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Cultural Liquidity: The Rise of Cryptomedia
In finance, liquidity refers to the ease with which an asset can be converted into cash. U.S. Treasuries, for instance, are a liquid asset because they have an active secondary market and can be quickly converted into cash. Land, real estate, your prized 1952 first-edition Micky Mantle baseball card—these are illiquid assets because there’s meaningful friction converting them to cash.
The things that move culture—film, music, books, art, writing—have historically been fairly illiquid. Cultural impact hasn’t mapped to economic value created or captured. Liquidity is a measure of market efficiency, and the “market” of culture is inefficient.
This market inefficiency stems from the archaic architecture behind “industries of culture.” The system was built for gatekeepers—for middlemen, intermediaries, brokers. Singers sing, and record labels get rich. Writers write, and publishers reap the rewards. Artists live under the thumb of galleries, and actors live at the whim of executives in suits.
I like how a consortium of excellent writers—Jarrod Dicker, Brian Flynn, Matt Stephenson, Jack Butcher, Tal, and Jonathan Glick—framed it in their piece Hip Hop, Blogs, and NFTs. “In the 20th Century,” they wrote, “media became an industrial product.” The Hollywood studio system employed the same production line system as Henry Ford’s Detroit automotive plants.
As media became mass produced, the puppeteers pulling the strings shaped culture and captured the lion’s share of the value. But in doing so, they restricted how big the pie could grow. The music industry is the best example. Over the past half-century, music has been invented and reinvented again and again. Vinyl, cassette, CDs, Napster, iTunes, Spotify. But through it all—independent of technology or business model—music’s economic value has remained relatively small compared to its societal influence. Music’s cultural impact is at least on par with gaming’s—but gaming is a $185 billion market today, 8x the size of the recorded music industry.
This is a difference in industry structure and business model. Gatekeepers stifle innovation and monopolize economics, which limits a market’s size. When you pay a $9.99 monthly subscription to Spotify, most of that money goes to the record labels; artists and songwriters get only ~7% and ~10% each. When a creator can’t earn a living, the flywheel can’t spin.
The model is laughably outdated. Record labels give artists an advance, hoping that the artist will be the next big star, and in return the label owns that artist’s work…forever. I liked this response to my tweet from David Greenstein:
Other industries of culture are hardly better. The architecture of culture is in need of a massive overhaul, and blockchain will provide it.
Today, we talk about non-fungible tokens, or NFTs. In the long-run, we’ll instead say “cryptomedia” or “digital assets”. Most things in life are non-fungible; fungible things, like money, are actually the exception rather than the rule. NFTs are unique in that they’re digital and built on blockchain, and “cryptomedia” and “digital assets” are more accessible and understandable terms.
Jacob Horne, the co-founder of Zora, coined the term “cryptomedia” to capture a new form of digital creation. Hypermedia is what we all know and love—the graphics, audio, text, and hyperlinks we interact with online all day. Cryptomedia is both universally accessible and individually ownable. Horne writes, “Cryptomedia can be thought of as hypermedia with built-in property rights.”
This is a key concept for rebuilding the systems that undergird culture. Culture should be both freely accessible and have economic value. Zora is compelling in that it shifts power back to the creator. Zora Protocol embeds the market into the work—this means a creator can decide exactly how much she wants to earn from primary and secondary sales of her work, and that rake is set in stone. No Web2 intermediary can change that.
The music industry is an early adopter of cryptomedia. The artist RAC worked with Zora to launch $RAC, a token built on Ethereum that he can distribute to his fans. In RAC’s words: “By rewarding my most loyal fans, we can create a community where tokens unlock access to various perks and exclusive content.”
Uniquely, fans can’t buy $RAC; they can only earn it. RAC retroactively distributed $RAC to fans based on their past support. He gave 25,000 to past Bandcamp supporters; 25,000 to fans who had bought RAC merch; 200,000 to Patreon supporters.
Fans can now earn $RAC through their ongoing fandom and cash in for exclusive perks: holding $RAC gives fans access to a private Discord server, as well as early access to future merch drops.
It’s easy to imagine $BILLIE or $DRAKE or $BEYONCE coming next. If I’m in the top 1% of Billie Eilish listeners on Spotify, how much $BILLIE is that worth? And does it get me better seats at her concert?
Cryptomedia and digital assets aren’t exclusive to music; they’ll rearchitect all cultural industries. Many of us were taught that because something is digital, it has no value. We were conditioned by the early internet to assume that everything online is free. But digital creations do have value; the system is just set up so that we don’t see it. As Bobby Hundreds puts it:
Your social media posts do make money. It’s just that you don’t see any of it. Your gorgeous photographs, compelling essays, and motion graphics draw attention to platforms like Facebook and Google, which churn advertising dollars off of all those eyeballs. You do all the hard work. They make the money from it. And now that you see it that way, isn’t it incredibly unfair?
If you make something, and millions of people derive value from that thing, shouldn’t you be rewarded for it?
During this year’s NFT mania, virtually every subject of a viral meme tokenized and sold that meme. The “Disaster Girl” meme, for instance, sold for $500,000. This is a good thing: the meme’s subject, Zoe Roth, had generated an incredible amount of cultural value but captured none of it economically. Now, someone can be the proud owner of that piece of culture, while Roth uses the money to pay off her student loans.
The brothers behind “Charlie Bit My Finger”—once the most-viewed YouTube video of all time—had a more controversial NFT sale. After selling the NFT of their video for $761K, they announced that the video would no longer be on YouTube. After a massive backlash, the brothers swiftly reversed course, though the original “Charlie Bit My Finger” video remains not on YouTube; a little bit of internet history is lost.
The brothers missed a crucial piece of cryptomedia: as Horne outlined, cryptomedia should be both universally accessible and individually ownable. Just because something is free and publicly available doesn’t mean that it doesn’t hold economic value. The brilliance of cryptomedia is that both can be true: cultural and economic value go hand-in-hand.
Digital creations—and all creations, really—are remixes of past work. Musicians sample each other’s sounds, TikTok creators Duet and Stitch other creators, writers source and reference fellow writers. Jesse Walden calls these “media legos”, and you could extend that concept to “culture legos” more broadly—composable parts, atoms stacked together to form new molecules. But until blockchain came along, there wasn’t a way to track or capture that value chain. We’re in the early innings, but we’re seeing clever new models to solve this problem. Mirror, for instance, has a feature called “Splits” that lets writers allocate economics to people who inspired or were cited in the work. Instead of sourcing Jarrod Dicker, Bobby Hundreds, and Jesse Walden at the bottom of this Substack piece—perhaps giving them a few new Twitter followers or newsletter subscribers—I can use Splits to divvy out true monetary value. It’s easy to see this extending to other forms of creation. In the future, every time an artist samples another song, the original artist will automatically and instantaneously be paid. Every time someone builds on a meme or viral video, the original creator will be compensated. Culture’s atomic units will be traceable and monetizable.
The economics of culture will become more important as we expand beyond the scope of our phones. In announcing last week that Facebook is building the metaverse, Mark Zuckerberg said, “We have these phones. They’re relatively small. A lot of the time that we’re spending, we’re basically mediating our lives and our communication through these small, glowing rectangles. I think that that’s not really how people are made to interact.” We’re in an in-between period: our parents grew up in the real world, our kids will grow up in virtual worlds, and we’re living our lives through glowing rectangles.
Digital creations are already more shareable and reproducible. As Bobby Hundreds puts it, you can hang a painting in your living room for 25 guests a year, or you can post a photo of the painting to Instagram where thousands of followers will appreciate it. VR and AR will magnify this 100x. Immersive virtual worlds will unlock new forms of art and creation and self-expression, and it’s critical to underly those works with—to borrow Jacob Horne’s phrasing—digital property rights securing their worth.
Earlier this year, the artist Krista Kim built the first NFT house. Kim made the house—deemed Mars House—on her iPad and sold it for $512,000. In June, Mars House hosted its first wedding. When I visit or build on or renovate Kim’s metaverse home, economic value may change hands.
Being a creator is broader than being a YouTuber or Instagrammer or TikToker. It’s being a digital architect—building virtual creations to experience online, increasingly in vast and immersive worlds. And it’s being a digital fashion designer. In May, a virtual Gucci bag in Roblox sold for $4,100. The same bag in the physical world costs $3,400.
Notably, this digital item is in the centralized world of Roblox. The purse is worth $0 outside Roblox’s closed walls. (The fully-realized metaverse will be interoperable, with cryptomedia and digital assets portable between destinations.) This underscores an important concept: status is just as important to us online. Buying a Gucci purse in the real world is about signaling, and it’s no different in the metaverse.
Cryptomedia and digital assets will be infinitely more scalable and reproducible than offline creations, and because they’re built on the blockchain, they’ll have provable and immutable value. People will make all sorts of things: videos, articles, domain names, game assets, digital houses, digital art, digital clothes. And people will own those works and share in their appreciating value.
In Horne’s words, “Cryptomedia inverts how we think about creating and capturing value on the internet, and provides the foundation for a sovereign internet owned by everyone.”
The internet promised to remove gatekeepers and in many ways, it has. It’s far easier to publish a book, an article, a video. But over time, the platforms have become the new gatekeepers, devouring value at the expense of creators and consumers.
If you think of the manufacturing of culture as a triangle, the three points to that triangle are:
Creator tools—is it easy to make stuff?
Distribution—is it easy to get discovered?
Monetization—is it easy to make money?
Accessible software tools have largely solved the first, and tools get better every year. (TikTok, for instance, is a marked improvement on YouTube—you only need the TikTok app to edit and overlay sounds, with no fancy equipment or knowledge of tools like Adobe Premiere necessary.) The second, distribution, is also improving. AI-driven feeds help level the playing field.
The third piece, monetization, is the piece in its earliest innings. The people who drive culture are still relying on sponsorships and brand deals and a cut of ad revenue. The big platforms are belatedly waking up to the reality that creators are the lifeblood of the internet, but it’s too little and too late.
Getting these three pieces to work in concert makes the market of culture efficient—cultural products can be easily manufactured and shipped and bought and sold. Transactions are quick and frictionless. The first two pieces are making progress, and cryptomedia and digital assets are the key to solving monetization. That will get the flywheel spinning faster and faster.
Culture is about to get liquid.
Sources & Additional Reading
Paul Farber, for teaching me everything I know about the music industry—but not everything he knows
All of Jarrod Dicker’s work at Dark Star—I recommend going down the rabbit hole!
What Is Cryptomedia? | Jacob Horne
Cryptomedia | Bobby Hundreds
The Ownership Economy | Jesse Walden
Related Digital Native pieces:
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