Proof of Steak: Building a Community-Driven Food Industry with Web3
Matt Newberg

Thu Jan 20 2022

Luxury NFT restaurants only scratch the surface of blockchain's potential to transform how we eat.

DAOs have a lot in common with the headless cooperatives of the past — and it just so happens that a lot of people who gravitate to these member-owned organizations love food. Founded in 1973, the Park Slope Food Coop is one of the oldest, continuously operating grocery cooperatives in the United States. The coveted membership requires an upfront $100 member-owner equity investment and a two-hour-and-45-minute shift every five weeks. In exchange, members get access to high-quality local produce and groceries, at prices as low as 40 percent below that of traditional retailers.

“We were going to try to have a better diet. And we needed the co-op to be able to afford that,” said Joe Holtz, co-founder and keeper of the co-op’s institutional memory, in a 2019 article. “And, of course, if we were going to do that, we were going to welcome everybody. Because we thought that it was joyful for people to work together and to have success together.”

Sounds pretty “WAGMI” circa 1973, right? Much like in a DAO, members attend monthly general meetings to discuss current affairs, vote on officers, and propose new projects, committees, and policies. The proposals touch on a wide spectrum of decisions, from the co-op’s strict rule of sourcing only organic or 100 percent grass-fed meat, to the stocks held in its pension fund. While the organization has become almost as famous for its internal disputes as it is for its generous selection of fruit and vegetables, it’s clear that the place — which currently counts over 17,000 members, with more than $56 million in annual revenue — brings tangible value to people’s lives. By banding together and pooling resources, members are able to tap into a collective buying power they wouldn’t have on their own, gaining access to nutritious foods at a discount.

Fast forward to the Web3 era, and we have yet to scratch the surface when it comes to the applications of blockchain in food. In a pandemic landscape that has seen over 90,000 eating and drinking establishments close their doors, Web3 has the potential to enable entrepreneurs to tap into novel business models, grounded in community patronage and financial transparency.

“Radical transparency in blockchain could forever change the economics of a restaurant,” said Joey Rubin, owner of Parade, an experiential culinary agency, and resident FWB LA social chair. “If you can unfuck the finances of this stuff, you can have a real conversation about the reasons restaurants came to exist and how they were born.”

Not surprisingly, many of the most attention-grabbing experiments thus far have revolved around high-end, luxury experiences. One of them is Gary Vaynerchuk’s Flyfish Club, a token-gated restaurant, cocktail lounge, and sushi bar launching in the first half of next year in Manhattan. Though diners will pay for food and drink in fiat, they need an NFT to get in. To that end, in December and January, they began minting a collection of 2,650 Flyfish NFTs, at 2.5 ETH apiece, granting members a base level of access — along with a series of 385 Flyfish Omakase NFTs, at 4.25 ETH, unlocking access to a 14-seat sushi counter where fish will supposedly be flown in daily from Japan. Though the project offers a futuristic twist on the members-only restaurant, it’s questionable how much it differs from a pay-to-play members-only club — other than its ability to provide speculation via a secondary market, where tokens have already sold for over 7 ETH.

Maxwell Social, a token-gated gathering space in New York’s Tribeca neighborhood that features liquor lockers and open cooking spaces for patrons, takes a different approach to the Web3 membership model. To fund the buildout of its lounge, it will be selling 600 membership NFTs granting holders liquor-locker access. Whereas Flyfish Club is open to anyone who can afford it, Maxwell Social initiates have to undergo a referral-based application process, whereby at least two existing members must vouch for each applicant. Approved members will then pay $250 per month to access the space, which helps Maxwell cover operating costs, like rent and staffing.

The space, which was previously occupied by the restaurant China Blue and will be outfitted with vented kitchen ranges, fridges, and plush couches, is modeled after Txokos, members-only gathering spaces found in the Spanish town of San Sebastian where patrons can cook their own food and pour their own drinks in a neutral space outside of their homes. Co-founder David Litwak said in an interview that the goal is to create a spot, like Central Perk or Cheers, “where everyone knows your name” and patrons feel a sense of ownership.

Litwak said that the startup, which describes itself as the “Web3 curation layer for IRL social spaces,” is also in talks to license its membership management and fundraising software to a whole new class of so-called “social space entrepreneurs.” “The blockchain does not curate people other than [by] price,” Litwak said. “To buy a Bored Ape Yacht Club you need proof of funds. If you’re rich enough, you can buy it. We’re building proof of friendship, proof of loyalty.”

Then there's the supper club model, which a group called DinnerDAO is currently testing out in cities like New York, Los Angeles, and Portland. Members purchase an NFT, and the proceeds are pooled into a treasury that pays for an eight-person group dinner. Anyone can buy-in, and everyone receives an equal vote in deciding which local restaurant the group should dine at. The group organizer then pays using a Coinbase credit card, which serves as the bridge between the treasury and the restaurant’s payment gateway.

Founder Austin Robey, who recently wrote about what DAOs and cooperatives can learn from each other, said the impetus behind DinnerDAO was mostly about creating the simplest iteration of a DAO that could bridge the gap between URL and IRL. “We’ve spent all this time over the last year and a half moving relationships online,” said Robey. “This is an exercise in moving them offline again. What better way to build bonds than to meet and break bread?”

In a recent post for Almanack, writer and crypto engineer Nat Eliason proposed two hypothetical DAO projects exploring other ways of tapping into the power of community. Similar to the Park Slope Food Coop, CowDAO is an idea for a decentralized version of ButcherBox offering members bulk discounts on high-quality meat while earning them a yield from its treasury. The DAO could also sell full-priced meat to the public, distributing its profits back to the pool. “As the business and treasury grow, membership gets better and better, and the meat gets cheaper and cheaper,” writes Eliason. CoffeeDAO, similarly, is a concept for a community-funded third-wave coffee shop, with a membership NFT granting backers unlimited free coffee, deals, and a share in future profits.

Other Web3 projects offer food professionals new ways to come together and support each other. CafeteriaDAO, which launched as a Discord server in October, is a community of chefs, restaurateurs, critics, and hardcore food enthusiasts united by a shared interest in empowering culinary influencers to capture value outside of traditional gatekeepers. The group, which started as a coalition of 19 people called “Table 0” and has since expanded to over 170 Discord members, is exploring a plethora of ideas for creating a better model for independent chefs, including funding new products, organizing restaurant crawls, and hosting token-gated dinners with up-and-coming chefs like Food & Wine columnist Jonah Reider.

Just as David Choe was paid in early Facebook shares to paint an office mural, chefs who participate in pop-ups would have the choice of receiving payment in fiat, or via a $CAFE token offering them exposure to the potential upside of the community. “We’re a community trying to create the right financial incentives for the food world to be more sustainable,” said founding member and Uniswap Software Engineer Spencer Yen. “There’s the idea that you can have more upside in the value that you create. That's the core ethos of crypto.”

Currently, creators are toying with a small handful of Web3-powered food experiences. But blockchain technology also has a long list of potential applications within the financial and operational structures of restaurants. Some coffee shops in Korea, for example, are already processing payments using Terra’s blockchain: Consumers link their bank to an app called Chai,  a payment processing platform with ultra-low transaction fees that briefly converts payments into a stablecoin, then pays merchants out in won, the national fiat currency. Just recently, a coffee subscription startup called Yes Plz Coffee launched “Bored Breakfast Club,” a series of 10,000 unique NFTs that unlock access to exclusive coffee drops. The project also features a “Community Coffee Wallet,” funded by a royalty on all secondary market sales, which enables Yes Plz Coffee to create a steady stream of new blends for NFT holders.

Rubin is a firm believer that decentralized financial applications have the potential to change the restaurant business for the better, fostering a greater degree of transparency in an industry that is rife with loose accounting and financial exploitation. As an example, he outlines a hypothetical restaurant network where each participating restaurant exists as a unique wallet address on an L2 chain. Consumers would pay with a new type of Diners Club card, on a blockchain like Polygon, where every restaurant would disclose its financials. Businesses would process vendor payments, payroll, and other expenses via a crypto bank that would also serve as a clearinghouse for all fiat transactions. Publicly surfacing salaries and operating costs would foster a new level of accountability on the part of restaurant owners, leading to a more stable footing for restaurants and ultimately creating a better working environment for staff.

When it comes to tipping servers or rewarding back-of-house staff like dishwashers, Rubin proposed the idea of transitioning tip pools to a flat service fee. This is something that many restaurateurs have done in recent years, but collecting funds on-chain could bring with it additional benefits: though service fee funds would primarily be used to supplement base salaries for staff, a percentage could be put into a treasury and rewarded to employees based on tenure or exceptional service. Staff could also be rewarded with tokens that accrued value as the business scaled, simulating an actual stake in the business.

“How do we change the form and function of service and think of it like a long-term, dignified career instead of a low-wage, transitional job?” Rubin said. “There's no 401k in a restaurant. This is an opportunity to create wealth.”

Yen, the CafeteriaDAO co-founder, is especially excited about the potential to decentralize online platforms like review sites — providing a more restaurant-friendly, community-driven alternative to sites like Yelp, which hijack restaurants’ online reputation and charge them for tools to control it.

“You’d rather listen to a ramen expert vs. Pete Wells,” said Yen. “How do you compensate and organize influencers to write and get compensated for that?”

One potential way to build a better Yelp or Google Local is through a Token-Curated Registry, a system that financially rewards authors with tokens based on the quality of their reviews. The framework was originally proposed by former ConsenSys engineer Mike Goldin about four years ago; it can apply to all sorts of lists, including restaurant reviews, and has the potential to align incentives between consumers, restaurants, and token-owning curators.

“If the quality of listings [is] high, then consumers will be interested in the registry such that [restaurants] will desire to be listed in the registry,” he wrote. “Token holders realize a direct financial benefit for curating the list in an expert manner, and the degree of their benefit increases proportionally to the quality of their curation as consumer and candidate interest rise in lockstep.”

Just like the Park Slope Food Coop, at the core of these projects is a desire to harness the collective power of communities to create outcomes far greater than any one individual could achieve. As Holtz, the co-op’s co-founder, put it, the idea felt like a powerful alternative to individual competition. “I felt that the whole idea of American culture being all about individual success—not that I didn’t think that individual success was legitimate, but I thought that our society was too focused on it, and not focused enough on community success, and community institutions.” In 2022, as in 1973, it all begins with a simple question: “What if”?  And if we keep asking that question, maybe one day we’ll see a new catchphrase making the rounds: WAGBWF. “We Are Gonna Buy Whole Foods.”

Matt Newberg is the founder of HNGRY, an LA-based subscription media platform examining how technology shapes the way we eat. Find him on Twitter @thenewb and Discord @n3wb.

Special thanks to Griffin Owens for his research assistance.

Artwork by Mykola Dosenko.