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Utility Debt: When Commitments Become Baggage
Utility is a commitment made between a project and their community. That commitment becomes a debt.
This is MetaVault, a weekly-ish newsletter that examines the rapidly evolving dynamics of the Web3 and NFT space. Creators, builders, communities, utility, simplicity, DAOs. Vibes.
Technical Debt
When software development teams expedite the delivery of a piece of functionality that later needs to be refactored or recoded, this results in technical debt. Here’s a simple explanation from the guy who originally framed the concept, Ward Cunningham:
With borrowed money, you can do something sooner than you might otherwise, but then — until you pay back that money — you’ll be paying interest.
I thought borrowing money was a good idea, I thought that rushing software out the door to get some experience with it was a good idea.
But of course, you would eventually go back and repay that loan by refactoring the program.
And when you have to go back and repay that loan, you’re now spending time covering your ass and fixing issues instead of innovating. That’s the interest being paid. The more technical debt that you have in your software, that interest compounds. Quickly.
Utility Debt in the NFT Space
Let me say first that utility is what hooked me on NFTs. Pixel Vault’s OG stake vs. burn decision for PUNKS Comic 1 was like mainlining adrenaline. Utility is now baked into the foundation of almost all NFT projects — or it’s certainly the first (and most frequent) question asked by various communities: wen utility? I mean, I’m still waiting on XCOPY’s MAX PAIN to reveal 🤣.
Utility is a commitment made between a project and their community. That commitment becomes a debt. Walking around with one debt? All good. It’s exciting — and more importantly, manageable. Walking around with 100 debts? Ugh. The interest accruing against those debts builds to the point where a project should service those debts before introducing new stuff.
The Doodles release of Dooplicators and Genesis Boxes brought this to mind. Dooplicators are a perpetual utility to, well, duplicate traits from OG Doodles in the creation of Doodles 2. Genesis Boxes are a one-time utility to generate wearables (hats, glasses, clothing) for Doodles 2.
Two utilities. One, Dooplicators, that can be used more than once and for an unknown amount of time. And another, Genesis Boxes, that can be used once for a more limited amount of time. That’s two different time horizons and two different kinds of commitments, which results in two different kinds of debts.
Why does this matter? If Doodles launches another NFT with utility baked in prior to servicing the debt on these two utilities, a debt cycle is created — ultimately making community members grumpy that their particular utility wasn’t serviced first.
And to be clear, I’m not cynical about Doodles delivering on existing utility. They happened to be the project that released a double whammy of intriguing utility as this concept was forming in my head.
Ok, But Really, Why Does This Matter?
Think about your favorite projects. How many utility debts do they have? How many are concrete and time-boxed? How many are sort of ambiguous and have no clear time horizon for servicing? Do they have debts stacked on top of debts, forming an ugly debt cycle? Are you holding assets that have ancient debts that seem to never get serviced?
These questions are important because they tell you what the project values. Delivering on commitments is hard. It’s 1000% easier to kick the can. Leave it for another day. Create something new. But servicing these utility debts is what makes communities happy and projects successful.
Disclaimer: None of this is financial advice. DYOR. And yes, I own pieces from the collections mentioned in this article.