GM frens,

In today’s edition of The Ground Floor we are breaking down the problems Web3 projects are encountering in 2023 as they seek to create new collections...

Creating New Collections

Azuki holders aren’t happy.

Earlier this week, Azuki created its 3rd collection ~ Azuki Elementals

This collection consists of 20,000 characters, with Azuki collectors receiving 1 for free, with the remaining 10,000 being sold for 2 eth each.

In total, the Azuki team received $38,000,000 from this drop.

What Went Wrong?

Excitement was in the air leading up to this launch, with this mint following in the footsteps of Azukis event in Las Vegas ~ an event that occurred days earlier.

Furthermore, Azuki had released footage for this mint that strongly suggested Azuki would be introducing animals into its ecosystem.

While details regarding what customers would receive were sparse, existing Azuki collectors were willing to part with $3,400 to mint an Azuki Elemental, and the collection sold out before the public had an opportunity to participate.

Unfortunately for Azuki holders, the footage released didn’t capture what this collection would entail, and instead of 20,000 animals ~ the new collection consisted of artwork that looks incredibly similar to the original Azukis.

It’s easy to see why Azuki holders are so disappointed by this drop.

With 20,000 additional Azuki characters that are almost indistinguishable from the original collection, characters that cost a fraction of the original 10,000 Azukis ~ the Azuki floor has fallen from 15 ETH to 8 ETH in the days post mint.

How We Got Here

It’s important to dissect the series of decisions that resulted in such a disappointing drop from a team held in such high regard.

First, and foremost ~ Azuki set very vague expectations amongst its holders as to what this new collection would consist of.

This is a problem that’s very unique to Web3, the only industry that exists whereby a company can sell a product for $3,400 without having to inform its customers what they are receiving.

Furthermore, Web3 is one of the only industry's whereby customers cannot receive a refund if they are unhappy with the product they receive.

The Solution(s)

1) Remove Speculation

In 2023, it’s unacceptable that Web3 companies would even consider selling products at such ludicrously high price points without informing its collectors what they will receive in return.

Undoubtedly, such transparency would reduce the room for speculation in this space that some seem to enjoy, however, such clarity is a necessity to successfully onboard new consumers to Web3.

2) Consumer Protections

There’s no reason why consumers purchasing Web3 products are without the same consumer protections afforded to every other consumer ~ specifically the ability to receive a refund within 14 days of making a purchase.

Such consumer protections would have such a positive impact on the products teams create, and more importantly the price points they sell these products for.

3) Consumers vs Investors

Last, but not least, projects need to emphasize that they are selling products vs raising funds from their community to develop products.

All too often projects justify raising such significant sums by suggesting the funds will be used to further develop the brand ~ thus benefiting token holders.

Why is this a problem?

Such rhetoric allows projects to ship incomplete products at high price points under the guise that they will use the capital to develop the brand.

If a project wants to raise capital to develop its brand, venture capitalists are the people they ought to approach to raise this capital from in exchange for equity in their company vs seeking non-dilutive capital from their community.

Looking Forward

As creator royalties continue to decline, it’s clear that projects with large teams that were formed on the assumption that they would continue to collect full creator royalties have little choice but to continue creating new collections to generate enough revenue to cover payroll.

As this happens, it’s imperative that projects clarify the products they are providing collectors prior to selling them ~ or they run the risk of doing significant damage to their brand as Azuki has done with its most recent drop.

💡 Web3 Roundup

1) 👀 Why DAOs are broken (great read)

2) 💸 The 162 ETH sale on Polygon this week

3) 🎨 Jack Butcher shares details on his new collection

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This newsletter is for informational purposes only and does not constitute financial or business advice to any person or entity