Emerging Revenue Models in DeFi

A look into how DeFi projects are trying to monetize

Oddly enough, revenue models for web3 products are one of the most contentious topics in the industry.

Seeing as many projects are subject to the strict decentralized ethos that the larger blockchain community ascribes to, it’s not surprising that companies looking to extract revenues from their application are often ridiculed.

However, it’s important to recognize that in order for any web3-native products to be sustainable the higher they get in the stack, the stronger the need for a degree of value capture which routes back to the issuing entity.

Most commonly, tokenized protocols and applications conducted huge ICOs, largely aggregating millions of dollars into a war chest that act as a runway for the development team’s first few years (decades? *cough cough Tezos*). As many of us have seen, this commonly translated to poor token model which would bottom near zero - leaving token holders upset and the issuing entity with no recourse to future liquidity.

In today’s article, we want to take a look at web3-native companies which take a different business approach, namely through the subtle integration of service fees.

It’s worth highlighting that behind both of these examples are untokenized projects which live within the larger DeFi landscape.

Let’s explore their models and put some of the myths to rest.


As a consumer-facing savings application, Dharma leverages Compound to offer users an annualized return on supported assets like Dai and USDC. What’s unique about Dharma is that it’s largely targeting the non-technical audience that many DeFi protocols fail to address.

In particular, the way the project is branded, marketed and packaged is vastly more consumer friendly than a lot of the other savings applications on the market. Under the hood, Dharma leverages native tokens called dTokens which represent the interest-bearing assets stored in a users wallet (dUSD or dDAI for example).

Similar to cTokens on Compound, dTokens on Dharma earn passive income as part of a larger lending liquidity pool. However, the primary difference is that with dTokens, 10% of the accumulated interest is routed back to Dharma itself.

This subtle shift caused many to express “If Dharma is taking 10%, why would I ever use them”? To that, the answer is convenience.

Just these past few weeks, Dharma announced both peer to peer trading in a Venmo-like fashion and the integration of a Layer 2 scaling solution called Optimistic Roll-Ups which allow transactions to be processed instantly.

Paired with its mobile first approach, it’s highly possible that many new users may get their first intro to DeFi through Dharma, all of which paints the perfect picture for a sustainable revenue model. 



Next up we have dYdX, a hybrid margin-trading exchange and lending protocol which has been making major waves in recent weeks.

Due largely to its capacity for traders to go long or short with up to 5x leverage on Ether without having to undergo KYC in tandem with passive income opportunities on all capital deposited to the exchange, dYdX is currently capturing roughly 40% of the DEX market.

This substantial growth coincides nicely with the introduction of trading fees, all of which help offset the gas expense dYdX covers on behalf of its users.

“Takers with orders over 0.5 ETH will pay 0.15% and 0.50% if it’s less than 0.5 ETH. In addition, the DAI/USDC pair will have a separate fee model where takers in excess of 0.5 ETH will incur a 0.05% trading fee compared to 0.50% for takers of less than 0.5 ETH.”

Tying this back to our earlier point, dYdX does not have a native token, and has been doing quite well without them. Since implementing their revenue model, trading volume has only continued to explode, recently reaching it’s ATH in volume of $45M on Black Thursday a few weeks back.

Profit First / Token Second

While there are numerous other niche companies following similar models, we’d like to highlight the fact that creating a token at inception is no longer a “requirement” for launching a web3-native business.

Instead, we largely encourage token projects to consider how they are capturing value and later tokenize the rights to that value once a clear path to revenue has been achieved.

A great example of this is Audius - a distributed streaming platform - who recently shared their plans to monetize in a fantastic tweet storm.

Tokens or Revenue? 

Tying this all together, we’ve yet to see a token project leveraging a purely token-first approach (Kyber and Synthetix being future contenders) demonstrate that their model is sustainable.

It’s important to recognize that we are huge fans of innovative token models, and long hope that they can either replace or complement revenue streams entirely in the not-so-distant future. In the short term, we believe that directing protocol fees towards a DAO may be the most viable and supported way of doing so.

For now, we hope that Dharma and dYdX can best show that as of today, not everyone will fork a protocol that has fees and that even DeFi users seem to be comfortable paying for a value added service.

If you or your project are eager to explore how revenue streams are evolving in web3 in more detail, give us a shout!

We’re constantly on the lookout for new ways to leverage the web3 ecosystem in an attempt to drive the needle forward.

Everything you need to know about Gitcoin Grants Round 5

Diving into the new round of Gitcoin's Grants and how to launch a campaign

Welcome back to another edition of Token Tuesdays! 

This week marks the beginning of the quarterly Gitcoin Grants CLR Round.

We’ll cover what’s new with Round 5 along with a quick guide on how to approach launching Gitcoin Grant proposals.

Let’s dive in!

-Lucas and Cooper

A Brief Recap on Gitcoin Grants

For those unfamiliar, the Gitcoin Grants CLR Rounds leverage quadratic funding - a fundraising mechanism where Gitcoin matches grants relative to the number of individual contributors to a given project, rather than the total amount donated to the project. As an example, a project that receives 50 individual 1 DAI donations will receive a significantly higher amount in grant funding from the matching pool than another project that receives a single 100 DAI donation. 

Every quarter, the Gitcoin Grants round has consistently grown, both in terms of the matching pool and the amount of individual donors. While not depicted, Gitcoin Grants Round 4 broke new records with a $200,000 matching pool and over 5,936 contributions across 230 Ethereum projects. 

Gitcoin Grants Round 4 Review

What’s New in Round 5

With Gitcoin Grants Round 5 beginning yesterday, we look forward to another successful round of innovative and sustainable web 3 funding. 

The new round features a $250,000 matching pool with the following allocations: 

  • Public Health ($100,000) - Support for COVID-19 research, response and recovery projects

  • Tech ($100,000) - Support for Ethereum infrastructure projects, DeFi protocols and applications, wallets, and more

  • Community ($50,000) - Support for media, community, and marketing projects 

The most notable addition here is the $100,000 support for COVID-19. The virus has taken a toll on global economies and it’s great to see the Gitcoin team taking an altruistic approach in mitigating the aftermath and supporting those affected. 

Round 5 also introduces a handful of new features tailored towards a better donation experience for contributors. This includes: 

Negative Voting: Given certain controversies in the last Media round,members can donate against Media grants to signal negative feedback. The amount donated is deducted from the grants matched funds. 

Fixed Pairwise Threshold: On the backend, Gitcoin has upgraded their matching algorithm to better mitigate collusion.

Recurring Donations: Users have the ability to donate projects on a recurring basis for future CLR rounds. 

Grants Feed: In order to promote signals rather than capital, Gitcoin has implemented an activity feed that allows donors to add messages to their donations. 

Evangelizing Donations

In addition to the massive amount of work done by Gitcoin, a number of other DeFi projects are also leveraging their products or applications to help encourage donations from the broader community. Supporting projects include: 

  • The Giving Block - Making crypto donations easy for public health partners

  • PoolTogether - Donator Ticket Giveaway

  • rDai - Use rDai to pledge support to Gitcoin Grantees alongside prominent community members 

Most notably, PoolTogether is giving away free tickets to all donors within a 72 hour period. The exact timing of the giveaway is yet to be determined, but make sure to follow PoolTogether on Twitter to know when it goes live. 

Outside of those three, there are plenty of other initiatives running in tandem with the CLR round, all facilitating contributions towards this altruistic form of web3 funding.

Generally speaking, it’s great to see more and more projects who’ve run successful grants in previous rounds to take a step back and help new projects realize their potential. 

Checklist For Launching a Gitcoin Grant

For those looking to run a grant this round, we’ve created a high level checklist on what you’ll need for a compelling proposal.

  • Project Overview - What is your project and how is it benefitting the larger Ethereum ecosystem? Keep it short and sweet and link to a larger primer if you have one.

  • Recent Traction - What are some of the key metrics you’ve achieved that show your project is being well received? Provide links to social proof or research which backs up your claims.

  • Use of Funds - What are you planning on doing with your donations that you couldn’t otherwise do? The more creative the better, however the biggest takeaway is that unless you need the funds to something specific, we encourage you to let those funds go towards other project which can put them to tangible use.

  • Why Gitcoin? - Have you explored other funding avenues? What is it about Gitcoin Grants that makes this funding opportunity unique and beneficial to your project.

  • Learn More - The shorter the proposal the better. However, please don’t assume that everyone knows everything about your project. Instead, point them to a few crucial resources which best explain your project and it’s future vision. (i.e. a specific Tweet thread is better than just generally linking to Twitter).

What To Expect

In the coming weeks, we expect this round of grants to start vamping up. It’s important to recognize that there’s a fine line of begging for money and encouraging donations in a digestible fashion.

The best thing you can do is make people aware of the value of the project, rather than directly asking them to donate. Similarly, it’s important to recognize those who support your grant. With the latest grant feed, it’s never been easier to add a quick comment thanking someone for their contribution.

Perhaps the best part of CLR matching is that even $1 of donations goes quite a long way in the larger pool.

We encourage users to take this opportunity to try and onboard new users into the space, better helping them understand just one of the many avenues in which blockchain-based funding mechanisms can amplify community support.

If you or your team are interested in setting up a Gitcoin Grant but struggling on coming to terms with whether or not it’s appropriate, give us a shout!

Until then, we’ll see you on the grants feed!

Maker's Black Swan

Reviewing the aftermath of last week's events for MakerDAO

For anyone who has been keeping an eye on the DeFi landscape, it’s hard to go far without hearing mention of Maker and their stablecoin, Dai. 

Maker is a permissionless lending protocol which allows users to post supported collateral - like ETH, BAT and now USDC - in order to mint new Dai. The system is unique in the sense that there is no KYC required to do so, and anyone can actively deposit or withdraw collateral to their Vault at their convenience.

To give some context on the points discussed in this article, there are a couple key aspects of the system which are worth keeping in mind. 

Stability Fee & DSR Relationships

In the current version of Maker, tokenholders vote on the spread between the Stability Fee - a debt which is incurred by those who borrow Dai and the Dai Savings Rate - an annualized return earned by those who lend Dai.

What’s important to recognize is that the spread is used to help control the outstanding supply of Dai.

In situations where demand is low - often taking the form of Dai trading below $1 - the DSR will increase, effectively incentivizing people to save more Dai to capitalize on an attractive return. When demand is high - often taking the form of Dai trading above $1 - the DSR will decrease, as to encourage people to close their Vault and supply the rest of the market with that Dai.

Similarly, the Stability Fee is a great way to aid in the borrowing of Dai. Simply put, the higher the Stability Fee, the less likely people are to borrow, thus providing a better control on a smaller circulating supply.

Collateralization Ratios

As with most of DeFi, active positions are overcollateralized by a minimum of 150%.

What’s interesting about Maker is should a Vault fall below the required 150% collateralization ratio, the position is automatically liquidated, with a 13% penalty applied. The collateral stored in a Vault is then auctioned off to buy-back the lost Dai, generally resulting in the borrower losing ~50% of their collateral in the process.

These auctions are performed by designated ecosystem actors called Keepers, and herein lies the story of our article.

What Happened?

Remember how all Vaults require a minimum of 150% collateralization?

Well what happens when the price of Ether drops by ~50% within 24 hours like what we saw on Thursday in light of the global pandemic?

To state it plainly, a very large number of Vaults get liquidated, effectively triggering a mass Keeper auction. Now while Keepers were swarming to bid on the first round of liquidations (while ETH was still around $190), the price kept dropping, going all the way down to $80.

This effectively created the largest list of liquidation auctions to date. While Keepers fought to participate in tandem with mass margin calls on DEXs like dYdX, gas prices went as high as 200 gwei, roughly 10x their normal costs.

Seeing as Keepers bid on auctions using Dai, the market suffered from an extreme shortage due to demand drastically outpacing supply.

What resulted was 99% of Keepers buying what they could, still leaving a large gap in auction capacity.

This is when one Keeper decided to do the unthinkable - bidding to buy all the liquidated collateral at $0/ETH.

Seeing as there was no other Keepers with Dai left to counter this bid, the auction *succeeded* and one Keeper made off roughly $4.5M worth of ETH for $0.*

The result? Everyone who was liquidated received 0% of their collateral in return, effectively creating a bad debt expense to the tune of roughly $5M. 

This thread of Reddit goes to show just some of the dozens of Vault owners who were drastically affected by this swing.

Julien Bouteloup@bneiluj
Here we are... as mentioned yesterday "auctions in @MakerDAO with zero bids successfully winning is no good" and triggered liquidation of many CDP's at 100% (not 13%...)
reddit.com/r/MakerDAO/com… reddit.com/r/MakerDAO/com… DAI ☠️

Julien Bouteloup @bneiluj

Over the past few months experts* were literally like: "You guys should open a CDP to long ETH & DeFi" Moon 🚀 dump time: experts are gone. & CDP's owners: "HELP...wtf I can't close my CDP's, my DAI are locked into DeFi....150 gwei doesn't go through...I can't go to bed"

As the dust started to settle, it was determined that Maker would hold their own auction, effectively minting new MKR which would be sold on the open market to recoup the $5M worth of Dai that had been lost in the Keeper exploit.

Maker Backstop Syndicate

In lieu of the liquidity crunch and the upcoming auction, the DeFi community has banded together to create the Maker Backstop Syndicate. 

The goal of the syndicate is to effectively become the buyers of last resort for the auction, ensuring that the auction results in a success and all of the system’s debt is covered through the sale of MKR. 

“We are proposing establishing a pooled auction contract that would give syndicate participants a way to participate in the auction process should the price of MKR (denominated in Dai) fall to, say, 100 DAI / MKR. Anyone could trigger an auction using pooled funds at the given price once the auctions begin, and all participants in the pool would be able to redeem the tokens they minted by supplying Dai for the equivalent Dai / MKR blend held by the pool.”

The Maker Syndicate garnered a fair amount of traction as prominent DeFi community members pioneered the effort. Some of the well-known names include:

  • Brendan Forster (COO of Dharma)

  • Ryan Sean Adams (Bankless)

  • DeFi Dude (Founder of Ethereal Summit)

  • Pet3rpan (MetaCartel)

  • Anthony Sassono (EthHub and Set Protocol)

If you’re interested in looking at the full list of pledges, you can visit the official google doc here.

It is a relief to see that the DeFi community have elected to support the Maker Protocol during these troubled times. The strong community sentiment is a testament to Maker’s increasing antifragility - a property found in crypto protocols where shocks, volatility and other stress events result in an increased capability for the system. 

As a response to the system’s malfunctioning, a multitude of new implementations are being considered to help prevent an event like this from happening again.

Maker Responds

While the community driven efforts are well-received, MakerDAO has also proposed a handful of system changes to combat the issues and return Dai’s peg to its rightful place. These changes include: 

  • Lowering the DSR to 0% 

  • Reducing Governance Security Module to 4 hours, instead of the current 24 hour window

  • Implementing a “decentralized circuit breaker” 

DSR To 0%

The most shocking change here is the DSR dropping to 0% - the lowest it has ever been since inception back in November 2019. The cut to the Dai Savings Rate came as a by-product of the decision to cut the stability fee to 0.5%. 

The drastic reduction to the stability fee creates a new dynamic for Dai (as we outlined above) as it is now cheaper to borrow Dai from Maker than any other DeFi platform, theoretically creating an influx of new supply from users.

How the changes to the DSR and Stability Fee will play out in third party lending markets is yet to be seen, but we’ll be keeping a close eye on it in the coming weeks.  

Governance Security Module (GSM) Changes

Even though the recent introduction of the 24-hour GSM was a safeguard against flash loans, it constrained the ability for MKR holders to react swiftly during times of volatility. In turn, MakerDAO submitted to the proposal to reduce the GSM to 4 hours as a measure to ensure protection against governance attacks while speeding up the turnaround time for new executive votes. 

Decentralized Circuit Breaker

The last major addition to the suite of executive votes includes what effectively is a decentralized circuit breaker, to be utilized only by the authority of MKR holders. 

The proposed solution, engineered by the Maker Foundation, will enable the ability to temporarily disable Vaults from being sent to the auction liquidation module. To re-enable liquidations, MKR holders would have to pass a subsequent executive vote.

It’s important to note that the proposed module lives outside of the GSM and is not subject to the aforementioned 4-hour delay. 

The introduction of the circuit breaker provides another tool for MKR holders to effectively ensure the proper functioning of the system at large. From a high level, this is a relatively simple mechanism to implement at a technical level as well as decentralized at the social and governance level. 

However, all of these tools and changes may still not be enough to restore and battle-harden the Maker system.

There’s one last thing MakerDAO is looking to implement.

Introducing USDC as Vault Collateral

With the above mentioned measures in place, Maker effectively looked to stimulate Dai supply however they could. Unfortunately, this was not enough to bridge the gap for the upcoming auction demand. Instead, the team decided that introducing a new type of collateral was the best way to quickly allow users to create new Dai.

To a high degree of contention, USDC was selected as the new collateral type, effectively allowing users to supply the permissioned stablecoin at a 20% Stability Fee to create new Dai.

The theory is that the high Stability Fee can be seen as a short term measure to allow users to mint new Dai to participate in the upcoming auction while discouraging average users from using USDC to create Dai in the long-term.

Here’s a great thread on why USDC was chosen as the newest form of collateral.

What to Expect?

On Thursday morning at 10:30AM EST, Maker will host its auction to recapitalize the system - effectively selling batch amounts of newly minted MKR in exchange for Dai.

The details of the auction can be found here, all of which will be quite interesting to watch unfold.

For Vault owners who were affected by this situation, we largely expect the proceeds from the auction to go towards reimbursing those who lost all of their collateral, but that is still yet to be discussed.

It’s interesting to note that despite the drop in the DSR to 0%, roughly 27M is still sitting in the contract - largely highlighting the lag in information across all Dai users.

In the meantime, we recommend staying up to date on all things Maker via their official forum or by following their Twitter.

If anything, this exploit goes to show DeFi still has a long way to go before its ready for primetime, and that experiments like these are perhaps some of the most novel form of decentralized coordination we’ve seen play out to date.

Until then, stay safe out there!

Reflections from the ETH Circuit

A recap of the past month of Ethereum events

Perhaps one of the most novel aspects of the Ethereum community is the myriad of events taking place on a global scale.

From hackathons to niche conferences and community meetups, many have come to dub the suite of events the “Ethereum Circuit” - all of which have been going on for years on end.

This past month, I was lucky enough to navigate the circuit, attending events in Denver, London, and Paris for three jam-packed weeks of innovation and research.

In this week’s article, we’ll reflect on the trends that were discovered from these travels, along with a quick thought piece on why participating in these events has more value than what meets the eyes.


Taking place over the course of Valentine’s weekend, many have come to note that ETHDenver serves as one of the strongest, most exhilarating hackathons to take place. With nearly 1,000 attendees coming together for 48 hours of development, there was certainly no shortage of innovation on what was being built.


Throughout the weekend, the most discussed topics included DAOs and Flash Loans, the latter of which was notoriously brought to center stage from the recent bZx attacks.

Beyond the headline news, some of the more creative submissions included:

  • Bound - A Patreon-like product for artists to provide exclusive content using a tokenized bonding curve

  • Flowerpots - A Github-based widget to allow for Ethereum-based tips

  • UpsideDai - 20x leverage on the volatility of Dai

  • DaiKittyDai - Wrapping CryptoKitties to earn a pooled prize


Just two weeks after ETHDenver, the ETHGlobal tour continued with a smaller, more intimate hackathon in London. What lacked in quantity was certainly made up for in quality as roughly 50 submissions all packed an awesome punch.

During ETHLondon, the most discussed topics included Interest-Derivatives and Privacy, with a special shoutout to NFTs of course, CoronaVirus.

Thanks to the leading sponsors from Aave, Aztec and a suite of UI/UX prizes from companies like Dapp Hero and Pepo, many of the winning submissions tied together a number of these ideas to display creative consumer-facing products.

Some noteworthy submissions included:

  • Daj - collect future interest now by locking collateral until maturity

  • GoodGhosting - Interest-earning game to incentivize saving between friends

  • LoanShark - Lease an NFT for a predefined period of time

  • zkDai + Sablier - Stream private money through an intuitive interface.


Although I wasn’t able to attend, many colleagues stopped through New York for a special conference dedicated to all things NFT.

I’d like to give a shoutout to Michael Arnold from MyCryptoHeros for putting together a fantastic recap on his takeaways from the event.


Unlike the two hackathons mentioned above, ETHCC was centered around emerging trends in the industry, with talks on everything from community development to DeFi, DAOs, ETH2 and more.


Based in the heart of Paris, it was refreshing to see such a strong turnout despite the constant headline news about the danger of CoronaVirus.

Unique to the event was a game called Trust Community, in which attendees were rewarded with Nectar tokens for connecting and endorsing other conference goers. What was unique about this game is that rewards were dynamic - meaning the amount of NEC received per connection varied relative to how many people were connecting around you. In short, the less frequent connections being made, the more NEC was received.

The game was a huge success, with top players earning roughly ~$1500 worth of NEC for connecting with 100+ other attendees.

Beyond the networking activities, top trends including the emergence of Metaverse-based games like Sandbox and Crypto Voxels, different ways of incentivizing governance and drawing a spectrum for developer responsibilities/obligations when deploying smart contracts to mainnet.

Perhaps the most obvious example of this is that of iEarn.Finance in which the lead developer, Andre, was brutally criticised when the system was exploited despite the fact that Andre has intended for the product to be “only for him”.

During a number of panels, there were avid discussions on the difference between a passion project and a tangible product/company - all of which challenged the notion of whether or not the creator’s should be at fault if more people flock to a contract than what was originally intended.

Similarly, I was able to learn about the intentional segmentation between Reddits’ r/ethereum and r/ethtrader which have come to be regarded by many as the best decision the Ethereum Foundation ever made for driving forward conversations in a more controlled environment.

The Power of the Circuit

In summary, there’s something special to be said for being on the ground floor of these events. It’s evident that valuable information commonly spreads from the source, and many of the trends discussed at these events have subsequently taken on a life of their own on social media.

Beyond the access to timely information, IRL interactions tend to drive more creative discussions than those that happen online. My biggest takeaway from the circuit was that while it was extremely beneficial for meeting new people and making stronger relationships, it’s very important to find a healthy balance between travel and solitude.

Towards the end of ETHCC, there was a common theme of relief as everyone geared up to head back to their base and build upon the ideas which had been incubated in the previous week(s).

Looking Forward

While many are skeptical of the circuit continuing this May in New York, it’s likely that a suite of virtual events will take its place.

In the short term, MetaCartel will be hosting its first virtual hackathon, the Dragon Quest, which will offer bounties, workshops and tutorials on a suite of emerging sectors.

In the meantime, I strongly encourage anyone interested in Ethereum to be on the lookout for hackathons and meetups hitting a city near you - as the enthusiasm and innovation is quite contagious.

Similarly, keep an eye out for Proof of Attendance Protocol NFTs as they’re a great way to keep track of your travels through unique badges for every notable Ethereum event you attend!

Perhaps the most interesting aspect of these events is that I can count on one hand the number of times the price of Ether was mentioned - despite the fact that all that was being discussed was Ethereum 24/7.

If anything, this goes to show that the industry at large is maturing, and with all the innovation described above, it won't be long until we find a framework that resonates with a much larger audience.

Democratizing Fashion

A look into tokenized clothing brands on Ethereum

It’s a late one, but welcome back to another week of Token Tuesdays!

In the past few months, we’ve seen the emergence of tokenized clothing brands on Ethereum. These unique assets leverage bonding curves to provide dynamic pricing and a new mechanism for market price discovery.

The “hypebeast frenzy” going on in streetwear today is a perfect example of where tokenization would help optimize the existing market for all parties involved.

Shout out to Cooper for staying up until 4:30am grinding this one out while in Paris. It came out great so we hope you enjoy this dive into the democratization of fashion.


-Lucas and Cooper

When it comes to the tokenization of unique assets, web3 applications unlock innovative new ways to contribute and capitalize on the upside of scarce value.

In the traditional world, fashion is one industry in which verifiable scarcity has been taken to an extreme.

To provide a few concrete examples, check out this article on the nature of hypebeast resale markets. What unfolds is secondary markets for clothing like Yeezy’s which sell at upwards of 1000% more than their original sale value.

But what happens when the very people who contribute to these drops are able to share in their upside?

Earlier today, we saw the launch of two extremely interesting brand economies - both of which tie together aspects of tokenization, democratization and scarcity as a new parallel for value creation.


Inspired by streetwear, gaming, NFT art and crypto-economics, MetaFactory has developed a crowdfunding platform for the creation of limited run, custom goods with an initial focus on fashion and apparel.

Zora Drops

Orchestrated by the creators of SAINTFAMEdao, Zora is a marketplace to buy, sell and trade limited-edition goods. All of these goods are launched as tokens allowing for dynamic pricing, fractional ownership and pre-production trading.

From the surface, both of these projects are conceptually similar. By adding a tokenized layer to physical goods leveraging a bonding curve, early adopters are able to benefit from the future demand of a limited-edition run.

In this week’s article, we’ll be diving into both of these projects, along with a historical timeline of this model that we’ve seen play out to date.


Incubated as an experiment by an Ethereum leading DEX - Uniswap - Unisocks was the first example of tokenized goods sold on a bonding curve.

There were 500 SOCKS tokens each representing a pair of Unisocks. The price of each pair was dynamic, meaning it changed based on supply and demand. SOCKS were redeemable for the physical good at any time, while the price would increase (or decrease) with every pair that was purchased (or sold).

At the time of writing, one pair of socks is trading for a whopping $86 with 215 SOCKS currently sitting in a liquidity pool. Here's a look at how they were priced.

Building off of this, we’re now seeing the expansion of this idea with new mechanisms for enhanced value capture.

$FAME Genesis Shirt

This past December, an internet-owned fashion collective called Saint Fame launched their first limited edition good - FAME shirts.

These shirts were curated by the highly acclaimed designer Matthew Vernon, using his time token - BOI - as payment.

Anyone could buy into the bonding curve using Uniswap, leading to an interesting market for price discovery as shared in the Zora launch article.

To recap, the price for FAME gradually fluctuated - dropping from $250/token to roughly $80 following the release of the shirt design. Since then, the price of FAME has climbed to over $400, signaling that many of these items may take on a second life leading up to the point when they become production ready (or redeemable).

The interesting takeaway here is that despite the changes in the price of the shirt, the cumulative volume is definitely worth keeping in mind. With liquidity fees being passed through Uniswap, those willing to seed the pool with tokens stand to earn a passive return while holding their FAME tokens.

“Saint Fame has made ~$17,000 from dropping in this model, currently averaging a sale price of $233. This average is excellent considering that low starting price of $8.”

“Compare this to selling at a flat rate of $60, which is a common price of a screen-printed long sleeve shirt, where Saint Fame would make only $6,000. FAME has seen almost $35,000 in trading volume since launch, with a rich amount of speculative activity on the shirt, with many people buying fractions of a FAME.”

In summary, Saint Fame introduced a way for people to trade culture.

While FAME was the first Zora Drop, new products will also have their own token - like $XYZ representing a pair of sneakers.

Enter MetaFactory

Shortly after the launch of FAME, a project called MetaFactory was created to further expand on the ideas of democratized fashion.

In particular, what happens when you tinker with different forms of sale mechanisms - tying in elements of profit-sharing, interest and blind auctions to increase the game theory on a product like FAME?

In their announcement post, MetaFactory dives into their genesis item - a reversible bomber jacket - which grants tokenholders profit-sharing rights and cumulative interest using Charged Particles based on Chai - a wrapped version of Dai earning the Dai Savings Rate.

“All buyers will be rewarded with a proportional share of sales for their support. This value, determined by the product order number, will be directly infused into the buyer’s digital token and will automatically begin earning interest.”

What we begin to see is different strategies to influence FOMO among buyers - all of which ultimately drive value back to both those individual buyers and the creators themselves.

What’s the Difference?

Let’s face it - both MetaFactory and Zora Drops are creating markets for limited edition apparel using Ethereum.

While both projects are sure to add a tremendous amount of value (both monetary and social) to the ecosystem, many may be curious to hear what makes them different from one another.

Let’s take a look under the hood at some of the unique strategies which may prove to be worthy in the wild.

Digi-Physical Goods

Movies like Ready Player One introduced the concept of virtual universes. Now imagine that within those worlds, you could be wearing virtual apparel.

With projects like Crypto Voxels, we’re seeing this happen today. In fact, the first inaugural meetup actually happened in Crypto Voxels, at the MetaFactory house - 16 Hook St.

The first bomber jacket will come with a digital equivilant which can be repped in the metaverse along with in the real world.

Drew Harding, co-founder of MetaFactory notes:

“Physical apparel is the anchor and likely to be the initial attraction for most, but I believe it will be the digital side and its future applications that will propel MetaFactory forward. We decided to combine these two trends and leverage them to cultivate culture and build community through the introduction of digi-physical apparel.”


SaintFame’s use of BOI tokens for the design of FAME was executed to perfection.

For those unaware, Matt Vernon has lead UX design for some of the most popular DeFi projects in the space (like Dharma) - earning him a reputation that gives FAME value in and of itself - regardless of the visual nature of the physical shirt itself.

With this, it’s clear that Vora Drops will be quite strategic with the designers (or brands) behind the next product(s) likely garnering significant hype from their respective communities.

Similarly, MetaFactory has also been fostering a strategic approach to designers, leveraging popular digital art creators like Twisted Vacancy, Van, Alotta Money and Skeenee for their next product launches.

Over time, it will be interesting to see which of the projects open the gates for more general participation, allowing lesser known creators to leverage these unique brand creation mechanisms.

Auction Design

If one thing is for certain, the interplay between a digital token and a physical item is tricky.

With FAME, we’ve seen first hand that the value of an item can shift drastically prior to it ever being created.

Both projects are likely to test different sale structures - such as blind auctions or appreciating price curves - which can be leveraged in different ways relative to the nature of any given product.


For those deeper down the rabbit hole, it’s interesting to note that both projects are structured as DAOs, meaning governance rests in the hands of its shareholders.

It’s likely that each community will focus on specific trends, schemes and perspectives that give each product a degree of notoriety.

Seeing as all of these decisions will be influenced by the different members, it’s very likely that the type of products released by each of the two projects will be distinguishably different.

Similarly, the infrastructure used to govern these DAOs will also differ.

Over time, these initiatives will provide tremendous value in better understanding how to best coordinate scare value creation using web3 solutions.

Looking Forward

Perhaps the most interesting aspect of this trend is the inevitable competition to establish market dominance.

Just as we’ve seen a suite of smart contracting protocols come to the table, the gradual democratization of fashion is an initiative which will spawn brands (and products) unlike anything we’ve seen to date.

Jacob Horne, one of the founders of Saint Fame, notes:

“We have pioneered a new model for the creation and ownership of culture. Culture itself can now be created and owned natively on the internet: using tokens and DAOs at its core. Imagine if a subreddit had money it could control, that's the kind of world we are just entering into. It's a fundamentally new paradigm for organizing ourselves as humans.”

For those in the know, redeeming some of these first items is sure to bring a degree of clout to the largest blockchain conferences in the world.

Over the next few months, we’ll be keeping a close eye on the democratization of fashion.

If you or your business are interested in getting in touch with either of these projects or in leveraging any of these ideas, give us a shout!

Until then, we’ll see you next Tuesday!

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