The Towel Experiment On-Chain
How crypto experiments have unlocked wildfire growth via social proof
by Lindsey Li and Casey Caruso
“Blogs are conversations nobody wanted to have with you.” — comedian Michelle Wolf
Luckily, my former Bessemer colleague Casey did have this conversation with me. In fact, we had the conversation so early (nearly a year ago in March 2021) that I made the mistake of dragging my feet putting this out into the world.
So here we are, both revisiting and revising our original discussion around blockchain as a marketing schema and how on-chain activity is the ultimate form of social proof — thereby serving as a dominant force in games, DAOs, and other fandoms bootstrapping capital and community.
Oh, and we both moved to San Francisco and Casey became an Investment Partner at Paradigm in the meantime. So much can happen in a year!
The Towel Experiment
In 2008, Professor Robert Cialdini, best known for his work in psychology on persuasion and influence, set out to determine which messaging would be most effective at nudging hotel guests to reuse their towels and help hotels meet their sustainability goals. There were a nearly limitless array of angles to play and motivational strings to pull, including informing guests that reusing one’s towels would conserve natural resources.
The research team found that descriptive norms (i.e. how most people behave in a situation) motivated both public and private action far more effectively than focusing on the environmental benefits of towel reuse. In the experiment, notecards placed in the bathroom that stated “Join your fellow guests in helping to save the environment” yielded a 44.1% higher towel reuse rate than the standard conservation-focused message that stated “Help save the environment,” despite survey results suggesting that over 75% of Americans at the time considered themselves environmentalists. The reality is that the behaviors of others in social environments play an extraordinarily strong role in shaping one’s own responses to situations, otherwise known as the power of social proof.
Our thesis is that crypto has heightened the power of social proof by making private actions, particularly around monetary transactions, public on-chain. Social proof over the last decade has been bought in a variety of different ways — through SEO, the manufacture and sale of fake followers on social media platforms, and most recently, through influencers/creators.
Unlike historical methods of shaping social proof, blockchain relies on publicly viewable transactions which reveal the most intimate details around the what and how much each wallet holds. For example, Dom Hofmann of Blitmap dropped Corruption(s*) without announcing the project publicly. The community watched on-chain activity and aped into the project. Though 1) traditional social media networks have played some role in amplifying social proof today, and 2) wallet anonymity and privacy may change over the next few years, the current state of the ecosystem provides clarity as to which projects are garnering the most interest, with influential participants signaling to their communities in ways far more powerful than any other marketing channels.
Therein lies at least part of the reason crypto projects can spread like wildfire — the influence is entirely organic and serves as the ultimate form of social proof. In fact, a wide variety of research shows that the behavior of others in the social environment shapes individuals’ interpretations of and responses to novel and ambiguous situations. Sounds like frontier technology to us!
We ultimately believe consumer behavior changes at an infinitesimally small fraction of the pace at which technology, particularly within crypto, is evolving and intend to continue examining how on-chain activity may translate into social proof outside of existing use cases, including varying degrees of visibility into financial assets, cultural assets, identity, and experience credentials. Mostly, we are excited to observe how social proof continues to affect the future of consumers’ interaction with entertainment, financial services and, ultimately, with one another.
Lindsey is an investor at Bessemer leading consumer-facing crypto, including gaming, creator platforms, marketplaces, and DAO’s. Casey is an investment partner at Paradigm. We’d love your feedback! Please reach out on Twitter @lindseyli_ and @caseykcaruso with your thoughts.
