Tokengated Commerce
Alex Danco Joins to Explain NFTs and How Shopify is Becoming Wallet-Aware
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Hi friends 👋,
Happy Monday! This is a cool one for me.
In April 2020, when Not Boring had 804 subscribers (I just checked), I reached out to one of my favorite bloggers about a piece I was writing based largely on something he wrote.
I was a complete nobody, and completely nervous about hitting send. But lo and behold, Alex Danco replied and linked to my piece in his newsletter.
I remember where I was when I got that email. I was so pumped. I told Puja and she was excited that I was excited but probably also thought I was a total nerd. I told Dan, and he was much more excited, because he was a Danco fanboy too.
This is going to be a cool one for you, too, I hope.
Since that first exchange, Alex slowed down the newsletter and joined Shopify, where he heads up the blockchain team. And he and Shopify have big plans for crypto, specifically for NFTs. This is a glimpse into their thought process, and, since they’re building both the platform and developer primitives, a glimpse into the near future.
One of the yet-to-be-realized opportunities I’m most excited about in web3 is what happens when developers start building products and experiences that adapt to peoples’ wallet inventories. As an example, if I own ReFi NFTs, a site might offer me the option to offset the carbon footprint of my transaction at checkout. That’s a simple one. The real magic will come when developers, armed with new primitives, build millions of new experiences that treat users as both community members and individuals. That’s what Shopify’s helping to build.
This is not a sponsored deep dive; I just jumped at the chance to hear from one of my favorite thinkers on one of my favorite topics, especially since Alex is in an important seat to turn thoughts into industry-wide action. Not investment advice, either.
We structured this as a back-and-forth — wherever it’s indented, bold, and italic, that’s me. The longer, more insightful, normal-text sections are Alex.
Let’s get to it.
Tokengated Commerce
(Click here 👆👆👆 to read the full thing online from the top)
Alex, thanks for coming to hang out in Not Boring. This is cool for me. I’ve been an “Alex Danco’s Newsletter” fan since before I started writing. In one of my first Not Boring essays, I wrote, “In Positional Scarcity, the essay that I cite the most, Alex Danco writes that ‘in conditions of abundance, relative position matters a great deal.’” So anyway, big fan.
Thank you! I’m thrilled to be here, both 1) because I also have enjoyed so many of your pieces over the past few years (I think about The Great Online Game all the time, and now here we are, finding each other inside that game once again!) and also because 2) by the Law of Newsletters I’m pretty sure you’re my supervisor now:
Haha well perfect, I’ll put you to work and make you answer some questions then.
We both worked for Canadians – you were at Social Capital, I was at Breather – and then we both wrote newsletters. We’ve gone in kind of different directions since – I’m doing a newsletter plus a fund, and you’ve put the newsletter on slow drip to become a full-time operator at Shopify.
I remember when you took the job thinking, a) that’s so cool! and b) what’s he going to do at Shopify? And we’ll get there, but for those who haven’t been keeping up, can you define what Shopify is today and what you think it’s going to become over the next decade?
Well, if you’d like a comprehensive answer about what Shopify is and does, I’ll refer you to this Colossus episode I did with Patrick O’Shaughnessy. But Shopify’s more simply stated purpose is to make commerce better for everyone, and specifically, we do that with software: we are the platform on which commerce is built. And our job is to build that platform in a way that offers merchants - and many others, like app developers, agencies, and now buyers - the very best version of what the internet can be.
And what are you, Alex Danco, doing at Shopify?
Making Shopify wallet-aware, of course.
Let’s go, diving right into web3. The first time you tweeted “gm” a few months ago, I thought you were being sarcastic. Then you changed your pfp. Now you’re running a blockchain team – you’re LinkedIn title is “Systems & Crypto person.” Have you been into crypto for a while? What interests you about it?
Hah, that’s actually funny, because it hadn’t even occurred to me that it might draw anyone’s attention. I’ve been into crypto for a while; I’ve been writing about it on my newsletter for a few years now and I guess that just goes to show one of the big things that writers often struggle with - most people haven’t read most of the things you’ve said. (And, also, why there’s a high overlap between highly effective people & people who repeat their key messages, over and over. I’m working on that.)
As far as, “What interests me about it?” Man, I dunno, everything? Here are some examples of my favourite things to think and write about, but I guess most importantly, crypto is in the middle of finding its purpose, and that’s where you want to be. There are three kinds of places you can spend time:
Those without a purpose
Those with an established, fixed purpose
Those that are discovering their purpose.
You tell me which sounds most fun.
I’m going to start using that instead of, “We’re so early!”
For a lot of people, “Discovering its purpose” means finding “Real use cases.”
To that end, Shopify is one of the more interesting places in tradtech from a crypto perspective – crypto and commerce are very linked, your CEO Tobi seems genuinely interested in it, and there are over 1 million businesses running on Shopify. Given its size and reach, it feels like Shopify can lend its legitimacy to use cases i.e. if Shopify supports something, it is a real use case because Shopify supports it.
With great power comes great responsibility. How did you start approaching whether to get involved and what to do in the space?
I guess I’d say, “Gradually and then suddenly?” I joined Shopify two years ago and found this funny juxtaposition, which was, 1) a lot of people scattered around the company who were all quite crypto-fluent and really knew what they were talking about, but also 2) no driving force to align on what to do, aside from payments. Shopify merchants have been able to accept crypto payments for several years now, thanks to third-party app developers building payment gateways (we are the platform on which commerce is built!).
But then last year when NFTs took off, it really lit a fire under us to go find an answer to that question: is this a part of “the best version of the internet,” that our platform must offer to merchants? And the answer was clearly yes, although it took us a minute to discover why.
Indeed. The first crypto news out of the company was, I think, the Chicago Bulls NFT store. And when I thought about Shopify’s role starting there, I thought your big push into the space would be something along those lines but richer – NFT minting, drops, sales. You help businesses sell things – physical and digital - so help them sell sweet, sweet high-margin NFTs. That’s not the way you went. Why?
Well, Packy, that’s the money question I want to talk to you about. (Although I’d be remiss if I didn’t mention that you can sell NFTs on Shopify, head here.) But back to our topic: instead of giving you a simple answer (“Because we think tokengated commerce is a 100x bigger opportunity than anyone else realizes, and it’s more inherently interesting to us than anything else”), I’m gonna give you a newsletter-length answer, cause that’s why we’re here, right?
Anyway, let me start my answer with a question for you. It’s a very big question. You ready? Here it is:
When you make a bet on crypto, what is it you’re betting on?
Oooo good one. This answer changes for me, but here’s my current thinking.
There was a line in that big Jonathan Haidt article a couple weeks ago that immediately made me think of crypto: “There is a direction to history and it is toward cooperation at larger scales.” Crypto is a bet on cooperation at larger scales without needing to pay companies to sit in the middle and coordinate everything. What do you think?
I specifically like the “coordination” part of this answer; let’s bookmark that idea. And for the record, I don’t think there’s one correct answer for this, of course - there are lots of different communities and schools of thought around what blockchains and cryptocurrency are here to do for us. That’s a good thing. But I’ll tell you mine, which I think covers a lot of what’s important.
When we bet on crypto “happening”, we’re betting on two things:
Wallets change how people behave,
And:
2. Over time, this behaviour will win.
Since you’re my guest here, I’m going to let you go with all the extra “u”’s. Behaviour. Classy. But yes, I like this answer because it incorporates both the social and the technical, and how computers and people interact. “First we shape our interfaces, and then our interfaces shape us.”
I think it covers it kinda nicely, don’t you think? It gives something for everyone. There’s something for the Sound Money folks (our wallets and cryptographic key pairs change the behaviour of how we save and spend, and that behaviour in the long run will outcompete the old behaviour), there’s something for the dapp builders (wallets change how people create and consume software), there’s something for communities (wallets change how people collect and present pieces of their identity).
I like this starting point because it brings us together on something we can all agree on. Crypto is fundamentally a kind of behaviour, just as much or arguably even more than it is a kind of technology.
There are many facets to this behaviour, but it starts from cryptography; and it starts in our wallets, when we sign something. And it starts at one moment, and that’s the magic moment where our wallets open a door into a new world and we step inside.
We’re working on some cool stuff inside that world. We call it tokengated commerce.
Tokengated commerce starts with an observation: that there’s a new kind of internet user out there in the world, called people with wallets.
I love this framing: people with wallets. Descriptions of what crypto lets people do are common, but I haven’t seen any that describe what crypto lets people become.
That’s exactly it. Forget what you can do for a second, let’s talk about who you can be. And I’ll tell you the answer: you’ll be someone with a wallet.
Let’s talk about these people with wallets. Who are they? They’re owners. Maybe they own some NFTs that signify community membership, an ENS name, an ETH or USDC balance, maybe a smart contract they’re associated with. They can sign things all over the internet.
These people behave in an interesting way: they really want to connect their wallets to things. They’re always connecting their wallets to get into discord channels, connecting their wallets to dapps, connecting their wallets to NFT marketplaces.
How come? Because the things we own through our wallets mean something. When we show up with our wallet, we show up as us. And when we connect our wallets, and feel that magic moment where suddenly the world changes - it sees us, and opens up - that’s a pretty awesome feeling. It feels like this:
What’s going on in this picture? This is from Doodles’ event at SXSW this past march, a pop-up world created by the web3 community Doodles.
The event was open to everyone, but if you were a Doodle holder, all kinds of experiences in this world - from the entry all the way through to the Shopify-powered gift shop - “opened up” to you in delightful ways. Lights flashed, bubbles blew, special gated merch dropped down on a hand-built roller coaster cart; and your Doodle showed up on a huge screen, announcing to the world: “Welcome, Doodle holder 3125!” And one after another, guests’ faces lit up in the unmistakable joy of being recognized; of successfully entering this new world.
This moment is what tokengated commerce is all about. It’s the moment where you realize, “Ah. I get the relationship between NFTs and commerce now.” NFTs aren’t an output of commerce; they’re an input for commerce. NFTs aren’t a kind of product; they’re a kind of buyer.
Two things I like there:
1. The idea that experiences can be open to anyone, but more special for NFT holders. I think music NFTs are really good at this: anyone can listen, a few can be visibly big supporters and get access to special tracks and meet-and-greets, etc…
2. Here it is again. What crypto lets people become.
It’s good to be a non-fungible buyer. You arrive at the storefront, connect your wallet, and suddenly the storefront changes based on an NFT you hold. Maybe a special product gets unlocked, or you get early access to a drop. Maybe you connect your wallet that unlocks a high-quality art print or 3D model of your NFT. Maybe you gain access to a special collab: for this limited-edition drop, your NFT opens a new door into another community. The more you explore, the more doors you find.
NFTs, specifically, have turned out to be the perfect catalyst for this behaviour. You know why? Think about what most successful NFT brands look like. It looks like a theme and variations: here’s what you fit into, and here’s how you stand out.
They’re identity tokens for that feeling of accomplishment: I’m in the Doodle Gang, and I have this Doodle. I’m in the Adam Bomb Squad, and I have this Adam Bomb. I’m in the Stapleverse, and I have this hood pigeon. NFTs are a new token of meaning on the internet for “fit in, and stand out”.
This is one of those cooperation at scale points again, I think. Within local communities, we’re naturally non-fungible buyers. You go to your favorite neighborhood stores and restaurants and the people there know you, know what you’re going to order before you say anything. You’re part of the local community (you “fit in”) but you’re you, with your own preferences and visible style and all (you “stand out”).
Yep. And it turns out, that behaviour, “Fit in, and then stand out,” is one of the most important raw ingredients for so many wonderful things in the world - culture, community, commerce. And now we have wallets, with an inventory of NFTs in them, that stand for this exact atomic unit of behaviour: fit in, and then stand out.
This feeling of “fit in, and then stand out” isn’t unique to crypto, of course. It’s a universal feeling, and it gets better when you reciprocate it.
My colleague Nicole has an anecdote about walking around the mall with the big Sephora bag (not the small one, the big one you get when you buy too many things to fit into the small one) and recognizing someone else had a big bag too. They both immediately think the same two things: 1, Nice; 2, what’s in YOUR bag? An engineer on our team has a similar experience when she sees others wearing the Engineers’ iron ring. Nice; what’s your discipline? I used to tour in a band, and I still get that feeling whenever I see someone on the street wearing a concert t-shirt: Nice; what show was that?
This recognition is contagious, because you both feel good. It’s a feeling of reciprocal inclusion: I’m letting you in, and you’re letting me in. It’s a challenge we do together: we both get to fit in, and stand out. You see it in every community: athletes, collectors, people who love bands and live music, and people who love comic books. And anywhere you see this feeling, commerce is right around the corner.
Great brands understand this concept really well. When you go shopping at their flagship store, it’s obvious how much care and craft go into creating this environment of mutually recognized accomplishment: not just in the decor and the aesthetic, but more importantly, in your interaction with the merchant. It could be as simple as the merchant seeing your t-shirt and nodding, nice; or getting offered a house discount to acknowledge that shared history.
“What’s that hoodie? Spring ‘18 collection? Nice. Hey we’ve got something for you in the back I think you’ll like.”
Bobby Hundreds (of the LA streetwear brand The Hundreds, and of course, Adam Bomb Squad) wrote a book called This is Not a T-Shirt that I highly recommend, that really hammers this point home.
Right! So this is a second layer on top of local I guess – in your local community, people might recognize you as you. A layer up, anywhere you go in the physical world, other people who love the same things you do might recognize you as a kindred spirit. But that’s hard to do online.
Yep. Before wallets, that magic moment of being seen was hard to create online. It’s hard for an online storefront to do a vibe check on a buyer, and respond to the buyer in a way that recognizes and celebrates a social contract. Customer accounts and loyalty programs don’t cut it; they’re not you, not in the same way that your wallet is. Customer accounts are fundamentally part of the store, not part of the buyer. In contrast, “connect your wallet, get recognized” is a feeling that I promise you, people don’t get from logging into their loyalty account. It’s not the same.
OK, that makes sense, but there’s a big open question for me. When I read “tokengated commerce” or “x-gated commerce,” the first thing that comes to mind is, “Why in the world would you want to gate your commerce? If you’re selling something, why not reach the widest audience you can? Why not just one-click check out?”
And I was about to ask you, but it reminded me a lot of the Business Breakdowns episode you did on Shopify with Patrick O’Shaughnessy. You talked a lot about the importance of keeping some friction to build trust for the things you categorized as “high-trust commerce.” Tokengated commerce feels like a way to intentionally introduce a little bit of friction for certain products. Is that right?
100%, and I think the way to square this in your mind is to replace the word “friction” with the word challenge: tokengating is about adding challenge to certain products.
This is demand 101: the default state of the world is not “everyone wants your product.” Creating demand is an art: you create a story, and a challenge, and you wrap the challenge in an adventure that the buyer and the merchant go on together. Think about a flash sale or a limited edition drop; these experiences are fun, and they’re wrapped in a story. You get to be somebody who successfully got the drop, and that’s half the fun.
This is actually a great time to revisit your line about crypto and “collaboration,” though, because one of the biggest things I’m excited for in tokengated commerce is collabs.
Collabs are the lifeblood of creative work; ask anyone in music, streetwear, or any kind of scene. But online, how do you organize a collab merch drop that’s exclusive for a superset of people: my fans plus your fans? There’s no conventional way to do this that’s both exclusive and not janky. But tokengated commerce makes this so easy. Connect your wallet, access drop with any of these NFTs. Bam. I let you in, and you let me in.
I’m especially interested in the challenge of how tokengated commerce will help brands endorse each other. I think of “endorsement” as a special subset of collabs, where an established artist will host or co-brand with an up-and-coming one. (The music industry does this particularly well.)
We should ask: how does a community endorse another up-and-coming community on the internet? With collaborative tokengating: when two brands get together, and flip exclusivity into reciprocal inclusivity.
What are tokengated collabs? When The Hundreds does a collab with Deadfellaz, and you can unlock limited edition merch with an NFT from either of their collections, that’s a tokengated collab. When Superplastic does a collab with Gucci that’s gated to holders of a secret SUPERGUCCI NFT, that’s a tokengated collab.
Here’s where the magic starts to happen: I belong to my community, you belong to your community, but when we do a collab together, I can invite you in; and you can invite me in. Tokengated collabs flip exclusivity into reciprocal inclusivity. A century-old brand like Gucci gets to endorse a really hot brand like Superplastic, in a way where their fans are both inviting each other into this shared experience, and this shared community they now have together.
So there’s this obvious question: why does tokengating make this better, why is this different from a loyalty program or a promo code?
So, there’s a cop-out answer I can give you, which hits again on that idea that “challenge feels good” - when you spent an ETH or more on a prized NFT, then unlocking tokengated products with it feels like an achievement. But for tokengated commerce to actually reach its potential, we need a next tier of cheaper (and, eventually, too-cheap-to-meter) tokens, and many of these are going to be a lot more utilitarian, and less “the challenge is its own reward”, you know? So we need a better answer for how tokengating will succeed over the long run.
Loyalty programs, promo codes, or any other kind of “account-based” gating system can work for reciprocal inclusivity mechanics - of course they can - but here’s the catch. It’s that your gating rules will exist as dependencies that refer back to accounts and permissions, which get complicated fast if you try to introduce any kind of interesting multiplayer mechanic at all.
Imagine gating a pop-up storefront across four different brands’ fans, with multiple tiers of access, that get you early access to a merch drop. Where do you “sign in,” and as who? What if you’re a member of multiple communities - do I need codes from each? How do you prevent promo code abuse, which gets more complex the more variables you throw in? I mean, you can do it, but social gating rules built on dependencies break under complexity pretty quickly, and when the fourth wall breaks and the “exclusive community vibe” is spoiled by buggy software, it’s not a good community experience at all.
In contrast, a token is a bearer instrument - (remember the bearer bonds in Die Hard?) - it is much more like a file, or like a physical ticket that you hold in your hand. (This file analogy is going to be important later.) The NFT does not “link back” to anything, it’s not a reference to a reference to an account entry on one or more merchant databases; it is the ticket itself.
In, let’s call it “single player mode” - so a single merchant gating to a single list of customers - it’s hard to see the advantage. But as soon as you enter multiplayer mode - multiple merchants gating to multiple sets of fans, through a set of social rules - the ticket being a bearer instrument that does not link back to anything and therefore brings no dependencies with it - but can still be trusted by the gate even though it doesn’t link back to anything (more on this later, this is the “why do you need a blockchain” part) is a radically simplifying mechanic. Because now, the tokengating rules can get super complicated, but they won’t break under the weight of dependencies because there aren’t any.
Reading this is a little lightbulb moment for me. Some of crypto’s killer use cases might be big and wild and impossible-to-imagine, but there’s also part of it that’s just, “This just makes the same thing so much easier that now a lot more of it will happen.” Stablecoin rails are in this camp.
I feel like this actually preempts a point I want to hit later so I’ll leave this here. But for now - when we look back ten years from now at 2022 and ask, “What was really obvious and in front of our faces that whole time?” I think one answer will be that collaborative gating will be the mechanic that dramatically simplifies how brands collaborate and endorse each other, and that simplification will mean that community commerce is about to get a lot more multiplayer.
Moreover, collaborative tokengating is an inherently superior format for anything that involves remixing community signifiers and endorsements: in our gated collab example, it’s not like we want to gate to a specific set of people, we want to gate to a specific set of accomplishment-holders, which is a far more flexible and remixable format.
Kei Kreutler expressed this idea brilliantly in a piece called Inventories, not Identities, and I want to double down on this idea by highlighting that NFTs are your inventory of accomplishments. They represent you, and now you can bring them shopping.
Today, we see a great fit from both web3 brands and traditional brands who are already tokengating their online stores, through tokengating app partners that are bringing these storefronts to life. These app partners have been incredible to work with, and we’re building with them really deliberately - more on them in a second. Meanwhile, we just teased a preview of a new mobile app for tokengated commerce: the Gated Merch Shop (“gm shop”, for short) that you should check out. Over the past several months we’ve really fallen in love with the problem of how do you make an incredible, mobile-first, single-purpose, tokengated commerce experience? And I’m so proud of the team that’s built this; it’s going to rule so much.
But all of this is only a crack in the door of what’s possible. What’s going on in the back-of-house is even more interesting.
Now that we’ve set up all the pins by introducing tokengated commerce, and how important this idea of fitting in and standing out is for commerce, we can talk about why it’s so significant this is happening in web3 wallets, on public blockchains.
The one-liner to remember here is: “We’re gonna make Shopify wallet-aware.”
WAGMSWA! WAGBWA?
When Nikhil Basu Trivedi asked for my contribution to his annual Next Big Thing piece, I wrote: “The next big thing in 2022 is entrepreneurs building custom experiences based on the inventories in peoples' wallets.” This sounds like exactly that, specifically for commerce!
The fun thing about writing is that I can just prognosticate, you actually have to build it now that you’ve decided to become an operator. How are you making it happen?
Hey, I wish I could prognosticate that concisely and insightfully. But yeah, when it comes to the building part there’s a lot to uncover, so I’ll take you through it piece by piece.
To really understand Shopify, the first thing to realize is that we’re not just an online store service for merchants; we’re also a developer platform.
Every storefront is unique; if you go to any great merchant’s storefront, that’s not just out-of-the-box Shopify, they’re probably running a dozen or more apps from different developers (or that they built themselves), all working together to create the exact experience that merchants want to represent their business. When you sign up for a subscription product, or navigate cool content in the storefront, or connect your wallet to unlock gated products, that’s all powered by agencies and app developers - just like most of what you do on your iPhone was built by an app developer, not by Apple, and that’s good for everyone.
Well, we want to make wallets a new input for developers building on top of Shopify’s platform. An NFT in your wallet is much more than “have NFT, or don’t.” That NFT is information; it is a smart contract, and that’s significant.
Here’s what we mean when we say, “Making Shopify wallet-aware.”
When a buyer shows up to a storefront, then if they show up with a wallet, all of the stuff that their wallet can sign for, and all of its public, social significance that the buyer wishes to put forward, should be accessible to the storefront and to third-party developers.
Those developers can take all that relevant state and build all kinds of apps and mechanics that can assume that state as an input. There is going to be a generation of very successful apps built on Shopify that give storefronts new kinds of powers, and today we have four amazing tokengating apps live - PERC Engage, Manifold, Shopthru, and Lit Protocol - powering tokengated commerce for merchants now, with several more behind the scenes that we’ll get to see soon enough.
The best web3 brands aren’t waiting. They’re creating intricate, intimate experiences for their tokenholders - new ways of crafting merch drops, new ways for brands and their buyers to collaborate in multiplayer mode. And the wonderful thing about having an app ecosystem is that developers can reuse, iterate, improve, and ultimately share these mechanics with lots of merchants and brands. And make a pretty good living doing so, I might add.
If you’re an app developer and this is interesting to you, I promise you, we’ve currently thought of approximately 1% of the applications that will go on to become huge. The remaining 99% are wide open for you to build.
This is the best part about new primitives: the swarm will think of all sorts of uses that even the primitive’s creators can’t. But you probably have some ideas in mind for what people might do.
To give you a sense of what’s possible, I want to get back to the idea of NFTs as tokens on the internet for representing social achievements and social contracts. NFTs are a more important achievement than you might think, because we’ve managed to package this atomic unit of culture and community - fitting in, and standing out - and capture it, almost like in a file format, that both people and computers can interpret and understand.
This is a big idea so let’s unpack it. What are the four things that the NFTs in your wallet have to say?
What you’re fitting into [a smart contract; a community; a socially-understood context],
How you stand out [which NFT you are signing for in that collection; what sub-meaning],
Who you are [your wallet address that you sign from],
And then one more thing, the genius addition that’s so simple but so important:
A human-readable image that makes it instantly recognizable.
I, alexdanco.eth, fit in to Adam Bomb Squad, and I stand out as the owner of Bomb #6233, the clean blue Disney trap design.
I know this sounds a little ridiculous, but this is actually a really impressive accomplishment; it’s like we have an accepted file format standard for putting a vibe on a computer, in a way where the vibe is not only faithfully preserved and carried forward, but more importantly, is now accessible to other things the computer can do.
It’s easy to laugh at this and point at how silly it all looks, but something pretty powerful is happening here. We now have a way for computers to recognize and understand these units of social accomplishment; these little nuggets of meaning, almost like files (They are a lot like files! This is what I was talking about earlier!) that store social meaning in this persistent little format that’s both human- and computer-legible. And by a minor miracle of social coordination, it’s catching on to broad acceptance.
The fact that NFTs (and other smart contracts on blockchains) are an intermediary format - that sits between the setting where this social meaning was established, and another setting where that social meaning gets deployed (wherever you connect your wallet) - is important. This is almost a step backwards from web2, back out of a world where everything is one app talking to another app directly through APIs, back into an earlier time where we got something more deeply right; and that thing we’re rediscovering is called composability.
The essential idea here is, if you want one app to successfully talk to another app, then that’s easy; you just tell them how. And if you want one app to talk successfully to 100 apps, then you write a nice API that says, “Hey hundred apps, here’s how to talk to me.”
But what if 100 apps want to talk to 100 apps? That’s a lot of connections to maintain. So instead, we can use something else: files. If I want to pass information from one app to another, I can pass it as a CSV file that everybody understands; where no dependencies are created between whoever made the file and whoever uses the file.
So an important principle to appreciate here is that, for any one task, or any one job to be done, having App 1 talk directly to App 99 is going to be “better,” strictly speaking, than going through an intermediary file. But the power of files reveals itself over time, through the power of standards. Because there’s a common format they agree on how to read and write to each other, and a common place for this content to live; on a disk, or on a network, or somewhere that’s accessible and persistent.
So why not pass it as a literal CSV file? I feel like it’s always my responsibility as someone who’s excited about web3 but understands some people’s skepticism about many of the use cases to ask: why does this need a blockchain? What does web3 allow here that you couldn’t have done otherwise?
Aha! Yes! Ok so we’ve finally gotten to the question of wHy dO yOu NeEd a bLocKcHaiN?
And it’s because we need to solve the problem that blockchains are actually, originally, here to solve, which is provable scarcity and the double-spend problem. These “files” need to live somewhere in public state, in an environment of code that can make commitments, in order for their social meaning to make sense. “Web3” is that environment - made possible by publicly agreed-upon blockchain state - with enough group confidence in these “intermediary files” for social meaning.
So if we go back to the present, and ask, “What is web3?” (I know, this is one of those impossible-to-answer questions, and I feel like people don’t want a settled answer because it’s better when you can gesture vaguely), to me, the most practical way to think about “web3” is simply as an environment where there is a consensus emerging for building around a new set of standards: everything is a smart contract address, everything is a tokenID, everything is a wallet address.
The re-emergence of these blockchain artifacts as intermediary “files” mean that interoperable, composable social mechanics are now competitive - and, I think, starting to outcompete - the closed, “web2”-style social network mechanics where everything either happens in one app, or as cross-dependencies between different apps.
This is going to be pretty bonkers for commerce, I think. Especially the most special and meaningful kinds of community commerce, where we’re constantly creating and remixing new ways to express our identities: how we fit in, and stand out. And the best part of this is, this idea is so wide open and divergent that on one company or no one app could ever “solve” this. It’s not possible. Culture is too interesting for that; we need many apps, many developers, many attempts at capturing these forms of community expression - starting with tokengating, but then expanding into, really, “Tokengating can actually mean a lot of things.”
And so, this is why I’m having such a good time working on this at Shopify - because we’re not playing this game alone, we’re a platform, and tokengated commerce really brings out the best of why we chose to build Shopify as a platform. Everyone gets to play.
So this reminds me of The Great Online Game, and part of it is the idea that we’re playing this infinite game, and there don’t have to be winners and losers. And I can see how that makes sense for people, but Shopify is a company. What does winning and losing mean in a company context? How do web3 and “actual companies” mix?
I want to go back to the original idea we opened with; wallets change how people behave, and in the long run, that behaviour will win. I want to focus on one word here specifically: “win”. What do we mean for that behaviour to “win?”
It doesn’t mean, we win, everyone else loses. Winning means we get to keep playing. And we play so that other people can play. It’s a beautiful idea, and I actually think about your “The Great Online Game” piece all the time here.
Shopify’s tagline that we’re known for has always been, “Make commerce better for everyone”, which is great, it’s what we’re here to do; but in the past year there’s been another purposeful slogan starting to pop up that I really like: “Win and help win.”
And I especially like the idea that we should think of the game we’re playing as not having boundaries, but having a horizon. When you move toward the horizon and explore it, you don’t use it up. The horizon keeps moving with you. And that’s how I hope everyone in this world thinks about it: there’s no web2 versus web3, there’s just “Bring the best version of the internet to the most people.” That’s horizon thinking. When you help others win, you win too.
And because you pretty much wrote my piece for me this week, and because I’ve been a fan for a while, and in the spirit of “win and help win,” I’ll throw you one here: where should people go to learn more / get involved in tokengated commerce / follow you on the internet?
Well, here are some suggestions:
Exploring this world for the first time? Get a wallet, go on an adventure.
Are you a brand? Get set up with tokengating, with one of our tokengating app partners.
Want to mint NFTs from your Shopify storefront? Learn about the beta program here.
Are you an engineer and want to work with us? Come join our team here are job postings
Want to get in touch with us, or just hang out on the internet? Find us on Twitter at @alex_danco @robjama @pauldowman @thatcryptowitch and many more of us.
Thanks for hanging out with us over at Not Boring this week, Alex! I’m excited for people to have this new lego – tokengated commerce – and all the new idea legos you dropped throughout the piece to play and build with.
Packy, thank you so much for, first of all, getting me back on the newsletter train - I had so much fun writing this - but more importantly, for your over-the-top generosity in getting this set up. I had the best time. This is what the great online game is all about.
Thanks to Alex for working on this with me, and to Dan for editing!
Thanks for reading, and see you next week,
Packy
This piece is so mesmerizing. I like the back and forth banter and i love the serendipity between the two of you. This would be so great in video/audio form. Im finding myself digging deeper into the sales and marketing aspects and social dynamics that go along with how the world will be changing once wallet aware becomes commonplace. I mean this really can affect almost all aspects of our digital and physical lives. its like layer wallet aware on geo tagging (and have it encrypted)… 😯 , so yes the social dynamics, the fun tech, the possibilities. excited af! also Packy i found the easter egg again “ this idea is so wide open and divergent that on one company or no one app could ever “solve” this.” 🦄
Great piece Packy, Alex and Dan, love to hear more about the intersection of Web3 and eCommerce.