Thread by Frank Rotman

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The Web3 community embraced my thread on the “House Money Effect”.

I’ve now seen something else that the community will appreciate: “Becoming Velocitized”.

A few thoughts on velocitization (what it is and why it matters):
It’s undeniable that the promise of web3 has attracted many mission-oriented builders to the space. But delivering on the full promise of web3 will take many years (if not decades).

But every new company needs customers to survive and web3 companies are no different.
What’s changed is that the “go to market motion” for web3 companies is unique to the web3 space.
Launching in the web3 ecosystem isn’t designed around functionality, UX/UI and marketing/awareness campaigns. Launching in the web3 ecosystem is about incentives and future promises.
And while well designed incentives and future promises can start the flywheel spinning around adoption for a new web3 technology, protocol or business model, they can also have long term impacts on what consumers of these products and services expect and how they behave.
A few months back I wrote about “The House Money Effect” and it resonated with the web3 community. It’s impact is everywhere you look.

Now I’ve spotted another psychological effect: “Becoming Velocitized”. And like “The House Money Effect”, it’s everywhere you look.
Becoming Velocitized

The term “velocitized” is used to explain one of the leading causes of car accidents.

Definition: “To cause an automobile driver to misjudge or become unaware of true speed or to become drowsy as a result of prolonged traveling at a high speed”
Driving fast has to be done carefully and on the right roads. Becoming addicted or numb to one’s speed can be very dangerous because context matters.

Replace the word “speed” with “risk” and you’ll start to understand what “Becoming Velocitized” means in a web3 context.
Because a web3 dominant future isn’t guaranteed, being an early adopter in the web3 space requires having an aggressive risk appetite. The upside potential is huge but extinction risk is real.

And not all web3 projects have the same risk profile. There’s risk and there’s RISK.
Yield farming is an example of a web3 investment and incentive construct that spans the entire risk spectrum. There are medium risk opportunities as well as extremely high risk opportunities that are equally available to investors.
An example of how easy it is to become velocitized is the LooksRare vampire attack on OpenSea.

LooksRare is an NFT platform that’s challenging OpenSea’s dominant position. It airdropped $LOOKS tokens to many OpenSea users with incentives that encourage users to switch platforms.
An important component of the incentive system is that holders of $LOOKS tokens can stake them in return for a very high APR (in $LOOKS) and additional incentives in $WETH.

The effective APR will drop over time, but for the past few weeks it’s been in the 600% zip code.
I’m currently staking 3 $ETH of $LOOKS, and what I’ll say is that the experience has flipped a switch in my head that will be difficult to flip back.

The switch: With high risk incentives in place, interest builds fast enough to be seen and felt on a daily basis!
The $LOOKS 600% interest rate is tangible. I don’t have to wait months or years to see the impact. I don’t have wait years for liquidity. I’ve been “velocitized” such that I’m numb to lower risk opportunities with single or low double digit APRs. They feel like I’m crawling.
But to be clear, the reason why $LOOKS incentives are so rich is that LooksRare has a high probability of failure. Unseating a dominant incumbent isn’t easy to do, and the $LOOKS incentive structure reflects this. Investing in $LOOKS is high speed, pedal to the metal driving.
The same is true in the NFT space. Grind to get a whitelist spot. Mint a handful of NFTs at 0.05 $ETH. Flip pre-reveal for 0.15 $ETH. Hold 1-2 in case they Moon. Even accounting for gas costs, the return can exceed 100% in a day and 1000% in a week if the project takes off.
All you have to do is spend time in a typical web3 Discord group and you’ll see the impact of a velocitized user base. The unrealistic expectations that accompany “high speed driving” have made many early adopters impatient. They don’t know how to slow down responsibly.
And velocitization also exists in a slightly different form in the web3 Founder and Investor communities. Building quick and wining or losing quickly is “in vogue”. It’s the opposite of carefully de-risking a business over time. It’s a strategy that seeks risk to generate alpha.
But building a durable company requires knowing when to drive on the Autobahn and when to drive on local roads. Full gas all the time can be very dangerous.

For instance, at the North American Bitcoin Conference, a prominent panelist said:
“I like tokens because I have liquidity. What I value the most in my life is time. I don’t have a lot of time to wait for companies to become valuable. If don’t like it I bail out. I'm not waiting 8 years for something to happen.”
So what happens when a company hits a speed bump? Does the Founding team and the company’s Investors have the patience to slow down to right the ship? Or are they fully velocitized such that they’re numb to anything but breakneck speed?
TL;DR: High risk, high velocity, high alpha opportunities can be very addicting. Launching incentive systems that cater to velocitized early adopters needs to be done carefully. And recognizing when you’re velocitized and need to slow down is an increasingly important skill.
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