January 18 2024 marked the beginning of a new era for InLeo, Hive and Web3. It may sound like a stretch, but bear with me.
On this day, the very first ad revenue distribution to LEO stakeholders took place. That was a very anticipated event that had been in discussion for a while within the Leo community.
I have no idea about the technical specifics that were put in place to make it happen but, as a Project Manager working in a tech company, I can imagine how many unforeseen challenges the team had to face.
But the important thing is they made it happen and now all Leo Power holders (with a few exceptions, perhaps) are getting a share of the ad revenue generated by the InLeo site.
How does it work?
Let's look at how this distribution model works and what it takes to benefit from it.
The InLeo site generates revenue from the ads it shows users who browse the interface. This revenue is then used to buy back LEO from the market, wherever it's cheaper at the moment.
The purchases happen on a weekly basis but they are somewhat randomized to avoid the risk of people trying to front-run the algorithm.
The LEO that is bought that way accumulates over the period of a month and then, on the 1st of every month, a smart contract distributes the LEO in the form of LEO Power (staked LEO) back to LEO power holders proportionally to their stake.
That's ad revenue distribution in a nutshell, but there are a few details that LEO stakeholders must observe to make sure they are eligible for ad revenue distribution.
Eligibility criteria
To be eligible for a share of ad revenue you must own at least 500 staked LEO, or LEO Power (LP), but there is a catch: the model considers owned LEO Power, meaning that any LP delegated in or out will not have any effect on the percentage of the ad revenue an account is entitled to.
Let's look at a simple example to make things clearer:
Imagine two accounts: account1 and account2. Let's say account1 owns 10,000 LP and account2 owns 0 LP. That's our starting point.
Now, Imagine That account1 decided to delegate half of its LP, or 5,000, to account2 and now both accounts effectively have (but not own) 5,000 LP.
In terms of ad revenue distribution, this changes nothing from the starting point. account1 will still get a share of the ad revenue proportional to all of its 10,000 LP regardless that it's delegating half of it out to another account and account2 will get nothing at all because despite having received a delegation of 5,000 LP, it owns 0 staked LEO.
There is one additional condition to be eligible for ad revenue distribution, which is being minimally active with your stake. That means curating a few posts every week on InLeo. I'm not sure what is the minimum threshold or even if that information is public, but the InLeo team mentioned more than once during their AMAs (Ask Me Anything) that it's very low, and if you curate a couple of posts every week, you should not have any issues.
That is to prevent idle stakes that are not contributing at all with rewards distribution to earn a share of ad revenue. I think that's a good idea and, personally, I would make the threshold even higher so only those who are minimally committed to the success of the platform would benefit from it.
Although this is an easy requirement, it may have some implications for some, especially when combined with the first one. Let me illustrate my point with another example.
Let's use our account1 and account2 example again but with a little twist: in this scenario, both accounts belong to the same person who created the account2 to be a dedicated InLeo curator.
In this case, since all of this user's LP is on account1 but they want to use account2 to curate InLeo content, they will delegate the full 10,000 LP from account1 to account2 and start using account2 to curate content in InLeo.
That's perfectly fine and will serve its purpose from a curation standpoint. However, because of the first requirement (LP ownership),
In a situation like this, what usually happens is this user will only use account2 to curate InLeo content. However account1 is the owner of the stake but, because account2 does all the curation, account1 is considered inactive.
So, to sum it up, in this situation account1 owns stake but it's considered inactive and account2 is active but owns no stake and therefore none of them are eligible for ad revenue!
If you are in that situation, make sure you remember to curate a few InLeo posts with the main account (the actual owner of LP) every now and then or make it follow your curation account to ensure you are eligible for ad revenue or else you could risk completely forfeiting your share of ad revenue.
The impacts of the LeoAds model
The way I see it, this model marks a new era for InLeo, Hive and web3, as it is the embodiment of what I see as the real creator economy.
In a way, it's very similar to the attention economy that's so prevalent on web2 but with a fundamental difference: it actually puts creators at the center of things and allows them to benefit proportionally to the value they generate.
This model also has a direct impact on the LEO economy as it generates buying pressure for the token that grows proportionally with user activity.
It can also potentially be a new way forward for Hive as a whole. There's been a lot of discussions recently about what should be done with the rewards pool and, even though nothing concrete has been decided, this model could represent a good way to transfer the rewards pool to layer 2.
Final thoughts
The first ad revenue distribution is something we were all looking forward to and I'm glad it finally happened.
I believe it is the first step towards the direction of what I think web3 should be all about. An attention economy that doesn't alienate creators in favour of VCs and big tech companies. There is much to be done still, but it had to start somewhere.
Finally, there is a whole other layer to ad revenue that focuses on evergreen content, but I will leave that for a different article.