The end of 2020 and especially the start of 2021, saw the year of yield chasing get into full swing, where liquidity pools on Eth, turned into a mass of clones on BSC and all offering all kinds of tokens with silly names, none of them being good for anything at all - other than selling for something that is good for something.
This approach while groundbreaking technologically, was never going to last, because for the most part, there was no reason other than the yield to participate and, that was why the yields were so high. This meant that people didn't have to commit to the project and could instead chase the highest yield - which ultimately, got many people burned. One of the reason that CUB is still ticking over is because there is a community behind it that believes that it is going to develop utility for its pools, but hopefully this won't just rely on maximizing yield.
However despite this first iteration, the innovation in technology and mindset have enormous value going forward and are going to be utilized in many forms in the rapidly-growing DeFi space.
As I have mentioned before, the gaming industry is a natural progression and first step for this, as it is already developed to have tokens of many kinds integrated and all that has to happen is for the "economy" to be attached. This means that like is happening on Splinterlands, a number of tokens can be introduced to have utility attached to the game (in various ways) and as long as people see the game worth playing and investing into, the tokens will have utility - even if they don't offer the highest yield.
But, there is more to it than this also, as unlike the liquidity pools, the players can own assets in the game also, which in Splinterlands for instance come by way of cards, land, guilds and other tokenized assets like titles and totems. All of these can be used to generate income streams in some way and are also attached to practical applications within the game, whether it be an Arena for Brawls owned by a guild or, a Title that gives "bragging rights" to an individual player. Whatever it is, players who are also owners see some value in taking part.
It is not a game of yield - it's a game of build.
Meaning that in order for tokens to have value, they need to be seen as having utility in the game. However, this is the same for all projects, because incentive matters. For example, on Hive the HIVE and HBD tokens have value for various reasons, not just because they can be sold for something that does have value. Sure, ultimately the financial value matters, but along that path is lots of room for building other factors, for example being able to distribute the pool through voting on what is enjoyable to consume, upvote and order comments on posts, earn on curation, vote proposals, put into savings for 12% APR and vote witnesses for blockchain development and security.
Whether it be Splinterlands, Hive or any other project, building is necessary to give the token value, because it is this that attracts people to hold the token and stay using it. If it only comes down to yield, there can be other places to earn more, but if chasing that yield means losing capabilities to "play the game", it becomes less attractive.
This is actually similar in all of the social platforms, because people get attached to them because they feel that they have ownership. Deleting a Facebook account that has been held since 2007, has thousands of photos through different stages of life, conversations with friends and all the other connects, can be hard - but, it isn't really "owned" by the creator, it is owned by the platform. This makes integrating a tokenized economy on it quite difficult, as in order to bring value to the token, it would require demand to buy that token. Would you buy stake in Facebook in order to upvote your friend's lunch picture and your mother's awkward selfie?
Now, Facebook could direct earnings to users, but once things start to get "out of hand" they will very quickly bring them back under their control and prove that building on Facebook means not owning your account and it would be a very public demonstration of demonetization. Relying on centralized control for business income is going to become even more risky, which is why ownership is vital.
See, even if Splinterlands was able to own all assets and distribute value to players without letting them own for themselves, as soon as the next shiny game comes along that promises a higher yield, many will abandon it. However, once ownership of assets is distributed amongst those players and there is value to be made by both using them in the game and earning on them as an investment too, the chance of "player retention" increases massively.
This is not just because of the yield and market sentiment on future potential, but it is in combination with player sentiment too, much like most people aren't willing to abandon their country, even if there are better places to live with more opportunity they could go to. Just like in real life, people have "built" part of their lives around their digital presence and as such, have an extended "real estate" footprint. But, now through tokenization that digital life is more valuable than just for sentimental reasons, it can be financially rewarding in ways that many people have no access to in real life, in those very countries they are unable to leave, because they have built a life there.
This means that in many ways, the digital life experiences are going to take care of its "citizens" in ways that the walking life won't because the games and projects are highly incentivized to do so and, the players are highly incentivized to actually support the game. Because this is contextual, there are likely to be more people in "agreeance" than a country also, because the game is going to have a selection bias factor integrated into it, even though all participants might not agree in many other ways - when it comes to the game, there is more buy-in and alignment - making the game culture far narrower than the cultures of the people who play it.
What this indicates is what we have been talking about for Hive all along - a future of decentralized communities that "pool" around contextual topics. Through the second-layer of Hive, a community like Splinterlands can form and similarly to a Liquidity Pool, it is possible to take a stake in the community and actually own a relative part of it, earning yield through community build.
This is an evolution of the LPs and AMMs that were DeFi 2021, but show where the future of DeFi is headed. While CUB Finance is largely just a liquidity pool clone, it also has a community backing it that is growing and expanding the reasons to be part of the community and while it still has a long way to go, it has the potential to be a very well subscribed Web3 platform that will spawn its own spinoff sub-communities in the same way Splinterlands has and will continue to do also.
However, what is key to recognize here is that it is the ownership model that is so sticky for investors, not the yield itself. Yes, there are always going to be yield chasers, but as time progresses, people will look for stability and just like investing into a bluechip stock that has a wide range of investors, the stability of the future is going to be where the people are not only willing to put their money, but also put their time and energy.
People are not just investing and looking for an ROI anymore, they are also looking to build a community that they can be part of, proud of and connected to. This becomes even more salient in a world where we are restricted in our movements with many too scared to go out, because instead of living in lockdown and reduced economic mobility, people will look for ways out and currently, there is borderless economy and freedom of travel - digitally. And through the same mechanisms, the investor becomes an owner and builds a house that becomes a home, anywhere in the world.
People tend to protect what they own, not burn it down.
Taraz
[ Gen1: Hive ]
