The Breakdown - Dungeons and Degens: Why Everyone Is Talking About Loot

Starting point is 00:00:04 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 Saturday, September 4th, and that means it's time for the weekly recap. Now, the weekly recap is a very loose heuristic for what a show is supposed to be. Sometimes I really do a true weekly recap where I look at four or five. different areas. Sometimes it's just a topic that was important but didn't fit into a show throughout the week. This is the latter version of that. Today we are talking about dungeons and

Starting point is 00:00:48 DGens and why everyone is talking about Lute. Last weekend, Dom, one of the founders of Vine, announced Lute. He tweeted, innocuously enough, text-based fantasy crypto loot. Use your imagination to play, and maybe a smart contract, Dungeons and Degens. Lute was a serious of 8,000 algorithmically generated sets or bags of items, each of which had a different rarity. These 8,000 bags were free to mint from the project's smart contract without a fee other than the gas fee. When the website for the project was launched, it said only, Lute is randomized adventure gear generated and stored on-chain. Stats, images, and other functionality are intentionally omitted for others to interpret.

Starting point is 00:01:31 Feel free to use Lute in any way you want. So what, though, actually were these bags? Well, for those who are used to role-playing games like Dungeons and Dragons, they made complete sense. They were basically in-game items for an as-yet-to-be-created fantasy game. They were, however, presented in a slightly jarring way. For those used to thinking about NFTs as JPEGs, I mean, that's what we call NFTs these days JPEGs, right? That have a particular visual style or are algorithmically generated art.

Starting point is 00:02:01 This was just a black square with a list of text words on it. And indeed, the NFT wasn't really the JPEG of the list of items. It was the items themselves, the bag of items themselves. So what were in these bags? Well, bag number one had hard leather armor, death root, ornate grieves of skill, studded leather gloves, divine hood, necklace of enlightenment, gold ring, hard leather belt, and grim shout, the grave wand of skill plus one. Lute bag number 111 had ringmail of giants, demon hide boots of the fox,

Starting point is 00:02:34 heavy gloves, cap, necklace, gold ring, wool slash of protection, ghost wand. Bag number 1234 had the holy chestplate, divine slippers of perfection, dragonskin gloves, the woe shout demon crown of protection plus one, necklace, titanium ring, silk slash, and book. Like I said, these are in-game items for an as-yet-to-be-created fantasy game, and that as-yet-to-be-created aspect was the thing that so quickly captured people's imagination. Almost immediately, people started imagining everything else about the world that these items would exist in. They imagined creatures. Dragonskin gloves?

Starting point is 00:03:13 Must be dragons. They imagined characters. Demon Crown of Protection. Hmm. Maybe a chaotic neutral pay-for-hire hunter of the evil things that dwell in dark places. They imagined stories. A grave wand of skill called grim shout? What was that grim shout referring to?

Starting point is 00:03:30 What travails did the bearer have to go through to win this wand of skill? Ultimately, they imagined a world. Indeed, David Hoffman from Bankless tweeted, The Bull Case for Lute is that it is the big bang of the metaverse. And here's the important thing. When I say that people started imagining these things, I'm not talking about just a few people. I'm talking about thousands and thousands of people in a matter of days, organizing themselves in fantastical ways. If you go look at the Discord right now, it has channels for builders, for artists, for writers. These are seeing an absolute torrent of comments, conversations, art, ideas, separate writing, world building, just a huge

Starting point is 00:04:10 outpouring of creativity and effort. And then there are the guilds. Guilds include Dow's, decentralized autonomous organizations that have spun up around specific items that people own in their loot bags, such as crowns, katanas, and divine hoods. What's more, there are already derivative projects that are building other parts of the world. On Thursday, Adventure Gold was related, and here's how David Hoffman again. described it. Adventure Gold, AGLD, is the theoretical currency of a theoretical universe that no one has yet built or committed to building. The bullcase is that the project builds itself. It's currently valued at $300 million. Hayden Adams from Uniswop responded to discuss just how much economic

Starting point is 00:04:51 activity there was around that. Adventure gold, this derivative piece. He tweets, the trading stats for and venture gold on Uniswap v3 are absolutely nuts right now. $125 million of 24-hour volume on $6 million of total value locked, with $1.25 million in 24-hour liquidity provider fees. Indeed, the economics of the project of a whole are just insane. The floor price of a loot bag on OpenC currently is around $16,000 or $60,000. Just the loot bags, not including any of the derivatives, are the fifth biggest NFT project by sales volume this week with $128 million in sales.

Starting point is 00:05:26 It is by far the biggest of the last 24 hours with $46 million in sales volume, about three times the number two, which is Axi Infinity. So let's zoom out and talk about what's actually going on. What are different ways to interpret this? NIDIG sponsors this podcast, and they also put out a really good newsletter, focused purely on Bitcoin. If you want insights into what's driving market moves, regulatory changes, and the metrics that deserve your attention,

Starting point is 00:05:55 sign up at Nidig.com slash NLW. That's NYDIG, forward slash NLW. The first is that it's just absolute peak mania around NFTs, and I think when it comes to the current cost and value of these assets, there is certainly something reasonable about that argument. I asked on Twitter a couple days ago if the barriers to entry for this game for this Metaverse would be too high because the loot bags themselves were so expensive. The response I got for many was basically that the community was building enough doors into the Metaverse that was being created around loot that they didn't think so. Still, I wasn't the only one who has this sort of skepticism. Hayden again from Uniswap tweets, games are a lot more fun when more people can afford to participate.

Starting point is 00:06:40 Lute is one of the cooler NFT experiments recently, but I hope more NFT projects move from thousands of items worth tens and hundreds of thousands each to millions of items worth dollars each. Still, for my part, I don't think you can ignore the tens of thousands of hours of time people have put into creating the world around it. Tandavas on Twitter called it a paradigm shift for NFTs,

Starting point is 00:06:59 tweeting, instead of selling a house, the founder of Lute sells bricks and lets you decide what you want to build with those bricks. You can build a house, you can build a bridge, you can build a stadium. The freedom is yours. Dom, the founder of Lute, creates a canvas. The collectors paint it. I think one of the practical effects within the NFT space is that Lute will help draw a much clearer line between different categories within it. To wit, Lute and Punks may both be NFTs technically, but they are fundamentally different types of things, with ultimately hugely different motivations for owning and participating, other than, of course, a class of speculators who's going to be in on any NFT project they think will increase in value. But what you might be asking,

Starting point is 00:07:37 does loot and all of this stuff that I'm talking about have to do with big picture power shifts, the expressed mandate of the show? I will admit I'm not totally sure, but I know that when there is such an explosion of energy, concentrated in one direction so quickly, energy that includes not only capital, which is prevalent here, but time, time, the scarcest of all resources, I pay attention. It would be one thing if we just saw an insane price floor around the loot bags, right? That I could write off as rich crypto kids doing rich crypto kid things. What's unignorable to me is the sheer amount of that ultimate scarcest of resources in time that is so dead set on meaming this metaverse into existence. I've said before that I think it's inevitable that

Starting point is 00:08:18 digital universes will compete with the physical world for our time. To some extent, that's already happening, of course, but when it comes to a real full-on competition, sci-fi tends to imagine it ready player one style, where one game from one company begets a world that people decide to spend all their time in. A true second life, if you remember that platform. What if it's something more like Lou, where in fact it is Terra Nueva, a new world for people to share create for their own myriad of non-deterministic motivations, from speculation to fun, to seeking an escape from the world they didn't have the chance to create before they got there? It's entirely possible that in three weeks no one is talking about this thing anymore. I think, based on the laws of markets, and again, crypto-rich kids doing crypto-rich-kid things,

Starting point is 00:09:01 it's more likely that in three weeks we're at the beginning of a metaverse bubble, with many new loot-like worlds building projects everywhere, and maybe that will be the thing that kills the energy, where the network effects around any of them won't be strong enough to let any one of them really come into being. But there's no denying that it's a fascinating human experiment. Now, before I let you off on your holiday-sadurday, there's one other thing that I did want to mention from this week.

Starting point is 00:09:23 Something that could, perhaps, bring our nascent metaverse crashing, The Wall Street Journal reported Friday that regulators are investing Uniswop Labs, the company behind the world's biggest decks. The report says that enforcement attorneys are looking for info on how investors use Uniswap and how it's marketed. Now, as the Wall Street Journal says, quote, the civil investigation of Uniswop Labs appears to be in its early stages and may not produce any formal allegations of wrongdoing. But to me, it's worth noting just how frequently defy is coming up with regulators these days. It is definitely drawn their scrutiny. My feeling is that even if it's not that regulators are going to mount some big case against uniswap, they are likely

Starting point is 00:10:00 to surface a set of questions that might make it difficult for defy to fit within the existing public policy framework. The answering of those questions will set the tone for what can and can't be legitimately and legally built on defy, at least in the U.S. regulatory regime. I'll certainly be keeping a close eye on that, but for now, I appreciate you listening. I hope you're having a great holiday weekend. Until tomorrow, guys, be safe and take care of each other. Peace.

The Breakdown - Dungeons and Degens: Why Everyone Is Talking About Loot

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