Like so much in technological innovation, Water & Music's journey into Web3 happened very slowly, and then all at once.
After covering music, tech and crypto from a critical, research-oriented perspective for the past two years, we dove headfirst into becoming Web3 and DAO operators ourselves in the second half of 2021. Within the span of just five months, we:
- Migrated our membership off of Patreon to our own (primarily Web2-facilitated) website and membership management stack, giving us more direct ownership over our community relationships and revenue flows;
- Went through Cohort 3 of the Seed Club accelerator, which gave us a crash course in Web3 and DAO fundamentals;
- Started and published our first-ever collaborative report as a DAO — a 20,000-word resource focused on all things music and Web3, featuring the work of over 40 member-contributors;
- Sold out of our first ever genesis NFTs in under 36 hours, which went directly towards supporting our research;
- Minted our token $STREAM, and
- Executed our first retroactive $STREAM airdrop to over 300 of our active members.
This post below is focused on fleshing out both the philosophical context and tactical details behind our inaugural $STREAMdrop (see what we did there?...). Not only is our airdrop approach complex in its multiple component parts, but it's also markedly different in its intention and target audience from those of many other DAOs, because fundamentally we are not a Web3-native community.
Rather, we have a nearly three-year history of running as a "Web2-native" business, supported entirely by recurring fiat membership fees from over 1,500 supporters. Over the course of these few years, we've cultivated a distinguished editorial voice and reputation in the music industry, as well as a robust community culture of members who have been intrinsically incentivized to support our mission and help their peers learn and grow, without any promise of extrinsic financial rewards (aside from perhaps the indirect upside of gaining the industry knowledge and connections to land their next big job, speaking gig or business partnership).
Hence, our $STREAM airdrop has two strategic objectives that sit at an interesting crossroads in how we are evolving as a community and brand:
- Looking back: Giving our historical community members and supporters a guided nudge into participating in Web3 in the context of our mission, plus a head-start towards active governance in our next stage as a DAO. We achieved this objective in the form of a retroactive airdrop of $STREAM to nearly 300 of our longtime historical supporters and contributors who had been buying into our mission long before our transition to Web3.
- Looking forward: Laying the foundation for a new incentive and reward structure around collaborative research in the music industry. We achieved this objective in the form of a retroactive airdrop of $STREAM to the 44 member-contributors to Season 1 of our collaborative research.
While we certainly don't have all the answers, we nonetheless hope the below discussion can provide a helpful starting blueprint for other Web2-native communities looking to make a similar foray into embracing Web3 infrastructure for collective financing and governance.
Recap: What is $STREAM and what does it represent?
The core concept behind $STREAM as laid out in our original Hello World post remains true: $STREAM is a “research token” that represents high-quality, tangible contributions to our larger project of collaborative research, knowledge-sharing and community-building in music and tech.
As a reminder, the $STREAM token has no inherent financial value. Rather, the token functions primarily as a key to on-chain governance for our most active contributors and supporters, especially with respect to how we use our community treasury resources to fund future research and editorial projects.
There is a fixed supply of 10 million $STREAM, broken down into the following four buckets:
- Retro community airdrop: 20% of total supply
- S1 collab research airdrop: 1%
- Stakeholders (founders, advisors, staff, etc.): 15% (founders and staff are subject to a 1-year vesting period with a 3-month cliff)
- Community treasury: 64%
Like any other token, you can view $STREAM's entire distribution and ownership history on-chain. Unlike many other tokens, however, no part of the incentive design or reward mechanics for $STREAM is currently automated; instead, core Water & Music team members (and, down the line, our core supporters and contributors) determine who earns $STREAM based on a more holistic evaluation on a given member's value-add to our community.
Distribution, Part I: Retro airdrop for historical supporters
Apart from us, almost no examples exist of Web2-native brands or companies that have retroactively airdropped tokens (fungible and/or non-fungible) to their historical community members. A few exceptions:
- In October 2020, independent electronic artist RAC gifted his own token $RAC to his historical supporters on Bandcamp, Twitch and Patreon, as well as on other on- and off-chain direct-to-fan channels such as his merch store and his $TAPE cassette sale on Zora.
- On November 26, 2021, Poolsuite — a beloved, summery music curation and lifestyle brand seven years in the making — airdropped exclusive Pool Member NFTs to a curated list of 250 historical supporters in their community. Just one day later, the brand launched their public Executive Member NFT sale, which generated $2 million in revenue for the brand in a matter of hours. (Disclaimer: I am a holder of both a Pool Member NFT and an Executive Member NFT from Poolsuite.)
In other words, literally no playbook or "best practice" for what we are trying to do exists. So, like many other emergent crypto communities, we have to write and iterate on our own playbook as we go, based on what we feel is most appropriate for our community.
We dedicated 20% of the $STREAM supply — or 2M $STREAM — to the retro community portion of our $STREAM airdrop. Our core pitch to prospective members is that the dynamism, intelligence and resourcefulness of our community, as displayed in our private Discord server, is as much a source of value as the original articles and research that we publish. To that end, we structured our retro community airdrop allocation into the following five buckets:
- Guest writers and editors for previous W&M articles (400,000 $STREAM across a total of 35 whitelisted contributors).
- Longtime supporters from when we were on Patreon (800,000 $STREAM, 983 whitelisted members).
- Historically engaged Discord users (500,000 $STREAM, 91 whitelisted members).
- Credited members in our weekly Discord digests (100,000 $STREAM, 58 whitelisted members).
- Core W&M team members (200,000 $STREAM, 5 whitelisted staff members).
Getting a concrete list of members for buckets 1, 4 and 5 were relatively straightforward, simply pulling from our archive of articles and email digests. Buckets 2 and 3 took longer to nail down from an engineering perspective, but also proved to be the most interesting and fruitful design spaces for creating our own retroactive reward system.
Time-weighted engagement
For both longtime Patreon supporters and engaged Discord users, we wanted to combat recency bias by implementing a time-weighted value system. We broke down Water & Music's existing history as a community and brand into the following three eras, giving more weight to qualifying members in earlier cohorts:
- Year 1: The OGs (Feb 2019–Jan 2020). I started the Patreon page for Water & Music primarily as an experimental, altruistic side channel for enthusiastic readers to support my freelance work financially. It was in all senses an individualistic and creator-centric rather than collective-centric endeavor, with myself posting all the exclusive content, being the only Discord moderator and overseeing business operations.
- Year 2: Water & Music becomes a full-time business (Feb 2020–Jan 2021). Right around the start of the COVID-19 pandemic was when I was able to start focusing less on freelancing and more on building out Water & Music full-time as a proper standalone brand, with a larger slate of guest writers and data-driven resources (e.g. databases of music/tech companies and deals). Water & Music's membership grew more than fourfold during this year, from under 300 members to over 1,200 members.
- Year 3: Going down the web3/DAO rabbit hole (Feb 2021–present). If you're reading this, you probably know what this era is about. :) 2021 has been devoted not only to intensive coverage of music/Web3 from a research perspective (see our ongoing Music/Crypto Dashboard and our $STREAM Season 1 report on music/Web3 trends), but also to our own meta exploration of DAOs as infrastructure for fostering more collaborative research and knowledge-sharing in our community.
Blended Discord metrics
Beyond time-weighting, there was also the question of what specific metrics in our Discord server best represented a concrete value-add in the context of our community. We wanted to avoid purely one-dimensional measures of engagement, such as merely rewarding the chattiest people in our server without measuring the extent of their direct interactions with others.
Ultimately, we decided on a custom blended weighting system that took into account the following four metrics for each Discord member:
- Total message count (weight 0.3)
- Total message length, measured by character count (0.4)
- Total reacts given to others (0.1)
- Total reacts received from others (0.2)
DISTRIBUTION, Part II: Retro airdrop for collab report contributors
There were two main forms of rewards for research contributors to $STREAM S1:
- 100,000 $STREAM allocation — or, 1% of the total $STREAM supply.
- The collab report portion of our genesis NFT sales — or, 55% of 23ETH = 12.65ETH.
A total of 44 contributors — all current Water & Music members or staff — participated in putting together $STREAM S1, with a starting date of October 22, 2021. Anyone who contributed in a direct capacity throughout the eight-week process, from our first week seeding research questions from the community to our final week editing articles and rolling out the report, was eligible to receive $STREAM and ETH rewards. Contributors also took on a variety of different roles throughout this journey, from interviewers, writers and document annotators to data analysts/curators and overall project leads; nearly all of these roles emerged organically over time instead of being predetermined. You can view detailed lists of contributors and the roles they took on at the bottom of each article in our report.
Ultimately, we decided to approach token allocations via a top-down points system, which you can see laid out in detail in this spreadsheet. We assigned each contributor a specific number of points via the following three steps:
- Thread-specific role weighting — for each thread of the report, rank each kind of contribution role from a scale of 1 to 5, with 5 representing the most effort/involvement in putting the thread together and 1 being the least. (You can view more specific breakdowns per thread in the "thread-specific weights" tab.)
- Thread-specific point distribution — for each thread, add up the points for each person's contribution based on the role(s) they took on, as itemized at the bottom of each article of the report (columns G–K of the "master list" tab). The "ideation/identity" column (F) accounts for people who helped shape topic synthesis early on from week 1, plus people who helped us develop the report's overall visual identity.
- Report-wide point distribution/weighting — sum up total points for each person across all threads, to get their total point value and percentage allocation for the entire report (columns E and D, respectively). This number informs each person's relative share of the 100,000 $STREAM allocation for Season 1 (column B) and the collab report portion of NFT sales (column C).
The hope is that this approach does a fair job of prioritizing the following groups of contributors:
- Meta-project leads (i.e. people who helped coordinate efforts across the entire report)
- Thread-specific project leads (i.e. people who helped coordinate efforts for a single thread of the report)
- People who were deeply involved in fewer threads from an earlier stage (i.e. people who committed to specializing in one topic from start to finish)
- People who were actively involved in more threads at a later stage (i.e. generalists who applied their skills in areas like writing, editing and visual design across multiple articles in the final two weeks)
All in all, each contributor to our report received an average of 2,273 $STREAM and 0.29 ETH (roughly US$1,100) for their work. Project leads also received separate one-time payments for the several hours they spent per week contributing and coordinating research, with the choice of receiving such payments in either fiat or a cryptocurrency of their choice.
While this compensation system has gotten positive feedback from our contributor community, it's also definitely imperfect, especially in how it provided little to no room for contributors to have a say in how their collective value was assessed. For instance, we assigned point values to specific tasks and job roles, but did not track other signals that others in the community might also find valuable (e.g. who consistently brought in and onboarded new contributors, or who led our weekly research standups and working-group calls). We're exploring using tools like Coordinape to facilitate more peer-to-peer token allocations around our future research seasons on top of base compensation, which will be an important step in practicing what we preach when it comes to building a DAO.
More contextual notes on strategy and execution
Where we diverge from "airdrop culture"
At large, airdrops are a crucial component of the marketing toolkit for many crypto projects today. More specifically, many early-stage Web3-native projects treat airdrops as a marketing tactic to growth-hack communities from the ground up. Recent examples include:
- The SOS airdrop for the newly formed OpenDAO (claimable by anyone who has ever bought or sold an NFT on OpenSea)
- The GAS airdrop for Gas DAO (claimable by anyone who has spent over $1,559 in gas fees on the Ethereum blockchain)
- The ENS airdrop for the ENS DAO (claimable by any owners of .eth domains)
A Twitter search for "drop your ENS" or "drop your ETH address" surfaces hundreds upon hundreds of other airdrop giveaways for as-yet unproven or unannounced tokens. Under this model, tweets act as a sort of public waitlist system, leveraging Twitter's network effects to maximize a project's attention — arguably the most scarce resource in crypto.
That said, the high frequency of airdrops has also created a culture in crypto where many prospective contributors join a community with the sole aim of maximizing their chances of getting airdropped tokens in the future — regardless of how invested they are in the community as a whole, or how slim the chances of these airdrops happening actually are. Such incentive structures run the risk of focusing a community participant's energy on earning tokens for their own sake, at the expense of ensuring they are serving the community's core mission and people. Hence many airdrops understandably feel borderline unnavigable and scammy for people who are uninformed about tokenomics, especially the implications of liquidity for tokens that have no clear utility or product roadmap.
This terrain has the potential to be especially treacherous for Web2 communities that want to honor a pre-existing set of social and cultural norms and expectations in their shift to Web3, instead of immediately drowning in the meta-game of tokenomics upon entering the scene. At Water & Music, we wanted to be much more thoughtful about our airdrop approach, and are intentionally diverging from the dominant "airdrop culture" by treating this launch first and foremost as a tool for strengthening our existing community and signaling the core values of our mission, instead of purely pursuing top-of-funnel marketing growth.
Why we're fronting gas fees (for now)
One crucial decision we had to make about this airdrop was whether to adopt a push or pull approach. In summary:
- A push approach is where a DAO or project sends (or "pushes") tokens in bulk directly to qualifying recipientspeople's crypto wallets, and front the gas fees in the process.
- A pull approach, or what is often referred to as a "claim" approach, is where a given DAO or project requests (or "pulls") qualifying community members to claim the tokens through a dedicated portal that connects to their individual wallets, in which case the community members incurcover gas fees themselves.
Many people we spoke with early on suggested going with a pull/claim approach, primarily because of the exorbitant gas fees that would be involved otherwise. Ultimately, though, we decided to go with the push approach for a few reasons:
- Water & Music is thankfully a revenue-positive business, so financial constraints are not as large of a roadblock as may be the case with newer, emergent communities.
- As the retro community portion of our $STREAM airdrop is meant to be a "thank-you" gesture to our members, it didn't make sense to us from a messaging perspective to reward members by forcing them to pay extra in gas fees to be thanked, especially if $STREAM does not yet have liquidity.
- As we are not a fully Web3-native community today, it would be arguably unrealistic to expect most of our members to understand how to navigate a token claim portal as their first experience engaging with our DAO.
Hence we executed both stages of our retro $STREAM airdrop via a push approach, using the CSV bulk transaction tool from our Gnosis safe. This approach ended up costing us around 0.9 ETH in gas. While we were comfortable fronting this cost as a business, it would clearly be more financially sustainable for us to move to a pull approach for future airdrops.
Onboarding for Web2 communities
Catering an airdrop solely to a whitelisted group of Web2 community members introduces a whole different set of onboarding and communication challenges from those of more public, open airdrops.
Some general rules of thumb for any communities transitioning to a new system:
- Your onboarding process can be as structured or as loose as you want it to be, but in no case can it be rushed or short-circuited. Accounting effectively for variances in individual members' fears, concerns and questions about a new technology or system simply takes time.
- Many of the most effective onboarding practices for Web2–>Web3 communities — daily Twitter Spaces, one-on-one Zoom calls, Discord AMAs — inherently and perhaps counterintuitively don't scale. As with any software or services company, the hard, manual work of recruiting, onboarding and delighting users one-by-one early on has compounding effects on future growth.
- In the words of Other Internet, "founders who desire a welcoming and wholesome community are personally responsible for embodying that culture" within said community. In the context of Web3 onboarding, this means that no one, not even core team members, is "above" providing core customer support tasks like setting up crypto wallets and going over general questions about crypto, tokenomics and security.
We're seeing the importance of patient, hands-on onboarding unfold in real time for our retro airdrop. For context, we have roughly 1,000 members who qualify for the Patreon-supporter bucket of our airdrop — but only around 30% of those people actually opted in to receive tokens, via an Airtable form that we've been sending out consistently via email to qualifying members over the last four weeks.
We don't have full context on why a given qualifying member ends up not filling out the form. Perhaps they're not interested in being a member of our DAO, or are generally reluctant to participate in crypto because they're still skeptical of the tech — or, maybe they just missed out on these emails entirely. Whatever the case, arguably the best course of action is simply to give qualifying people more time to discover this information, and give them the tools to make their own informed decisions about whether they want to participate in the airdrop. To this end, we're planning on doing a second wave of our retro community airdrop to any remaining whitelisted token holders in late January 2022, after which any unclaimed tokens will be kept in the W&M community treasury.
Moreover, out of the ~300 qualifying members who did opt in to the airdrop, roughly 1 out of 9 said they did not have a crypto wallet yet and needed help setting one up. To that end, our core team members held a series of live crypto wallet setup tutorials in our Discord server in December led by. We plan on holding more of these tutorials in the next few weeks as we onboard both historical and new members into our DAO.
Reconciling cross-platform supporter identities
In the process of generating our list of qualifying members for our airdrop, we ran into a frustrating but eye-opening problem of trying to reconcile member identities across both our Patreon and Memberful databases (which was a necessary step for us in determining active members’ lifetime contribution history). While simple on the surface, this bucket quickly became a complex data modeling problem, because there was no consistent member identifier across both platforms to easily merge the two lists. Several of our members changed their email or Discord handle amidst the transition, while others changed the name associated with their account and/or maintained multiple different accounts.
We think this has significant implications for any community with a cross-platform presence that wants to approach retroactive token distribution in a fair and comprehensive way. Ironically, reconciliation of supporter identities across platforms is not only an important component of equitably onboarding Web2 communities into crypto, but is also a massive, persistent marketing and data-modeling challenge far beyond Web3 alone.
What comes next?
Now that our first airdrop is fully executed and $STREAM S1 is out in the world as our "proof of process," we're one step closer now to our mission of building an environment that tangibly rewards collaboration and peer-to-peer knowledge-building in music.
Now, the hard and important work comes in around honing this process to accommodate an expanding slate of contributors and research interests across the music and tech industries. We'll publish a more detailed post in the next week about how our emergent research process unfolded for S1, and how we'll improve on contributor onboarding, wayfinding and coordination for upcoming seasons.
In the meantime, there are already a handful of different follow-up research ideas and working groups swirling around our Discord server, from constructing modular music NFT contract templates to running a deeper interview project on music/label DAOs. You can sign up for our membership to support this ongoing research, follow the discussions in our server and learn more about how you can contribute.
Continued investment in onboarding will also be a core focus for our team in the next few weeks — communicating as clearly as we can with our membership on who has $STREAM in their wallets and why, and how they will be able to use $STREAM down the line to help shape the future of our DAO as a whole. Given our history and our established editorial voice, we're not rushing the process to on-chain governance and are thinking critically about what decisions will be open to community stewardship, what models we will use to make those decisions and whose voices in the community should have the most weight. Keep an eye out for more governance updates on our Mirror page in the coming weeks as well.
We look forward to experimenting and learning more in public, and are grateful to bring you all along for the ride. 🌊
About Water & Music
Water & Music is a newsletter and research DAO building the innovator’s guide to the music business. We’re on a mission to empower the music industry with the knowledge, network and skills to do more collaborative, innovative and progressive work with technology. We’ve been early to report on several cutting-edge industry trends — from music avatars and niche streaming services to several different strands of music and Web3 including music NFT drops, Web3-native music communities and crypto-based royalty payments.
Our community is home to over 1,700 paying members across music and entertainment, spanning everyone from emerging artists and startup founders to marketers, investors and C-Suite executives at major music companies. What makes our work stand out is our relentless curiosity, our penchant for experimentation, our passion for interdisciplinary thinking and our recognition of constructive critique as a driving force of progress in music, tech and culture.
In December 2021, we launched our inaugural collaborative report as a DAO on the state of music and Web3, which you can read below: