Evolution of Web3 Communities

Key Insights

• Initially, profile picture (PFP) NFT projects emphasized community, but over time, many projects shifted their focus towards financialization, with NFT holders prioritizing financial returns over community engagement.
• Consumer applications focusing on decentralized social media, digital identity, and blockchain-based domain names have experienced a remarkable increase in unique user adoption within the NFT market, with the rate surging by nearly 10x from mid-2021 to early 2022.
• Protocols have set themselves up for success in the realm of new consumer applications by prioritizing natural network effects through user connections and offering opportunities for meaningful connections and curated online identities.

Historically, profile picture (PFP) NFT projects emphasized "community" as a fundamental value. However, over the past year, many prominent NFT projects have increasingly focused on financialization, with "community" members (NFT holders) prioritizing financial returns over the emotional benefits of being part of a community.

Considering the user perspective, the shift from community-driven projects to financialization could have occurred through one of two paths. Either the same users changed their values, or new financially motivated users replaced the initial community-oriented users. The latter path is more likely, as the customer profile of early adopters in community-driven IP (NFT projects) significantly differs from that of individuals who trade tokens solely for financial gain. Assuming that community-driven users hold greater value for early-stage consumer projects, the question arises: where did these users turn once financialization took hold?

In large part, these users migrated to new consumer platforms that prioritize Web3-based community engagement, surpassing the declining community-centric PFP projects. These platforms encompass decentralized social media, digital identity solutions, and blockchain-based domain names. They not only fill the void created by the shifting NFT landscape but also usher in a fresh era of inclusive participation. By studying user behavior across different aspects of NFT-based applications on EVM chains, we can extract valuable insights into user migrations and the emergence of subcommunities within this rapidly evolving sector.