The Whitelist Loop

Bringing the inequality of access to the web3 world

The individual who receives the money supply first benefits the most. The money multiplier effect is a core concept in macroeconomics, it is the idea that because of the flow of money, an increase in wealth will pass through many hands. Therefore, the implications of additional money extend beyond the person that first receives it. An amazing theory that is not without its problems. Whoever prints/creates the currency, in most cases governments, has the most control and benefits the greatest. The next recipients to receive it can put those funds to use to participate in financial gain before passing it onto the next person.

We saw this in a mass scale through the pandemic where the first recipients of the CARES act money through PPE loans, Employer Retention Credits, and other programs were able to turn relief into profit. Some businesses were truly in need but a lot were law firms, accounting practices, and other that paid these programs out as large bonuses to partners because they saw little or no drop in volume. They in turn try to turn that into some financial gain before passing it on to the next person, extracting a little more of the finite value. That cycle continues until you either find equilibrium or the the scales start to turn the other way and the receiver makes less.

This process usually takes some time as it moves through banks, funds, stocks, business, consumers, and retail. But in web3 it happens at an exponential rate in line with most things in this space. It brings a hyper awareness to the inequality of how money is distributed and how wealth is made. An important caveat here is that generating wealth is not a bad thing. Traders should still exist and this market is immature so there are lots of inefficiencies aka ways to make money. It can be done with a backdrop of strong ethos and a net positive for those around you. It can also do the opposite where the first receiver tries to extract as much as possible leaving very little for those behind them. There is a balance of profits and sustainability. The idea of conscious capitalism.

The Whitelist meta ‘WL’ encompasses this idea of the wealthy taking profits first and dictating the remainder of the share. It started as a need to combat botters in the ecosystem. Due to extremely low transaction fees they could spam the network endlessly to bot the mint and at times slow or even halt the chain. So the WL meta came to be. But as the tech caught up and they introduced a tax on botters the meta still continued. It did so because it allowed an effective network loop to sell out a project. Get ‘influencers’ to hype a mint because they had a large allocation and in return the project gained followers and a buy pressure that allowed them a successfully capital raise.

As much as we want to blame the people with allocations the fault also lies with the projects that went down this path. It doesn’t excuse the people that were publicly shilling a buy with one hand and selling with the other. But it also shows that projects wanted and needed to close out a round and would do what it took to enable that. What it leaves all of us, as a community, is a quicker dynamic than the VC dump in traditional markets. The advising arm is paid for awareness through whitelists, the only monetary value for them is through selling, and the project is trying to grow community and battling what they gave early on to create interest. What they are left with when the dust settles is a misalignment of incentives.

This rift is the fault of the project and the ‘influencers’. It is a fault of the communities and the retail that follows those individuals. Retail is upset because they buy at X price and want to sell it at 2X price but at times the value has already been extracted. They are upset because the people that told them to buy took the majority of the profits and left them with little or in some cases losses. The human element is that we are all trying to make money with our investments and when the scales tip outside our favor we look for someone to blame.

It is impossible to change the human element of investing. The end goal is to become better off than you were previously. The time horizons based on your comfort in life and wealth might change the duration but the outcome is the same, “I invest in this business or project to acquire more than I put in to begin with”. What Web3 allows us to do however is tip the scales of equality where each individual has opportunity. A chance to be closer to the original creation of the currency. It doesn’t mean that each person is entitled to wealth or will get it but it levels the playing field, giving each person a shot.

WL’s remove those ethos. It continues the cycles of the rich getting richer. To receive a WL of a top mint you have to be in a community with an entrance price that many can’t afford. Or build a reputation that takes months or years to cultivate. That comes with buy in to top projects (monetary) while also contributing your time which is valuable. In all reality it cannot be achieved unless you have enough money to be extremely patient with investments, something that few of us can afford to do in reality, or the innate networking skills that not everyone has a talent for.

The WL meta perpetuates the old world ideology of either having access to wealth or growing up with the understanding of how it works. We have an opportunity to change that cycle. Where we give each individual, regardless of socioeconomic upbringing the opportunity to invest. It is an unregulated world where we give the power back to the individual without trying to regulate a market entangled by complexity that can lead to unintended consequences. “We have a propensity to compound crises rather than extinguishing them because trying to regulate a market entangled by the safeguards add even more complexity.”

That leaves us with a dynamic that is incumbent upon us to fix as a community because we don’t have these safeguards and need to protect ourselves and those around us. One that enables but challenges us to stand up to those with poor intentions and say that what we hear is not truth. A place where silence is acknowledgment of behavior that we accept.

If a business deserves our money, they should be able to form a capital raise without this WL loop. To be successful it is because they deserve it. Thinking of more creative uses of NFT vesting schedules for larger allocations and queue systems for mints so people have a fair shot.

The WL meta is a continuation of what we hope to solve in this space. The wealthy gaining access first and becoming more wealthy. The continuation of inequality. I think that it should end if we truly believe in a world where unencumbered access is a tenant that we believe in. Removing it doesn’t fix everything but I think it is a step in the right direction.