Our Means vs. Your Ends
A response to Metalabel’s recent post “When The Means Justify The Ends”
Prelude
After reading the recent blog post from Metalabel, "When The Means Justify The Ends", we were compelled to respond.
Like any startup with limited resources and infinite choice, Metalabel must make decisions it believes will bring it closer to its goals. With this post, Metalabel has drawn a line in the sand; their goals necessitate a departure from crypto.
Using the same logic, we'll critically examine the statements made to justify the exodus. We want to provide a more balanced view to comfort those they leave behind.
For the avoidance of doubt, Metalabel's new direction makes a lot of sense if you consider their original goals. Before reading our commentary, it's worth reading the original article first.
And before we get going, it's worth saying that Yancey's overall goals for Metalabel, drawing inspiration from punk bands and the Royal Society, align strongly with our own. Releasing content as a means to create cultural, intellectual, and narrative Schelling points is the point of this publication.
The piece opens by stating that the experiences and opinions are the writer's own, and others will have different takes, so here is ours.
Things I Want → Things We Want
You don't need to get far into the piece to ask yourself if crypto was ever the right place for Metalabel.
In 2021, during one of our industry's more impressive bouts of growth, Metalabel found themselves drawn to crypto by the promise of "permanent storage, collective governance, interoperable data, and artist royalties."
The feature list spans technical, economic, and social boundaries—some are delivered as code and enforced by a network of machines and economic mechanisms. Some are delivered as values and enforced by a network of humans. Foreshadowing its eventual ouster, Metalabel's descent into the crypto black hole rests on the belief that blockchains offer an escape from increasingly financialised decision-making.
Whether true or retconned, this appears to be a misunderstanding. Crypto never promised an escape from financialized decision-making. If anything, it promised us increased financialized decision-making.
Ultimately, the economic security that ensures our information is permanent and executes our governance decisions is provided by validators who are paid handsomely for their services. This financialised system works so well, in fact, that validators actually oversupply security to Ethereum users.
Though we've figured out how to make random people on the internet store our data forever, as mentioned earlier, some of the "Things We Want" still need to be socially enforced by the people in crypto—which means us. We haven't yet figured out the incentive judo required to make "The Things We Want", like artist royalties, downstream of the average Cryptopian's selfish goals. However, "peacing out" certainly tilts the balance in the wrong direction.
Returning to the post, the example given in the very next paragraph, Adele using a loyalty system to sell tickets to "the most deserving" fans, suggests another misunderstanding.
Based on the linked article, Adele's team giving loyalty scores to fans based on their listening history didn't require blockchain technology in 2015, coincidentally the year of Ethereum's launch. Even today, it would be far easier to achieve this technically using standard web2 technology.
"Especially with blockchains, where it was possible to turn basically any numerical value into a gating mechanic"
And, yes, this is true. But it's also true that Ticketmaster could use the same numerical value to gate access to ticket sales. So why don't they?
Let's consider the case where an artist, maybe Adele, uses a blockchain to sell tickets to her fans, requiring fans to prove their fandom on-chain before they can make a purchase. This use case is possible today, so blockchains were an excellent technology choice. However, the problem Adele has isn't simply a technology problem—it's an incentive problem. Again, if Ticketmaster can enforce the exact gating mechanism as Adele, why don't they? If an artist can sell tickets to their fans directly, why don't they? If fans can get tickets directly from the artist, why don't they?
Blockchains, as portrayed in this example, are a solution to a problem Adele never had. As long as Adele wants to perform to her fans in one of Live Nation's ~400 worldwide venues, they'll have to become well acquainted with Ticketmaster's "Things I Want" list.
In the following example given for their departure from Crypto, Metalabel announced an NFT drop based on the extremely popular Quadratic Funding whitepaper authored by Vitalik Buterin, Glen Weyl, and Zoe Hitzig. Anyone in crypto could have predicted the result, not least Metalabel.
Released into a market dominated by speculation, it didn't disappoint, generating 460 ETH (c. $1m) for the Open Edition and 120 ETH (c. $240k) for the Signature Edition. Metalabel, it appears, took 10% of the proceeds—a good result for everyone involved.
Yet it seems like the person who angrily wrote to MetaLabel on Twitter saying, "I own three and don't even know why?", is at one with the memetic nature of crypto markets. Metalabel, it seems, is not—positioning this person, their kinfolk (🦍), and their lists of "Things I Want" as disappointingly out-of-context.
False Equivalences
The speculation Metalabel decried during the Quadratic Funding whitepaper drop is cited as a benefit to artists. The new problem was that someone came along and stopped the party.
To dig into Metalabel's point and why we believe it is misguided, we must first discuss what Blur did.
To avoid doubt, when people talk about" artist royalties" regarding NFTs, they aren't actually talking about royalties at all, at least by any standard definition. They are talking about the right to a % of resale value in perpetuity. This was never law, just some code in a smart contract. If you used the contract to mint an NFT, sold it, and then transferred it, you'd pay the creator a % of the sale proceeds. This right was also non-negotiable, an extremely important distinction when comparing.
On the issue outlined in the above segment, the author chastises Blur for finding an edge in the market that, ultimately, destroyed theirs. Though the world has decided that royalties are a useful mechanism for compensating IP creators, enshrined them in law, and now enforces them through its courts, NFT "artist royalties" don't yet enjoy that level of support. During Blur's ascension, the market and the social layer weighed the case for "artist royalties", and the traders won over the artists and collectors. Had the scales tipped in the other direction, we may have seen "Artist Royalties" enshrined in the Ethereum protocol as the ecosystem continues to make progress. Without this, avoiding paying "Artist royalties" would always be possible. Blur made its move, and the market responded in its favour.
There are strong arguments about why the failure of "Artist Royalties" may or may not be a good thing, but that's not the point. As we've said, crypto aims to align selfish incentives to produce collective goods. If traders dominate the collective, then crypto will produce goods for them. If crypto doesn't represent our interests, we must redesign the system or introduce more like-minded people. Taking leave leaves us all worse off.
With that, we turn to the most misleading part of the original article.
As previously mentioned, these "royalties" differ, and stating equivalence is inaccurate. Spotify is subject to copyright restrictions (as is any platform that exploits the rights of creators, even Opensea and Blur), which are legal. The "resale % right" is not a legal right enjoyed by any copyright holder, which is a good thing. Especially if you own a second-hand record store or want to sell your car, imagine having to give Musk 10% every time you sell your Tesla.
Spotify, unlike Blur, can't just decide not to pay royalties; technically, it could require exclusive releases (i.e., blocking content from appearing on other platforms). This happens all the time in other media (and also happened on Tidal for a bit, remember that?).
The reason this doesn't work is a commercial one - supply chain power in the music industry is concentrated in a few companies that project their collective negotiating power, whether within a major label or through a collection society, up and down the chain. The most powerful rightsholders have decided that the ubiquity of content, "Things I Want," is the right model for music, "Things We Want."
This situation was possible in our nascent industry because of the lack of collective negotiating power. On the announcement of Blur's decision to remove artist resale "royalties," the major NFT creators could have formed an alliance to remove their content from Blur and only choose platforms that supported resale "royalties." But they didn't, and even if they had, the market might have responded similarly because traders, i.e., the customer, hold most of the power, and resale royalties are an inefficiency for them.
The collective experience of the Metalabel team suggests these arguments will not be new to them, so we don't find the "first strike" compelling.
Unrealistic Expectations
The second two strikes feel like they come from a similar place: an expectation that the ecosystem and technology should be more advanced than they are.
With that said, there are still some elements that we feel obligated to point out.
No one would argue that L1 gas prices are reasonable for use in consumer applications, especially considering the volatility. But that's why many consumer applications, like Gitcoin and Zora, have moved to L2s like Optimism, Arbitrum, and Base.
2021 and 2022 were typified by a series of gas volatility events, to which the relatively high spike in May 2023 paled in comparison.
It's fair to say that L2s were still fairly new for consumer applications in April / May 2023 but weren't unheard of. For example, there are guides from September 2022 on how to do an NFT drop on Optimism. Opensea supported Optimism and Arbitrum from late 2022.
That Metalabel decided to use L1 for their drops suggests they were happy with the risks at the time as long as it gave them access to most users. The fact the risk didn't pay off is then, bewilderingly, counted as a "strike" against Metalabel's participation in the entire ecosystem.
The third strike follows a similar path.
Hacks are undeniably terrible, but does the author getting hacked negate the value produced by the entire ecosystem? However unfortunate, anyone with a public profile must expect to be targeted.
There's not much else to say on this as the details are personal, but again, that this counts as the third and final "strike" against Metalabel's participation in crypto is puzzling.
Critical thinking
We won't quote any more of the article as it moves towards setting the scene for their pivot, which is outside of our critique. It is worth commenting on the "climbing out the rabbit hole" section, as it probably highlights the root cause for all of the above and leads towards the conclusion of this piece.
The author describes going on a "crypto diet" and cutting out their exposure to web3 influencers.
This speaks to the environment that they had created for themselves before deciding to go on a "diet" as much as anything else. Part of the blame for unrealistic expectations should indeed go towards those who created a "Web3" narrative that was inaccurate at best and duplicitous at worst. But it is also incumbent on all of us to think critically about the promises being made and who by, especially during the hype of a bull cycle.
Many of the learnings Metalabel experienced over the past year were hiding in plain sight from the beginning. That they didn't see them is a function of the distorted reality they and many of us create for ourselves.
It is certainly positive that a crypto diet allowed them to see this, and hopefully, Metalabel’s web3 pilgrimage will end up being a cautionary tale about the importance of critical thinking.