Hello readers,

We believe crypto has the potential to unlock new forms of monetization for the creator economy — an industry expected to grow to $500b by 2030. We covered this idea in our recent pump fun memo.

This week, we pull on the thread some more through the lens of Zora — a social network where every creator has a coin, every post is a token, and creators earn trading fees.

Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.

The DeFi Report is powered by BIT Digital, the leading global platform for high-performance computing infrastructure and one of the largest ETH treasury companies. NASDAQ: BTBT

Let’s go.

The Product

Two primary components:

1. The L2

The Zora Network is an L2 built on the OP stack.

Data: Blockworks Research

It’s processing between 5-10k transactions per day right now. The catch? These transactions are not coming from the Zora App — which was launched in February via an integration with Base App (formerly Coinbase Wallet).

More on the Base integration later in the report.

Coinbase recently rebranded Coinbase Wallet into the “Base App” and embedded Zora (and Farcaster). This move then surfaced Zora coins to Coinbase’s distribution, catalyzing a spike in user activity on Zora, starting in July.

The app has incentive alignment with Coinbase/Base since it’s driving usage of the Base App and transaction volumes to Base L2…

How it Works

It took me about a minute to create an account. You can use your own wallet, or Zora will provide one for you (important for onboarding “normies”).

You can then link your Twitter, website, etc. (for social proof of who you are), and you’re off and running.

When you create an account, Zora creates a “creator coin” for you. Each creator coin has 1 billion tokens in supply, with the creators receiving 50% of the coins. Creator coins vest daily, on a linear basis over 5 years (prevents “rug pulls”).

Trading tokens are added to liquidity pools on Uniswap v4 through swaps with the bonding curve. Not all of the 50% supply not allocated to me was immediately tradeable.

Creator Posts

Each time you post on Zora, the platform creates a coin tied to the post. Each content coin also has a 1 billion supply, with 1% allocated to the creator and 990m coins becoming tradeable.

As you can imagine, the content on the app is quirky, wide-ranging, and quite experimental. My most valuable post is worth about $8 right now. The highest I saw was $36.

UX

As far as UX, it was better than I expected — with a few subtle quirks. For example, some images I uploaded were rejected for being “too wide.” On the bright side, the onboard was very smooth, it seems to support most media types you see on other social apps, and I’m sure more bells and whistles will be added.

We believe the decision to build on Base was the right one because of its single sequencer. This prevents bots and snipers from manipulating the token price, allowing for more organic price discovery.

All trading happens on Uniswap v4 (on Base). Each coin has its own liquidity pool, which is automatically deployed upon minting.

A DEX Screener page is also immediately created:

Via Dex Screener

Wait. Did I just take The DeFi Report public??

Creator Incentives

Each swap of the creator coin charges a 3% LP fee (!) to the trader/user. The fees are split as follows:

1% to the creators (this is recurring revenue if the coin gets escape velocity)
1% liquidity provider fee
1% to Zora

Creators also get 1% of all content coin trades, with 1% to the LP, and .3% to Zora.

All creator earnings are paid in the Zora token (highly speculative).

Can you make money on the platform? With the Zora token up 10x over the last month, yes. In a bear market? We’re skeptical due to the reflexive nature of the app (creator income is directly tied to the price of the Zora token).

In case you’re wondering, I earned a few thousand dollars in the first hour or so in the Zora token. This came from the 1% trading fees — primarily on the creator coin.

My Experience

I set up an account to experiment with Zora as part of my research for this report. It was sort of a last-minute thing that I didn’t think too much about.

I put up my first post, and my creator coin immediately shot up to $114k market cap. Zora then congratulated me and asked me to share the milestone.

Designed for engagement. Dopamine on top of dopamine.

I posted it to X:

The next thing I knew, my creator coin was trading at nearly $400k market cap with over $313k of trading volume in the first few hours (again, this is where my earnings came from).

Keep in mind, the X post only got a few thousand views. There were only about a hundred holders. At peak, liquidity in the trading pool was around $130k.

It then immediately sold off. We’ll see what happens long-term. We set up the account simply to play with the app, so this is certainly not a recommendation to buy the token.

Now. My X following is 12.4k. That’s more than the average social media user. But it’s not a large account.

If I’m able to make almost $3k in a few hours simply by posting to Zora, you have to wonder how much someone with 100k or 200k X followers could make.

Do I want to go back to X or LinkedIn now? Not really. I’m getting paid on Zora to do the same thing over there.

Hmm.

Base Integration

Base is the distribution arm for Zora. The social app is embedded into Base App — which is the new “Coinbase Wallet.”

[It appears Coinbase is trying to create a “crypto app store” via Base App.]

On Base mainnet, ZORA token is the default pairing currency, which means all fees are paid out in ZORA on Base.

It also means that every creator post on Zora App is a transaction on Base. Which also means that every creator coin or post traded on Zora App is a transaction on Base.

Now we know why Coinbase/Base has been pushing Zora on X.

[Coinbase Ventures has also backed Zora]

By integrating with Base, Zora “bought” distribution.

Base “bought” a fun app for its users + transaction volume on the L2.

That’s an interesting partnership. And a significant advantage for Zora over potential competitors.

Fundamentals

New Creator Posts/Content Coins

Data: Blockworks Research

There were 55k creator posts on Zora yesterday (up 18x over the last 30 days).

For reference, Farcaster (competing web3 social app that does not have a token/creator model) had 287k “casts.”

There are roughly 500 million tweets per day on X.

New vs Existing Posting Accounts

The app is averaging roughly 3k new posting accounts per day over the last week. In total, there are roughly 15k posting accounts/day currently.

For reference, Farcaster has roughly 1 million daily users.

X has roughly 245 million daily users.

Aggregate Coin Fully Diluted Value

Data: Blockworks Research

The total value of all creator + content coins on the platform is roughly $173m, with the creator coins making up 85% of that value.

Imagine how much value this app could have if it hits just 5-10% of X users?

Fascinating to think about.

Coins by FDV Tiers

Data: Blockworks Research

There are currently:

993 tokens with a fully diluted market cap > $10k (.17%)
221 tokens with a fully diluted market cap > $100k (.4%)
23 tokens with a fully diluted market cap > $1m (.003%)

That said, if you’re a creator on Zora, you don’t need your token to soar to make money.

What you want is steady trading volume of the creator coin + your content coins. The 1% trading fees can add up fast. And it can become “recurring revenue” in the sense that once the coin has achieved some escape velocity, you’re making money in your sleep.

Zora Revenue

Data: Blockworks Research

Zora makes 1% on all creator coin trades and .3% on all content coin trades.

In this new model, both the platform and the creator make money.

The advertiser has been removed — since platform revenues now come from trading fees. Users foot the bill instead of advertisers.

Risks

High fees. 3% trading fees for Zora are very high, even for crypto.
Speculation. Should creators be incentivized to post content to earn money? That’s the million-dollar question. Will content be diluted down? Will outstanding content stand out more? How will content go “viral?” There are many questions still unanswered. We’re skeptical. But we also think there is a model here that will ultimately work.
Every post is a coin. We think this is potentially dilutive to the content creator coin itself. Isn’t speculating on the creator enough? Why does every single post also need to be tradeable? Again. We’re skeptical (yet open-minded) about this.
Regulation. It’s possible that “creator coins” and “content coins” are prohibited under forthcoming regulations.
Creator churn. Given the speculative nature of the platform, we question how this will ultimately impact content creators. On the one hand, Zora could be seen as another line of revenue for creators, incentivizing them to build on Zora. On the other hand, if creators leave in a bear market, do they come back later? Does the social media app become cyclical with the markets?

Closing Thoughts

Things happened FAST after I created my account.

Seeing people speculate on the token was a bizarre experience. It’s one thing to view “animal spirits” from the outside in. And entirely different from the inside out.

It was exciting at the same time.

And the next thing I knew, I was wondering if I just took The DeFi Report public?

We understand there are other “company” creator coins on the platform. Which makes you think.

Can everything be a token now?

Our understanding is that if the token doesn’t offer any rights or cash flows to holders, it's a non-security and is exempt from any registration under pending legislation.

In any event, this is not an endorsement to buy the token.

With all of that said, it can be incredibly fun and rewarding to be “early” in crypto. This was one of those moments.

We encourage readers to get their hands dirty and play around with new apps. You never know what you’ll discover (or how it could inform an investment thesis).

Does Zora have staying power?

Short to medium term? Yes. In a bull market? Yes.

Long term? In a bear market? We’re highly skeptical at this stage.

Why?

The platform is only fun (and aligned with creators) when they can make money.

Therefore, we think challenges are ahead for the protocol

With that said it does feel like the highly speculative Zora App could be the “meta” for this stage of the cycle.

And we still believe that one of the largest crypto apps could ultimately be a social media app that solves the creator monetization gap in web2.

Take a Report.

And Stay Curious.

Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.

The Product

1. The L2

2. The Social App/Platform

How it Works

Creator Posts

UX

Creator Incentives

My Experience

Base Integration

Fundamentals

New Creator Posts/Content Coins

New vs Existing Posting Accounts

Aggregate Coin Fully Diluted Value

Coins by FDV Tiers

Zora Revenue

Risks

Closing Thoughts

Does Zora have staying power?

A deep dive on the latest crypto "meta"

Topics Covered