What I learned about web3 vs web2 when we all tried to buy the Constitution
Originally published November 21, 2021
Original tweet thread:
Full post:
I'm a fintech nerd but a web3 noob so I thought the @ConstitutionDAO project was a good opp to learn.
I just wanted to contribute 0.01337 ETH ($56) over my lunch break.
6+ hrs, 4 platforms, $88 in fees later, I'm now the holder of 13,370 $PEOPLE tokens?! I learned a lot.
The payment process was expensive, complicated & slow. Decentralization didn't always make things better.
I see a great future for web3 but only if it builds on what web2 does right vs starting from scratch.
Here's what I learned from the 4 platforms you meet on the way.
Platform #1 - The DAO
@ConstitutionDAO is just a group of people with a shared wallet who wanted to crowdfund a bid to buy a copy of the Constitution at Sotheby's ("the project").
If you wanted to play a part, you could choose to contribute Ether (ETH) to their wallet.
Contributing didn't mean you got an ownership stake in the copy of the Constitution. You just got a pro rata vote on what to do if they won it.
Hype aside, while it may be "We the People" in name, it's not 1 person, 1 vote. Money is power for governance tokens.
Sure, everyone gets a say and that's not a guarantee elsewhere for these kinds of projects so props are due.
But practically speaking, the richest contributors have an outsized say and not everyone even had a say (not unlike web2).
What WAS cool was how community-oriented @ConstitutionDAO was as an org. You felt like you were part of a coalition and they always had an open Discord & Twitter Space.
We'll see how this translates to empowering smaller but active & engaged contributors in the future.
Platform #2 - The Crowdfunding Platform
If you wanted to contribute to @ConstitutionDAO, you couldn't contribute directly to their project. You had to use web3's version of a crowdfunding platform - @juiceboxETH.
But as everything in web3 right now, nothing was that easy.
Okay - I'll grant that Juicebox is <6 months old and there's more to be done. But there's so many good web2 examples of crowdfunding and they seemed to have followed none of those.
Projects info is barebones with no real details other than a ledger of contributions.
It's not clear when you contribute that Juicebox typically charges a 5% fee for withdrawals.
Also unclear why you can't just pay Juicebox directly w/ fiat & have them convert to ETH to contribute (like web2 platforms).
In any case, you needed a wallet.
Platform #3 - The Wallet
To contribute to Juicebox to contribute to ConstitutionDAO, you needed a wallet that stores and transfers your ETH to the project.
Two main things to care about:
centralized / custodial vs decentralized / self-custody
Web and/or Mobile apps
Tradeoffs for wallet types:
Centralized / Custodial (+) Already connected to exchange so easier to buy/sell crypto and move to wallet; easier to recover funds (-) Less secure, requires KYC & 3rd party, no hardware wallets
I chose decentralized so @Metamask is the most popular w/ browser + Android mobile app.
But instead of building great UX off of web2 wallets, they use their own confusing UX.
Also not great that it's 3/5 stars with awful customer service, but it's the only option for now.
No matter which wallet you choose, you'll have to pay a fee to move money from the wallet to the crowdfunding platform.
You may have heard the term "gas fees"? They're the network fees paid to facilitate txns on the network like withdrawals or transfers.
Like web2 payments, the fee is difficult to calc.
A few diffs: A) For web2 payments, speed is fixed; cost depends on txn elements (incl. size). For web3, cost depends on speed, txn complexity & network capacity B) Web3 fees are very high. $54 in gas fees for $56 transfer
Oh and since we're using a self-custody wallet, we can't actually buy ETH from the wallet itself.
That's right. To contribute to a web3 wallet to contribute to Juicebox to contribute to ConstitutionDAO, you needed another platform.
You needed an exchange.
Platform #4 - The Exchange
You use an exchange to buy crypto like ETH. It was weirdly hard to get on one:
@coinbase - KYC did not recognize my selfie
@Gemini - deposits declined by Chase
@sendwyre - had txn errors
@transak_finance - didn't work w/ ETH
@BinanceUS - didn't verify ID
Luckily, @cryptocom just bought a stadium and caught my attention (marketing dollars well spent!) and they're known to have better customer service & lower fees than most, so I went with them.
They too ignore web2 UX & instead use awkward style & way too many PIN entries.
There's a few options to move money into the exchange at this point.
ACH takes forever and debit/credit card fees are a whopping 2.99% (even though we fintech nerds know debit card linking / AFTs are cheaper!) but I went with debit for speed:
You'll buy your ETH & pay another hidden trading fee.
Then you need to withdraw the ETH to your wallet.
For this exchange, there's another hidden withdrawal fee & it's fixed but high for small txns ($25).
Even web2 instant transfers are %-based & have a fee cap 🤷🏾
So here's the flow of funds:
$150 deposited to exchange:
(-) 2.99% fee for debit card: $5
(-) 0.4% trading fees: $1
(-) Gas fee to transfer to wallet: $25
$119 in wallet
(-) Gas fee to transfer $56 to DAO: $54 (-) 5% fee for Juicebox: $3
$88 fee to contribute $56
There are so many platforms & fees are so high at each turn, partly because of decentralization.
Scaling up to the $209 avg contribution size and even keeping gas fees fixed, we're talking ~$99 in fees* (47%).
*Excl. extra fees for refund gas fees since bid didn't win.
$49M net contributions (per Juicebox) would be ~$92M, gross of fees.
On Web2, you'd pay 2-3% txn fee + 5% to the crowdfunding platform.
So $85M net in Web2 vs $49M net in web3. That's a big bid.
So contributing to this project on web2 payment rails could have meant wabtc.
Don't get me wrong. There's HUGE potential for web3 payments.
But we do need to build on what works in web2 vs ignoring it. Web2 has ways to streamline UX, lower fees & consolidate platforms.
Excited about web3 iteration, flexibility & openness!