The Breakdown - Deeze on Why 2021 Was the Year of NFTs

Episode Date: December 24, 2021

This episode is sponsored by NYDIG.  On this episode of “The Breakdown’s” “End of Year Extravaganza,” NLW is joined by Deeze. Deeze is known throughout NFT circles as a true community member. As host of one of the most popular regular Twitter Spaces on NFTs, he creates context for many to explore the emerging area of NFTs.  Find our guest on Twitter: @DeezeFi Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW NYDIG, the institutional-grade platform for bitcoin, is making it possible for thousands of banks who have trusted relationships with hundreds of millions of customers, to offer Bitcoin. Learn more at NYDIG.com/NLW. - “The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our holiday theme music is “Spike The Eggnog” by Two Dudes. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: Alexi Rosenfeld/Getty Images Entertainment, modified by CoinDesk.

I think you need a cooling period to really filter out the builders and the long-term players versus the short-term sociopaths who've kind of come in and started running the space in various ways. I think those cool-off periods are just crucial for the market in the long-term. Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the Big Picture Power Shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Friday, December 24th, and we are back with another episode of the end-of-year extravaganza. Now, it is undeniable that NFTs were a dominant story this year in the crypto

industry. Whether they actually can lead to big-picture power ships is, I think, a question for 2022. Certainly, there are many who believe they can. And as part of this whole NFT movement, a variety of new voices sprung to the top of the scene. Folks who got in deep with different communities and created spaces and forums for their peers to congregate to discuss. One of those is Dees, Deesfy on Twitter, who hosts regular Twitter spaces, turns them into podcasts, and generally has been a super, super-engaged NFT community member. On this episode, we get a sense of how he got into this space, what he thinks of the process, projects that launched this year and what he thinks is going to happen with NFTs in the year to come.

Let's jump into the conversation. All right. Welcome back to the breakdown. Dees. It is great to have you here. Welcome to the show. Thank you for having me, man. We've been talking for a while. It's nice to finally get to sit down and talk to you for a bit. I know. And you are, I think, a big proponent of talking, thinking, learning, sharing out loud. It's certainly one of your hallmark. So excited to have you give you this different kind of platform to explore. Some of the things that, you know, made 21, what a crazy year that it was and maybe some predictions for what we might see next year. So again, excited to have you here. Yeah, thank you. I love learning in public and I'm often wrong. So, you know, it's great to learn in the public eye and,

you know, be open about the process. Let's actually start with a little bit of your story. for folks who don't know. And maybe just, you know, let's give some timeframes for, you know, when and how you really started going down the NFT rabbit hole. Yeah, so the quick story would be that I got involved in crypto in 2017 during that epic run, thought I was a genius. And then in 2018, I lost all the money I made. Fast forward to 2020.

And I came off a pretty decent DeFi summer. and my friend Trill was telling me I needed to look into crypto punks around September 2020. And that was the first time I really paid attention to NFTs. I ended up buying my first four punk and, you know, got into art blocks and a whole bunch other stuff shortly after. And I've been pretty dedicated to NFTs now for the last, we'll say, 15 months since that's September. So this is really interesting too, because I've heard you talk about this sort of Genesis story

on a few different podcasts. but I want to actually maybe incorporate some of these like year-end questions into your story a little bit too. You know, so maybe I'll ask them in both a way that's sort of for you personally, but also your thoughts more broadly. What do you think was the hook both for yourself and for others? Like when it clicked for you, when you were dragged back in, what combination of the art itself, the community around it, the ideas and conversations around it? Like, what was the cocktail of things that really kind of made this such a captivating thing to spend time and attention and energy on? Yeah. So when I got into punks, I started trading them.

And it reminded me a lot of trading rare items in like MMOs, specifically like trading party hats in a game called RuneScape. And I thought to myself like, oh, wow, these punks are like the party hats of Ramescape. They're these very scarce, illiquid items that came out a long time ago that people are buying just to show status. They have no utility other than like the art and status. So for me, I fully understood like why this would be a good bet by comparing it to gaming experiences. For other people, I think it was a mixture of like social pressure from big names starting to like really talk about. punks and NFTs. I think like before January in 2021, it was fairly quiet. And then in January 2021, you have people like Gary V. come in. You have John Bales and Peter Jennings from the

daily fantasy crowd. You have a bunch of high profile people kind of aping in NFTs. And that was when I think it clicked for a lot of people like, oh crap, Topshot is making these people a ton of money. Oh crap, punks are making these people a ton of money. And then later on, you know, board A and every subsequent project that came out and made those people a lot of money. Do you think it mattered that there were two kind of very different types of NFTs popping off at the same time in the sense that you had sort of the profile picks and then not too much longer sort of generative AI art and things like that? But then on a complete other end of the spectrum, you had TopShaw, which was really not only sort of not just pure crypto natives,

it was in some ways steering away from that language and that audience, but still showing the power of this different approach to technology. Yeah, I think having the different options meant there was a little something like for everyone. I know a lot of collectors who ended up like only going down the R Block's rabbit hole, but didn't go down the Punks rabbit hole or other PFP rabbit hole. And vice versa. There's people who just stuck with PFPs.

There's still people who just stuck, unfortunately, with Topshot and didn't want to migrate to a Ethereum-based marketplace, but wanted to stick on a place where they could just use dollars. And I think just having all those different options really grew the pie for everybody. And then those different communities kind of cross-pollinated each other. And you saw funds flow back and forth between them as well. Fun flows are actually another question that I wanted to ask. How much do you think it, like, was the timing of this shaped by, um, excess capital from previous successes in the sense that we had just come off

Defi Summer, right, in some ways. And obviously, TopShod is a little bit different because the constituency was so different, but for the PFPs and sort of Ethereum-based NFTs, do you think that part of the timing was just there was more people who had made a bunch of money on Defi Summer? Or is that sort of just correlated but not causal? I definitely think it has something to do with it. mean, for me personally, that's how I was able to get in NFTs, was taking my capital from

a defy summer. That being said, I think a lot of the money that came in in January 2021 was more USD-based and not crypto-native, like the people specifically coming into Topshot. And then I think a lot of the projects after Top Shot, specifically Board Apes, a lot of that money wasn't, you know, from Defi people at all. That was new money that came in. I would say, yeah, the defy stuff helped in the beginning, but it's not the main reason. I think we just brought in a whole new market of, like, crypto users who never touched crypto before NFTs.

That's super interesting, super, super, super interesting. Let's actually explore that a little bit more. So, you know, there's been a bunch of sort of waves of new folks coming in. How much is, or what's the combination of people who are finding their way to crypto for the first time through NFTs? versus crypto people who are finding their way over into NFTs. What's that blend look like? In terms of a split, I'm not really sure, but in terms of the people I've communicated with a lot

on Twitter and spaces and discords, I feel like over 75% of them are new market participants who haven't come from crypto. That just comes with my conversations talking to people about defy stuff, like, as simple as liquidity pool, on Uniswap and like, you know, basic yield farming, those principles and that knowledge is just missing from a wide, like, most I feel like of the new NFT participants. And I could just be like

my audience and the people I end up engaging with. A lot of artists and creators follow me, maybe more so than the crypto Twitter scene. But I feel like it's over 75% non-crypto-native people. Super interesting. I think that this is, I mean, this is something that I've been watching with interest. It feels to me like the first subsection of crypto that really will have a lot of people ultimately interacting with it without having at least initially any real sense of it being quote unquote crypto, right? And I think that's a pretty remarkable moment just for the industry as a whole. Oh, it's been great to get people in who would have never like touched a ERC 20 token or like thought

about, you know, yield farming. But now that they can upload something they created and form a community around it, it's something very appealing to a lot of them. So, yeah, I think NFTs are the first major, like, mainstream breakthrough. And I think for last year, I thought D5 would be the breakthrough, but it became pretty apparent that the average person doesn't really want to put in the time to care about DFI principles and, like, yield farming. They just, it's not, the numbers aren't.

is like appealing and fancy to that. But when you bring in pictures and art and digital gaming assets and stuff, that's something that's a lot more tangible to people. And they, I think, intuitively understand it a lot better. Do you think that the gaming sort of, the normalcy of gaming among our generation has contributed to that as well? Oh, absolutely. I think, I mean, for me, I grew up playing video games for eight plus hours a day since I was,

I don't know, 10 years old. And it just, you know, you understand how you can have something that's digital and not real, but it's still scarce. And it still has value. And I think, you know, as time goes on, we're going to become more and more of a digital flexing culture. Like, I look at my younger brother and he kind of spends all his money on Fortnite skips. Like he won't even get into crypto, no matter how much I try. But he'll cut the neighbor's grass, make 20 bucks, and then spend it on V bucks immediately. Like it's a savings account.

So it's, you know, where I think we're going. And I just hope that that attention shifts to the more crypto-native and self-soveread and, you know, owning type platform and not as much as the centralized, gated metaverses that people are currently spending a lot of time and money in. Nidig sponsors this podcast and they're helping CFOs, traders, and risk managers safely and securely integrate Bitcoin into their operations. Learn more about what NIDIG does and how they do it at NIDIG.com slash NLW. That's NYDIIG.com slash NLW. So I have kind of two questions that are in verses of one another. And so the first one is over the course of the last, you know, the time that you've been in the space or just, you know, since January, how have you seen the critiques slash skepticism slash cynicism?

slash cynicism around NFTs change or evolve, right? Are people skeptical of the same things? Are their arguments against it the same or have they evolved? And then kind of on the flip side, how have you seen the arguments in favor of or reasons why people are getting excited? How have those evolved as well? Yeah. So I still feel like most of the arguments for people not getting involved.

Sorry, my cat is a suicide bomb and my dad's made up. Okay. I probably hear his count who's the end and saying. Anyway, the reasons I think people are hesitant is still similar to what I saw last year or earlier in the year when it was like environmental concerns, right click save. Like, why is there, you know, a reason to own this when I can just save it or why are you destroying the environment? I think those have been debunked a lot, but new people don't put in the work to maybe understand those arguments. still repeat them. I think like the mainstream media slash Reddit crowd has very warped and dogmatic takes on crypto and NFTs. Even my gaming friends, I've tried to convert a lot of them that I spent,

you know, 300 plus days playing Roomscape with. And maybe four of the 50 people in my group chat have gotten a crypto and the rest are just like staunchly again. it. I don't understand it. In terms of being excited and like bullish changes over the year, I think at first it was just a lot about like art and flexing. Like, oh, I come by this punk. It's cool art. And like I can flex that I spent so much money on it. And throughout the year, specifically with like board apes and bee friends, we've seen more of a drive for utility and community functions that are not just limited to like being in the punk's discord and about the market in general, but people want to go to events with their fellow community members.

They want to do things in the metaverse of their fellow community members. So I think that's been the biggest change where I've seen the market place a big premium on these different utility functions that didn't really exist before V-Friends and board apes. I want to come back to actually the question of some of these skepticism, but how much do you think that utility is going to play out in the metaverse versus IRL? because people are pushing pretty strongly in both directions, right? These sort of, you know, these passports, you know, or cards, you know, access cards to these different worlds are happening both in the real world and online, it seems like, to me at least. Yeah, I think there are going to be pushes in both directions.

And I think the best communities are going to provide both and that maybe there will be a divergence in, you know, communities that prefer more. or digital experiences versus the communities that push for more physical. But I think the best will do a combination of both. I mean, in my opinion, I have a lot more deeper connection to people I'm sharing a physical space with in person than I am like in a VR game. Even if in the VR game, their character is approximately close, it just doesn't feel the same. So personally, I look for like a combination of events because I'd attend both. Yeah, yeah, it's super interesting. I mean, I think the thing that's cool about this is that it's all totally to be created, how it ultimately plays out. And a lot of these things aren't mutually exclusive. But I did want to circle back to this question of particularly the environmental critique and the gamer animosity towards NFTs. I have, this is high on my list of things that I would not have expected this year is a sort of overblown. I mean, my biases are coming through with that description.

but an overblown environmental critique, stopping people from supporting, like, one of the first ways artists have ever found to actually make money without just selling their soul to someone else is mind-blowing to me. But I wonder, you know, you spent more time with it than I have. Like, do you have any deeper insight into where that comes from or where the sort of gamer animosity in general to this, to the space comes from? Yeah. So this is just my opinion. It's not fact. But what I've seen, with my own friends is a mixture of, number one, a lot of cryptocurrency miners buying up graphics cards, driving up the prices of graphics cards. That makes gamers very angry when they

can't just go buy a new card for MSRP, but they need to spend in some cases 50% over MSRP or more to, you know, make their gaming rig better. So they have, I think, a bias to dislike crypto just from the need for graphics cards. And then on top of that, I think a lot of gamers are more left-leaning in their thoughts, whether it's like, how do I say this? I think a lot of gamers are dogmatic thinkers who spend too much time in echo chambers and they don't think for themselves. And they don't let something that might be obvious with some rational thought get through

to them because all of their friends are saying, something else and they want to be a part of that group. And those are kind of my two observations between like graphics card prices and then the dogmatic group thing. Yeah, it's interesting. I mean, I think the dogmatic thinker thing is interesting because it almost like it doesn't dogmatism doesn't care what your starting point for the dogmatism cares in the echo chambers don't care either. It's just it's the self-repeating nature of them, you know? So it's just interesting. It's something that's sort of been a surprise and, you know, I hope shifts over time. But, Pretty interesting to see. What do you think, as you're kind of looking into 2022, what are the things that people are starting to explore in the NFT space that actually have you really excited? And what I mean by that is that like, you know, is it different types of digital art? Is it, you know, new kind of plug-ins with different types of game experiences? Like it feels like, and maybe just as another kind of addition to this question is, what do you know, do you know,

those new things mean for all of the PFPs and different projects that started this year? You know, are they all going to get flushed away or some big majority of them? Or is it still just such an early kind of Cambrian explosion moment that we don't know yet what's going to really survive and thrive? Yeah, so I see a lot of hype in this space for P2E and gaming, like, metaverse-oriented stuff. I personally am like not positioned or bought into it as much as other people, but things like sandbox and obviously AXE has had an incredible year and people are trying to figure out, okay, like, how do we make AXE but better because the game isn't fun, but like we want to pay people to play it.

I think another area I'm excited in is like the Metaverse Galleries aspect. As a collector, I kind of buy everything with this idea that I'll eventually show it off in a gallery in the future. So I'm seeing specifically the platform on cyber. come out with a lot of cool curated galleries that are limited edition, but they're also working with like boutique architects to create one-on-one galleries for curators. And I get really excited about building my own virtual museum.

And so I can make my own museum with my whole collection, which is awesome to me. So in terms of other things, I also am more excited for like the utility projects that are copying V-Friends. Most recently, I've been a pretty big proponent of Deathbats Club, and that's a profile picture project by the Avenge Sevenfold band, where they're kind of taking the V-Friends utility model and warping it to their band and fans where, like, you know, meet and greets, backstage passes, you know, you can go golfing with Matt Shadows or get guitar lessons from Sinister Gates or all these other cool things through the project. And I'm excited for just more creators to look at this model and realize that there's probably something there for them to

offer their community. And that's kind of how I want to engage with some of my favorite creators going forward. Maybe I don't always want to like subscribe the Patreon or do some Web 2 way of supporting them like Twitch subscriptions, but I'd rather like own an NFT that lets me hang out with them or do something. So those are the big three I'm kind of looking at in terms of shifts. I forget the second part of the question, honestly. Oh, I mean, me too. It's classic. Sorry.

I was like trying to make sure. No, I answered the three things I liked. And then I was like, wait, you asked another part of the question. No, no. Oh, I do remember now. What do you think it means for this wave of projects? I mean, I guess it's kind of a more broad thing. Like, is how will we view this?

Like, how much of the stuff that's created this year is has long term versus it's just a lot of people trying things out and a lot of it's going to fade way. Yeah, I think like 95% is going to fade away, if not more. There's so much junk in the ecosystem. There are good projects that I think will stay on the test of time, and I have some bets on them. But in general, I think most people are going to chase the shiny new thing. I think it's going to be reminiscent of like the ICO boom and then subsequent chip coins. Like a lot of people who, let's just use like ICX, for example, or some 2017 shiq. A lot of people weren't buying ICX in Defi summer because there's nothing going on with it.

There's new tokens coming out that have fresh blood. There's no bag holders. There's like more upside on pumps. I think the same as with NFT projects. Like do you see stuff that had a pump cycle and they're not doing anything in their community? Like I would not buy that hoping it pumps again. I would just wait for a new project to buy into where there aren't bagholders. So I think, you know, 95% plus of current NFTs are going to just trend to zero.

much like a lot of the ICO stuff just never panned out because they didn't do anything and better stuff came out after them. I think it's really interesting. One of the things that makes NFTs kind of interesting, just being that they are art, that they are collectible, you could have really good projects that a bunch of people really like that still just don't make it because there's a power law distribution of how much time, energy and attention. It's like people who have their favorite bands that they can't believe that other people

don't like. And that's probably actually a sign of a healthy market that not everything is thriving at all times, right? No, you're definitely correct there. I would agree with all that. What have you learned hosting Twitter spaces over this year? Obviously, this is one of the things, you know, probably a lot of folks who are listening to this know you from, you know, doing a ton of community conversations and just talking and listening. But, you know, anything that stands out as kind of lessons that you've drawn from that experience. Yeah, the biggest thing I learned is, like, personally, I really like to collect photography more than I thought I did because I got to hear the artist tell a story.

Another thing is that a lot of people in this community that you've never heard of are actually super smart and can add a lot of value. And using something like a Twitter space where you bring up basically anybody who requests just to talk to them is a better way, I think, to, like, engage with smart people and get to know them better, even if they don't have a reputation in the space. Like, I feel like I've met so many people with under 500 followers who have become well known now just from coming into spaces and talking their mind and sharing their opinion openly.

Another thing I love with spaces is that it's kind of like having a 24-7 or not 24-7, but a very open radio platform where you can have like 10 to 12 people on stage just talking about whatever and anything that comes out there's like a very very high chance those 10 to 12 people are going to mention it so like the night the mutant apes came out we were just hosting a space and all of us did very well because we were talking about the drop or like when something comes up out of nowhere like loot and people are in space talking about it immediately and then you hop on the bandwagon it's like a good uh source of alpha flow if you curate the right people on the stage which is something I didn't expect it to be.

I thought it would be just more like general conversations. So that's a couple surprises from spaces for me. Super cool. Well, I hope you continue to do spaces and other content. But just to round out this conversation, which I've had a ton of fun with, what's a prediction that you have for next year? And it could be NFTs, could be broader crypto space, could be the market, it could be anything.

But one prediction that you have for 2022. One prediction. Man, I'm like really bearish right now, because I'm thinking of 2017 and how that went for me. So I feel like my perception is very skewed. I've been personally like positioning myself very stable and comfortably. So I don't want to predict that the market's going to crash or anything, but I want to predict that like NFTs in 2022,

I'm going to say NFTs in 2022. are not going to do as well as people think they are. That's just my prediction. Like, I don't think punks are going to 10x again. I don't think apes are going to go, you know, to 150th floor. I don't think cats are going to flip apes. I don't think a lot of crazy stuff people are expecting is going to happen. I think we already had that cycle.

So I'm going to make, I guess, a bearish prediction and say that the market isn't going to be as hot as people think. Do you think that... It's important to have that sort of cooling period for the longevity of the space? Oh, absolutely. I think you need a cooling period to really filter out the builders and the long-term players versus the short-term sociopaths who've kind of come in and started running the space in various ways.

I think those cool-off periods are just crucial for the market in the long-term. And expectations. Like the people in NFTs right now, a lot of them, their expectations of what this is is so warped because they experienced that like July, August time frame where the market was just insanely hot every day. And now that the market doesn't like that, you know, they're like, what the hell is going on? Like, I'm not getting sales as an artist. I can't sell my NFTs as a flipper. Like devs do something is the vibe I get. So I'm just going to predict that that happens longer than people think it will.

Well, listen, man, I appreciate you taking the time. I'm so glad that you're kind of in this space and doing what you do and getting a lot of people to share their insights. I appreciate you coming on today and look forward to chatting more in the new year. Yeah, I look forward to chatting more too. Thank you for having me on. I think over and over when you talk to folks who are deep in the NFT space, you don't get a lot of arguments that it isn't cluttered with a lot of extraneous.

projects or copycap projects. What separates the folks who are true believers from some of the folks who are maybe just tourists or looking to make a buck is that they can distinguish between those things and the fact that there are so many of those types of projects doesn't diminish what they see as the potential long term. How that all plays out will be a really fascinating story in the year to come and I super appreciate these taking the time to come on the show. We're off tomorrow, guys, for Christmas. Merry Christmas to those of you who celebrate. And even if you don't. I hope you have a great Saturday anyways. So until Sunday, December 26th, be safe and take care of each other. Peace.