You know, now that “gasless” UXes with creative social subsidy patterns are becoming common, the industry is finally putting the crypto in cryptoeconomics. It isn’t about using encryption. It’s about hiding the economic layer altogether so it all looks like magic free abundance to low-value transaction flows.

Delver at contraptions.venkateshrao.com, running summerofprotocols.com, host of /gloom ☀️

Is there a term for this? Account abstraction is an enabler at the individual level but this is like social/cultural abstraction of economic activity. It’s still market economics looking for efficiency under the hood, but you don’t need to know or deal with that fact below a threshold.

Economics offers valuable social design mechanisms but creates low-income problems to manage at the bottom. Transaction costs also make it an an inefficient class of mechanisms at small values. Traditional economics used a mix of tax-based redistribution, philanthropy, and advertising to solve for low-value flows.

SaaS and subscription models are the last, best idea that’s possible with Web2 and tradfi. Microtransactions (by trad standards) “rolled up” via a decoupled billing contract to make it worthwhile for everybody to provision < $1/week things (eg $5 substack for 1-2 newsletters a week). That’s the limit.

It’s limited and rigid microtransaction aggregation and automation with zero programmability. At most you can choose annual billing for a discount. Even pay-per-use credit balances are too messy to implement. Rewards programs (Starbucks is a good example) are as good as it gets.

Microtransactions and automation go together to create a kind of economics that’s possible to abstract away *and* the aggregation dynamics that make it worth solving. But it takes the programmability of crypto to explore the design space properly. Cryptoeconomics is abstractable, programmable economics.

A key piece of this puzzle is staking I think. Staking is currently seen as mainly an L1 infrastructure security thing, but any time people with more assets use them to underwrite low-value transaction flows for people with fewer assets, it’s a staking activity. You’re just securing things other than L1 security

For eg, Zora’s “no-fee” mints can be understood as staking the social security of the creator economy for some staking rewards. It’s a toy-scale equity structure. Tiny cap tables with automated liquidation preferences everywhere. VC scaffolding deployed at $1 scale. It’s not philanthropy or ads.

Web2 got hung up on “micro transactions” as the problem frame, never managed to solve it, and turned to fracking attention with ads till things started breaking. Initially crypto was framing it the same way, and high fees looked like an existential problem. Now it’s clear the solution is transaction automation.