From: thepipeline_xyz
The creation of Backpack’s Mad Lads NFT collection and subsequent launch of the Backpack Exchange exemplify how community building, technological innovation, and strategic token distribution can play a crucial role in the crypto ecosystem.
Building a Community-First Foundation
The initial inspiration for Mad Lads was centered on building community and creating a group of people [00:03:28]. This began with a unique, unannounced market entry where team members and colleagues changed their Twitter usernames to include “xnf” [00:04:18], generating immense mystery and engagement [00:04:37].
“[The] huge air of mystery started and people wanted to know… Everyone started following that account, everyone started engaging with that account, and people went rabid. We were getting about 10,000 followers in that first month on a fresh account without doing like any type of paid engagement whatsoever.” [00:04:37]
To channel this energy, a private Discord was created, with invites extended to those who posted strong memes or interesting content [00:05:22]. This process filtered for “hardcore chronically online crypto addicts and meme Masters” [00:07:23], leading to a “Cambrian explosion of memes” [00:06:39] focused on the mystery of “what the XNF is” and the “blue ball meme” (referencing the anticipation and the delay in revealing details) [00:07:46].
NFTs as a Cultural Backbone and Tech Showcase
The team realized that while product and tech were vital, a strong culture was needed to sustain momentum [00:09:44]. This led to the decision to launch an NFT collection as the “best community building exercise” [00:09:55]. This collection, Mad Lads, was designed to utilize the core group of early community members as a “cultural backbone” [00:10:08].
Mad Lads also served as a showcase for the XNF (executable NFT) technology, allowing NFTs to also function as applications, offering a depth of experience previously not possible [00:11:03].
Innovative Engagement and Distribution
Backpack used its wallet as a community engagement tool, keeping it locked to those without an invite code but integrating games to allow users to win access [00:12:35]. These games included:
- Guessing AI-generated image prompts [00:12:54]
- Guessing animal sounds [00:13:55]
- Navigating a Minecraft map to find hidden codes [00:14:04]
This approach created shared experiences that fostered genuine care for the project, moving beyond purely financial incentives [00:14:19].
The Mad Lads mint itself was entirely conducted within the Backpack wallet [00:21:28], requiring users to claim their whitelist token or mint publicly through the wallet. It also featured a game where users had to “defeat the Mad King” to “unrug” their Madlad NFT [00:21:42]. This unique interactive minting experience generated significant attention during a “dire sad time” in the crypto market in early 2023 [00:22:07]. The mint successfully attracted participants from across the crypto ecosystem, including Ethereum, Bitcoin, VC, and Cosmos communities [00:22:57].
The Backpack Exchange: A Regulated and Synergistic Platform
The decision to launch the Backpack Exchange stemmed from a serendipitous meeting with a top regulatory and licensing expert [00:23:21]. Recognizing a gap left by FTX [00:24:23], the team merged their product, engineering, marketing, and community expertise with the regulatory and compliance knowledge to build an exchange.
Focus on Regulation and Innovation
Backpack Exchange stands out by being fully regulated and compliant from day zero [00:25:09], holding the first Vara full retail cryptocurrency exchange license in Dubai [00:25:13]. This contrasts with the “cowboy” approach many international exchanges have taken, later backtracking into regulatory compliance [00:25:32].
The exchange’s architecture is innovative, built as a permissioned blockchain with different validators running instances of the same exchange. This allows for:
- Replayability of transactions for accountability [00:26:15]
- Potential for regulators or other trusted parties to run validators, enhancing transparency and eliminating single points of failure [00:26:33]
Future plans include integrating a ZK-proof of reserves system, allowing users to verify their funds without trusting the exchange [00:27:18].
Strategic Market Positioning
Backpack aims to occupy a unique middle ground between heavily compliant, US-focused exchanges like Coinbase and crypto-native, fast-moving exchanges like Binance [00:28:07]. It combines careful compliance and strong regulatory relationships with a nimble product team capable of rapidly adjusting and deploying new features [00:28:13].
On-chain and Off-chain Synergy
A key aspect of Backpack’s strategy is the synergy between its non-custodial wallet and its exchange. The wallet handles users’ on-chain journey, while the exchange handles their off-chain journey [00:28:50]. This allows for a seamless user experience, making it easy to move fiat to gas tokens and interact with the on-chain world [00:29:31].
The Mad Lads community serves as the “top of funnel,” acting as both super fans and super users. They generate attention and eyeballs while also rigorously testing new products and providing feedback [00:30:07].
Token Distribution as a Growth Vehicle
The Backpack Exchange launched in November 2023 [00:34:16], partly rushed due to a partnership with Pyth Network for their token generation event (TGE) [00:34:31]. Backpack served as a distribution vehicle, giving out 10 million Pyth tokens to exchange users [00:34:57]. This campaign went viral, especially in China [00:35:07], leading to:
- 140,000 KYC users in the first week [00:35:29]
- 74,000 participants in the Pyth drop [00:35:36]
This initial surge, despite immense stress on systems [00:35:57], “hardened” the team and infrastructure [00:36:01].
Point System and Airdrops
Starting February 13th, 2024, Backpack implemented a point system, which generated “absurd amounts of spot volume” [00:36:47].
- Before February 13th: $3-7 million in 24-hour spot volume [00:36:54].
- February 13th - March 18th (first snapshot): 1 billion [00:37:08].
- Some days saw the Soul Market as the largest in the world [00:37:12].
This high volume attracted more market makers, further improving liquidity [00:37:33].
Backpack then performed large-scale token distributions based on trading volume:
- Wormhole (W): 27 million Wormhole tokens were distributed to 300,000 users who traded between February 13th and March 18th [00:37:50]. This served as a growth vehicle for Backpack and introduced Wormhole’s token to a large audience of primarily centralized exchange users who were new to the on-chain world [00:38:16].
- Tensor (TNSR): A second snapshot for Tensor tokens was taken. The requirement included not just exchange trading volume but also performing a single trade on the Tensor protocol by connecting their wallet [00:40:34]. This initiative “sent a 100,000 people onto an onchain protocol that had probably never really used much onchain stuff” [00:40:54], demonstrating Backpack’s ability to onboard centralized exchange users into the on-chain ecosystem.
Between these events, Backpack has seen a consistent increase in organic spot trading volume, plateauing higher after each event [00:39:11]. The volume increased from 30-60 million after the first snapshot, and then to $120-160 million daily with no incentives announced [00:39:19].
Future Outlook
Backpack aims to become a “Mainstay International Cryptocurrency Exchange” [00:48:11] and one of the largest wallets, continuously adding new products like Bitcoin, Ethereum (ERC20s), and futures trading to serve as users’ primary trading home [00:39:51].
The team emphasizes the importance of not taking oneself too seriously in crypto, as “crypto is ran by crypto Twitter” and relies on entertainment and authentic storytelling [00:44:56]. This approach, combined with a strong focus on building trust and consistent product development, underpins their strategy for success.