechanisms, but individual rewards are less certain);
• Governance rights/tokens (allowing members to have a greater sense of participation, but governance token values generally have greater volatility);
• Tips (funds/tokens) paid directly by the central organization (can be the fastest way to reward contributors, but is highly centralized and may lead to uncertain income);
• Bounties (funds/tokens) (suitable for some special tasks, but monitoring the completion of tasks correctly is a challenge);
• Donations (suitable for complex plans/projects incubated within DAOs, but their effects are also difficult to verify);
• NFTs (can be used for tickets, establish reputation systems, but their liquidity is limited);
• SBTs (SBTs can serve as personal reputation certificates, combined with DID to become a resume in the Web 3 world).

This incentive system not only ensures the incentive mechanism but also tries to solve a very realistic problem in the early co-construction of the Web 3 ecosystem — how a Web 3 application can take care of the livelihoods of some excellent Builder users who do not have other full-time/commissioned work in the real world. For example, if a Builder user of The PrimediaDAO participates in collaborative research and creation more than three times a month, and his/her contribution is equivalent to completing two independent content analysis articles, The PrimediaDAO can infer that he/she is almost in a full-time state of participation in collaborative research and creation. Therefore, in order to better play its role and ensure its survival in the real economic world, The PrimediaDAO will provide a bonus reward of 600–1000 U tokens in addition to the corresponding amount of token incentives.

Therefore, for early Web 3 projects, effective fund management is equally important as on-chain asset management. Based on the above analysis, Safe Treasury has formed a collaborative platform that combines “Web 3 application fund management + Builder user on-chain asset management” to serve the Web 3 ecosystem. Therefore, in addition to on-chain related services, Safe Treasury also attempts to provide a more transparent financial disclosure solution for Web 3 community governance, trying to establish financial norms for Web 3 and generate financial statements, creating an aggregator that integrates all assets for Builder users and Web 3 applications.

3 — Value

Throughout the long history of human evolution, each era of civilization represents the adaptation of human social order to changes in the external environment and the structure of survival. The digital civilization is no exception. Human nature is complex, and real-world laws are the bottom-line norms of human morality that regulate social behavior. In the Web3 world, smart contracts regulate the behavior of builders and guarantee the normal operation of community governance.

Internal coordination and governance of the community require members to share common values and goals, and the constitution (smart contract) is the interface of shared values. The existing DAO constitution takes the form and structure of modern constitutions, defining power and responsibility through clauses, expressing values and guidelines through declarations, and encoding goals, values, and rights mentioned in community and Web3 project digital constitutions. This is called computational constitutionalism, where the community is defined by their use of smart contracts.

As a product of power decentralization in the community, the constitution also defines a specific narrative of how the community collaborates in a decentralized manner. This is mainly reflected in proposal rights, proposal questioning rights, voting rights, non-discrimination, and exit rights. The constitution defines the community’s goals and values, which are primarily divided into developing specific Web3 technologies, disseminating technologies for the benefit of the world, and building communities. The expressed values include openness, inclusivity, free access, and decentralization.

The founding team of Safe Treasury believes that early builders and contributors can gain some of the value they help create on the platform and ultimately govern and control it under reasonable decentralized governance rules. Essentially, this is the greatest social transformation created by decentralization here — hand over these companies to builders.

We can imagine that in the process of the digital civilization based on Web 3 application iterations, this is a new paradigm of survival structure, which is a little more equal and a little more socialist, allowing each builder to participate in the ongoing economic creation and sharing in the world, and having corresponding social governance rights based on their contribution, rather than being limited to a few individuals such as capital, technology, and politicians. As a result, Web 3 applications will greatly unleash human creativity, and while completing the evolution of digital civilization, humans can also begin to imagine interstellar civilization…