gm! Welcome back to the Variant newsletter.
While we love art for the sake of art as much as anyone in the space (and have written a lot recently about the value we see in generative art NFTs), we also think very carefully about practical use cases of crypto tooling—both developer-facing and consumer-facing.
In that spirit, we’ve got two smart features this issue aimed at builders: Alana Levin maps out a decision tree for how different apps can operate within the evolving rollup infrastructure; and Mason Nystrom offers a new path for using NFTs, tokens, and onchain identity data for better digital advertising.
Earlier this month, we welcomed the first cohort of the Founder Fellowship, our three-month accelerator program for builders; we’ll share selected content from VFF with you over the course of the summer.
Thanks for reading and subscribing.
—Dan Roberts, Editor in Chief
App-Specific Rollups: A Trade-Off Between Connectivity and Control
Two years ago, app developers faced a fairly simple choice when determining where they wanted to deploy their application: Ethereum, Solana, Cosmos, or maybe a few additional layer-1 chains. Rollups weren’t yet operational, and few had ever heard the phrase “modular stack.” The differences between the L1s (throughput, fees, etc.) were stark and relatively easy to grasp.
Today, the landscape looks quite different. App developers are faced with a much larger array of choices: L1s, general-purpose rollups (both optimistic and zk), advanced IBC infra, rollup-as-a-service providers, appchains, and more. With more choices come more questions, including: whether teams should deploy to a general-purpose rollup or build an app-specific rollup; if they pick a general-purpose rollup, then which one; if they go the app-rollup route, then which SDK/rollup-as-a-service to use; which data availability layer to select; whether EigenLayer can help; how to think about sequencers; and if there will even be a colored orb emoji within Optimism’s Superchain ecosystem left if they choose to go the OP Stack route. It’s overwhelming.
To narrow down the set of questions, this piece will take the framing of an app already deployed on Ethereum that wants to scale within the Ethereum ecosystem. Consequently, the focus will be on the decision tree that app teams face when determining whether to launch their own rollup, my hypotheses around which types of apps are particularly well suited for this infrastructure, and when I think we might hit the tipping point in adoption.
‘This Protocol Is Brought to You By': An Onchain Model for Web3 Advertising
Web3 has always been reluctant to use advertising as a business model.
Ads in general can stir up negative associations for many internet consumers. Web2 tech giants milk user data and serve it back to us in the form of super-targeted ads. Moreover, most smaller-scale individual creators haven’t been able to convert ads into a stable income, relying instead on subscriptions to make money online.
But advertising aligns the objective of broad product distribution with a viable revenue stream, making it one of the best monetization models out there. This is why social and search networks subsidize their platforms with ads, and top content creators leverage ads over subscriptions on platforms like Substack and Spotify.
The open nature of crypto protocols breaks down traditional platform business models that rely on siloed data and user lock-in. Core elements of the web3 advertising stack are already emerging, including advertisers, ad protocols, marketplaces, and applications. As crypto platforms search for viable business models, the advertising model sits there, waiting patiently for its inevitable adoption.
But web3 ads don’t have to mirror their web2 counterparts. While all of the web3 advertising stack components are important to the future of crypto-native advertising, let’s focus on the atomic unit of the advertising stack, the ads themselves.
Read this next
More fresh posts on the Variant site.
Mason Nystrom: Overcoming ‘Token Debt’
Token debt afflicts crypto protocols that have issued a token but must make significant changes down the road.
A framework for thinking about how to build crypto-powered social networks: asset-first or ideology-first. We explore both paths.
Caleb Shough: Adventures in Onchain Ownership
Crypto is fun. Here's how trying cool stuff onchain made me a real degen.
Alana Levin: Blackbird Makes Me More Excited to Dine Out
Blackbird gives restaurants tools to better understand their guests, while rewarding diners for their loyalty.
Thinking in public
We welcome your input and replies on Twitter.
Jesse is putting forward a pithy thesis for protocol development:
(For a longer explanation, watch Jesse’s talk as part of Summer of Protocols.)
Geoff is wondering about lending protocol pain points:
Derek is seeing new trends around the unbundling of wallets:
See you next issue.
Disclaimer: This post is for general information purposes only. It does not constitute investment advice or a recommendation or solicitation to buy or sell any investment and should not be used in the evaluation of the merits of making any investment decision. It should not be relied upon for accounting, legal or tax advice or investment recommendations. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Variant. While taken from sources believed to be reliable, Variant has not independently verified such information. Variant makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This post reflects the current opinions of the authors and is not made on behalf of Variant or its Clients and does not necessarily reflect the opinions of Variant, its General Partners, its affiliates, advisors or individuals associated with Variant. The opinions reflected herein are subject to change without being updated.