The Pipeline Knowledge Graph

Challenges and opportunities for new applications in crypto and blockchain

6 min read

From: thepipeline_xyz

New applications in the crypto and blockchain space, such as social media betting, are emerging, driven by a desire to innovate beyond traditional decentralized finance (DeFi) protocols. These applications leverage blockchain technology to address scalability and trust, while tapping into the burgeoning attention economy of social media and prediction markets [02:25:00].

KY: Social Media Betting

KY is a new application that facilitates social media betting, allowing users to bet on the performance of their favorite influencers and creators [01:01:03]. The market design draws inspiration from sports betting, where wagers are placed on athletes’ performance; on KY, the focus is on creators’ performance, such as the number of views Donald Trump’s next tweet will receive [01:17:01]. Payouts are based on the popularity of the content [01:36:01].

Inspiration and Market Opportunity

The rise of content creators and social media influencers over the past two decades has led to an “attention economy” [01:51:30]. While sports have existed for centuries and sports betting evolved on top of them, social media is relatively new [02:53:00]. Speculation is seen as a potentially more exciting market for social media consumers [03:04:08].

Key inspirations include:

  • Team’s Youthful Perspective: The KY team, being younger, is deeply ingrained in meme-driven social media applications [03:17:15].
  • Farcaster’s Influence: The launch of Farcaster (frch) demonstrated user excitement for buying and trading “keys” or “shares” based on perceived popularity [03:39:00]. While Farcaster focused on chat rooms as utility, KY recognized the stronger appeal of the financialization and marketplace aspects [04:01:00].

Creator Selection and Market Dynamics

KY focuses on supporting creators with strong “tribalism and fandom” [06:35:00]. This includes:

  • “Brain rot” streamers like Kai Cenat, Aiden Ross, and IShowSpeed, who have massive, highly engaged fan bases [06:41:00].
  • Tech sphere creators like MKBHD [07:07:00].
  • US election figures like Donald Trump and Kamala Harris, due to intense tribalism [07:19:00].
  • Mega-creators and influencers like Elon Musk and Mr. Beast [07:28:00].
  • Ronaldo, who has over a billion fans across social media platforms [32:30:00].

The approach is to select the biggest and most popular influencers, similar to how sports betting focuses on professional and college-level games rather than high school games [08:02:00].

Tailwinds for New Crypto Applications

Several trends create opportunities for applications like KY:

Growth of Social Media and Online Betting

Social media platforms boast immense user bases:

Simultaneously, online gambling and betting are increasingly popular [09:57:00]. The thesis for KY is that as social media grows, people will want to speculate and use their knowledge of creators and tribalism to make money from their hobbies [10:15:00].

Prediction Markets and Crypto Enablement

Prediction markets are gaining significant traction. PolyMarket, for instance, saw billions in open interest on US election bets, showcasing that betting on non-sports events can be prominent [10:43:00]. Crypto is crucial for powering these markets, providing a censorship-resistant platform to ensure secure and reliable payouts [11:25:00].

Evolution of Social Media Content and Engagement

Social media trends suggest continued growth:

  • Adaptation: Platforms quickly adopt novel content types, like Clubhouse’s audio rooms or TikTok’s short-form video “For You” page [12:12:00].
  • User Engagement: 77% of Gen Z uses social media daily [13:29:00]. Phones are a necessity, and people spend more time online [14:01:00].
  • Monetization: KY could serve as a growth hack for new creators by allowing community members to bet on their growth and success [33:26:00]. This fosters deeper engagement and can provide an alternative revenue stream for creators through fee sharing, without requiring them to change their content creation behavior [36:30:00].

Emerging Technologies and Social Media

  • AR/VR: While nascent, augmented reality (AR) and virtual reality (VR) could transform social media. AR, in particular, by making digital experiences more immersive (e.g., trying on clothes virtually), could lead to increased engagement and consumer purchases [15:23:00]. The challenge lies in developing an “iPhone moment” where the technology becomes user-friendly and widely adopted [15:04:00].
  • AI: AI-generated influencers are already accumulating massive audiences and attracting sponsorships, demonstrating a potential for new forms of content and monetization [17:01:00]. The challenge lies in making convincing AI characters more accessible for creation [18:37:00].

Challenges and Opportunities in Crypto Gaming and Social Platforms

New applications in crypto face challenges in achieving widespread adoption and designing sustainable models.

Comparison with Fantasy Top

Fantasy Top, a crypto Twitter influencer betting game, is an example of a successful first mover that has captured users and built a strong community, potentially even achieving profitability [29:28:00].

However, KY differentiates itself by focusing on mass adoption and avoiding complexities that could hinder scalability:

  • NFTs and Complexity: Fantasy Top’s reliance on NFTs for cards adds a layer of complexity and locks the game into a specific model [30:28:00]. NFTs inherently create an expectation of long-term value return, and if prize money or engagement decreases, it can devalue users’ assets, leading to a negative perception [31:00:00].
  • Scalability: Fantasy Top’s model, particularly with NFTs tied to specific platforms like crypto Twitter, struggles to scale to larger platforms like YouTube without a complete redesign [30:39:00]. KY aims for broader appeal by betting on universally known figures like Donald Trump, MKBHD, and Mr. Beast, who have hundreds of millions of fans [32:21:00].
  • Creator Permission: Fantasy Top requires creators to sign up and give permission for markets to be hosted on them [37:22:00]. KY can stand up markets on anyone, offering an alternative revenue stream to creators who choose to participate [37:35:00].

Why Build On-Chain?

Building new applications on blockchain rails offers unique advantages:

  1. Global Liquidity and Access: Blockchain provides access to global liquidity and customers without the extensive operational legwork of setting up banking infrastructure, on/off-ramps, and partners in every region [38:16:00]. Users simply connect their wallets to access global liquidity [38:42:00].
  2. Ideal User Base: Crypto customers are an ideal demographic for testing new gambling and speculation products, known for being early adopters and willing to try novel applications [39:01:00].
  3. Liquidity Bootstrapping: Blockchain enables decentralized mechanisms for liquidity provision, similar to DeFi protocols like JLP and GMX. This allows applications to bootstrap and scale liquidity provided by users who earn yield, potentially supporting millions of users [39:32:00].
  4. Inherent Benefits: Building on-chain also provides inherent benefits like security, transparency, and instant payouts [40:22:00].

These factors demonstrate that blockchain can meaningfully improve the product, making it an exciting area for new applications [40:39:00].

Community Involvement

New applications often begin with community engagement. For KY, early involvement is through Telegram and Discord channels for testing and feedback [41:14:00].

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