Nestcoin: Building the ByteDance of Web3
Building products whose "demand" feed into another's "supply"
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Hi friends 👋🏻,
Welcome to another essay on Open Africa.
In Part I, we covered Yele’s history, his journey from medical school to crypto and discussed Nestcoin’s current products.
But Nestcoin’s recent market activities are even more intriguing and that’s what we’re going to discuss in Part II today.
We continue from Part I to go through:
X–To– Earn Business Models
Building the ByteDance of Web3
Speculative Times With Interesting Outcomes
Favour: Have you changed your mind about Nestcoin since Part I? If so, please let me know in the comments.
Let’s get to it.
X–to– Earn Business Models
This is the second part of a two-part series. Check out Part 1: Nestcoin: Building Africa's Wealth Through Crypto.
Developers saw the success of the play to earn model and began to think about how they could adopt it in new areas to produce value.
This model isn't very different from the "work to-earn" model we have today. That is, if my "work" was to sing a song, I would be rewarded for it. But as more work was demanded, people came together to create companies. These companies were born to do work faster and make our lives easier.
But this came with trade-offs.
Twitter creates value through the network of people actively sending 140-character tweets daily. Those who amassed enough following became influencers. These influencers (“orbital stakeholders”) contribute to the company’s bottom lines but as these companies grew, their relationship with influencers became unsustainable.
This, according to Chris Dixon, is “Why Decentralization Matters”
Now, crypto shows that when people are given the right incentives, they are willing to trade time and skills for the growth of a network and the appreciation of tokens. In the future, doing “normal” actions can become valuable to a network that will reward them for those actions.
Axie Infinity has shown that it works and Nestcoin is looking to capitalise to create more x-to-earn opportunities.
Learn-to-Earn.
One of the major drawbacks to crypto adoption has been the lack of education. As a result, many people are left out from potentially changing their lives.
Learn to earn is a new model that rewards users as they learn about crypto and contribute to the network.
Side note: Traditional education models need to change. I've been thinking about how content (education) and money could be used as incentives for learning. It seems Learn-to-earn is a good starting point for people wanting to learn a skill and add value at the same time.
A popular startup Learn-to-Earn startup is Rabbithole. On Rabbithole, users learn skills such as governance, identity, lending etc and take “quests” to test their knowledge. They are rewarded when they complete these quests. These quests are provided by protocols like Compound that need the best users to support their network.
Why would a protocol choose to empower participants? This can’t be free right?
This is where Rabbithole shines. One of the bad things about crypto projects is that they launch to great fanfare, get a lot of revenues and burn out just as fast. A massive contributor to Axie Infinity was the staunch community of supporters it had even while building during crypto winter.
As Axie co-founder and growth lead, Jeff “Jiho” Zirlin, puts it:
The community needs to be small first to work when it gets really big. That’s what makes Axie hard to copy -- if you build a competitor now, you’re going to attract the kind of people who want to find the next Axie, not the kind of people who are actually interested in moving gaming forward.
For every participant in the Learn to earn model, it's a win-win:
Users learn about Web3, obtain credentials, earn through it, and apply their skills to the right protocols.
Protocols reduce CAC and gain new users that can become active contributors in their networks.
Rabbithole earns a commission of the fees by facilitating knowledge transfer and protocol discovery.
Since launching, RabbitHole has distributed over $100k to 10k+ addresses in rewards from some of the largest protocols in crypto (e.g., Uniswap, Aave, Compound, The Graph, Pool Together, and Polygon).
The Learn-to-earn space is still very early and there's so much untapped revenue. Nestcoin promises to onboard the next million crypto users and if it can get them active enough through learning and participation, the upside is anyone’s guess.
Invest to earn
When Yele was asked what he would change about Bundle, he mentioned he would probably have made it non-custodial.
Being non-custodial means that they’d have a wider market reach without the worry of centralized authorities. In other words, Bundle could have been present in all countries in Africa from Day 1 providing more users access to crypto.
However, trading is just one part of the play.
DeFi opens more opportunities for people to have ownership of money, financial and financial services. The main problems DeFi solves are control and liquidity. Take the stock market, for example, you only have access to it from 9 am-4 pm EST when the banks are open. You can't access it outside of those hours or during the weekends. Even your money takes breaks on public holidays. This limits a lot of activities that could be done.
With DeFi, you can:
Lend your crypto to borrowers.
Earn interest on all crypto owned.
By being active participants in different networks, games or otherwise, Nestcoin can enable multiple ways for users to earn by lending and staking their crypto assets.
But while companies like YGG and Rabbithole are doubling down on gaming and education, Nestcoin is building something much bigger. They are building products whose “demand” feed into the “supply” of the others to create a Web3 juggernaut. Breach and MVM are the first iterations of this.
Yele wants to build Web3’s ByteDance.
Building the ByteDance of Web3
YGG has expanded beyond Axie infinity moving into other games. Gabby Dizon, founder of Yield Guild Games said in an episode of The Interview-Crypto, that “Yield Guild Games wants to build the “talent agency of the Metaverse” or “job board of the Metaverse”.
Quite ambitious.
Yele's Nestcoin is just as ambitious. In the same interview with Peach, Yele stealthily said that Nestcoin wants to be the ByteDance of Web3.
ByteDance is an internet holding company most known for its famous product, TikTok. Here's how they describe themselves:
"ByteDance's mission is to inspire creativity and enrich life. With a suite of more than a dozen products, including TikTok, Helo, and Resso, as well as platforms specific to the China market, including Toutiao, Douyin, and Xigua, ByteDance has made it easier and more fun for people to connect with, consume, and create content."
If Nestcoin would be Web3's ByteDance, this would be the pitch.
"Nestcoin's mission is to inspire creativity and enrich life. With products including Breach and MVM, Nestcoin will make it easier and more fun for Africans to connect with, consume, create and earn from content."
With Breach and MVM released, Nestcoin is pushing heavily on investments and partnerships to achieve its dreams.
Just a week after its launch, Nestcoin announced its first investment in Lazerpay. I didn't know anything about Nestcoin or Lazerpay but I was still shocked. “How can a pre-product startup just come out of stealth to invest in startups?”
Even Stitch's country manager, Benjamin Dada was shocked too.
Traditionally, startups go through the innovation lifecycle – ideate, create a prototype, speak to customers, get feedback, iterate. Rinse and repeat. The end of this process results in a product that customers love and are willing to pay for. Most times it’s only when they go public or become unicorns do they begin to invest in other companies.
So why did Nestcoin invest so early? Two reasons come to mind.
Front row seats to the future. When startups get big, it becomes harder to produce innovative products. Facebook’s WhatsApp, Instagram and Oculus were all acquisitions. Google’s attempts at innovation has led to failures. Remember Fiber, Google+, Google glass? Innovating isn’t bad however, these companies have shown that going from 100-infinity is more about capital allocation than innovation. Also if the Metaverse is going to be open without a monopoly, this approach gives you multiple ways to capture value.
Onboard people to Web3 faster. Tencent’s WeChat did this bringing more users to the Mobile Internet and enabling more uses on the platform. With multiple investments, Nestcoin could become the place most users are spending their time to create wealth in Web3.
Since releasing Breach and MVM, Nestcoin has either invested or partnered with the following startups:
Lazerpay – The stripe for cryptocurrencies. Just as stripe enabled merchants to accept payments from anyone in the world, Lazerpay wants to remove the hurdles on accepting crypto payments.
AltSchool – They are building Lambda School for Africa. They teach students in cohorts and earn through an income share agreement once students secure jobs.
Bitsika – is a Pan-African remittance app that allows users to send money from any country in Africa. Today, they currently serve Nigeria, Cameroon, Togo, Benin, Burkina Faso, Côte d'Ivoire and Senegal.
With so many investments and partnerships for a four-month-old startup, let’s imagine what Nestcoin’s flywheel might look like in practice
Gaming. With MVM, Nestcoin is entering the first act of the Metaverse. The Metaverse today feels like a game and it remains the fastest on-ramp to bringing people into Web3.
Community. Every community-based business is reliant on network effects. With Breach, Nestcoin is building a community of gamers and the crypto curious to explore, interact and learn together.
Education. For the community to grow and have stronger connections, they would need to learn together. Breach and AltSchool can fill this gap by creating learning content that is key to other parts of the flywheel. While Breach can be the arm that produces “creator-inspired” content, AltSchool can be the arm that provides the credentials that verify knowledge in Web3. Also, imagine community members not only earning by learning (cc: Rabbithole) but also from things like course merch, avatars, skins and badges treated as tokens.
Payments. As the community earns from both education and gaming, Lazerpay would be the on and off-ramp making it easy for companies and creators to conduct crypto to fiat transactions and vice versa.
Invest to earn. If Nestcoin hits critical mass and users hold $10,000 in their wallets as projected, they need a way to manage this income. Instead of always converting tokens to fiat, they can lend it or stake it earning yields on them.
Nestcoin is developing innovative products while giving itself front row seats to Web3 through investments. Users learn on Breach, earn from quests, sell NFTs and still invest their crypto earnings. If they pull it off, Nestcoin could become a very important company as the ByteDance of Web3.
Speculative Times With Interesting Outcomes
In the space of five years, Yele has gone on from wanting to save lives to giving Africans the tools to generate wealth.
Imagine a world where people learn in a community, become empowered and use the knowledge for the growth of the same platform they discovered. It's like YouTube teaching you about video editing, and the more you learn and display your skills on YouTube, the more you earn ad revenue from YouTube. You can then trade YouTube tokens across different networks or even convert them to cash.
That world doesn’t exist. Nestcoin wants to take a shot at it.
The market is still very early. Nestcoin still has two other products yet to be released. The leaders YGG and Rabbithole in their respective spaces only just raised in the last year. Yield Guild Games(YGG) has raised a total of $22.4M. Rabbithole raised an $18m series A round in January.
How the market evolves is still anyone's guess. I would be remiss to say there aren’t any risks some of which include:
Fad. Learn-to-Earn, Play-to-Earn and X-to-Earn might just be a fad that dies out. (I doubt this though).
External dependencies. The earning potential of users is dependent on the demand and supply for tokens outside of Nestcoin’s control. In Learn-to-Earn models, the worth of quests is fixed and non-negotiable by protocols. In the unlikeliest of cases, the country’s economy could be so good that it relegates X-to-Earn products to the background.
Power law of “player returns”. For a typical fund in venture capital, just a few companies return more than the investments made in them. The others die or generate “just OK” returns. Most VCs then double down on the highly successful ones to increase their returns. This could happen to Nestcoin. Only highly successful users could be granted access to more tokens and resources. This could cause an imbalance in the community.
Government. This is table stakes but it is still worth mentioning.
Do I have any of the answers? No. Are the problems Nestcoin’s solving important? Yes.
The fact that people’s income will be a mix of things they already do whether it’s gaming, traditional 9-5 work, attending school or investing is interesting. I’ve gone a little DAOn the rabbit hole (😉) since my last essay on the Blockchain. I’m more curious about the applications of Web3 to change the lives of people in a way that’s both fun and rewarding.
New X-to-Earn use cases could even open up. Decide on whether a Decentralised Exchange (DEX) fork should or shouldn’t happen? Judge to earn. Like a picture from a celebrity’s decentralised Instagram? Like to earn.
Maybe I’m ignorant and don’t even know anything that I’m talking about. Nestcoin is a project the team speaks about very passionately and I’m rooting for them.
Now, back to Web2.
Open Questions
Crypto education is important. How can Nestcoin be an arbiter of truth in a decentralized world? Do we get to a point where “truth” is dictated by the platforms that provide the most rewards?
How do you manage user expectations by managing people’s genuine interests for “playing” and those focused on receiving a financial reward?
How does Nestcoin reduce or prevent the “Power law of “player returns”?
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Kamso.