The Breakdown - We’ve Come a Long Way Since ‘What the Hell’s an NFT?’

Starting point is 00:00:00 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 nexo.io, Abra, and FTX, and produced and distributed by CoinDesk. What's going on, guys? It is Wednesday, January 5th, and we have been catching up on all of the news from the last couple weeks of December, as well as the first few days of this week. Yesterday it was regulations, CBDCs and Bitcoin mining, and today we're going to look at a few key bits of NFT news. But first, sponsors. This show is sponsored by nexo.io, the all-in-one crypto platform for storing and earning interest

Starting point is 00:00:49 on your crypto, Abra, a simple and secure app for trading crypto and getting crypto-collateralized loans, and FTX, the safe, regulated way to buy digital assets with up to 85% lower fees than competitors. Disclosure, as always, I help run marketing at FTX. Second, if you want to support the breakdown, please go, subscribe, give a five-star rating, or write a review. Or if you're so inclined, join the Breakers Discord. There's a link in the show notes, or you can go to bit.combe, slash breakdown pod. So, on to the show.

Starting point is 00:01:22 Today we have a major corporate integration showing a business bet on NFTs for a mainstream audience, a major funding announcement showing the bet that investors are making in NFTs potential, a shift in the cultural dynamic within NFTs, and finally, what could be the beginning of a political fundraising trend. So let's take them one by one, and let's start with this major corporate integration. On Monday, Samsung announced that its new smart TVs will support NFTs. Here's the big quote from their press release. With demand for NFTs on the rise, the need for a solution to today's fractures.

Starting point is 00:01:58 segmented viewing and purchasing landscape has never been greater. In 2022, Samsung is introducing the world's first TV screen-based NFT Explorer and Marketplace Aggregator, a groundbreaking platform that lets you browse, purchase, and display your favorite art all in one place. So let's talk about the functionality. These new Samsung TVs are going to allow you to preview an NFT, including learning about its on-chain history. They're going to allow you to purchase NFTs, and there's also even going to be a smart calibration

Starting point is 00:02:27 feature that will automatically adjust settings to, quote, the creator's preset values. So this is sort of like Dolby Vision or any of the other smart TV settings you see, where the picture automatically adjusts to meet some sort of specific constraint. Now, as you might imagine, the community had lots of thoughts about this. There was, of course, the standard hate the people who are disinclined to NFTs for their world-killing electricity using properties or any of the other reasons a whole group of people have decided to hate this technology, but there was also a lot of joking about what has become that standard hate. Kobe tweeted, Goddbom Samsung, Eco-Terrorist, scam-enabling mega-capitalist pricks, et cetera, et cetera. And Udi Wertheimer tweeted,

Starting point is 00:03:08 if you're an ideological NFT hater, you can no longer buy Samsung TVs. And if you own one, you have to burn it, because old ones will get auto-updated. But of course, there is also a lot of excitement about this. Salana Legend tweeted, so Samsung, one of the largest hardware manufacturers in the world is making an NFT marketplace on their TVs? Tens of millions of homes have Samsung TVs, and people will be able to purchase, view, and trade NFTs at home. Okay. Jake Liebert tweets lots of meming on this, but for many of us,

Starting point is 00:03:38 the TV is already the first electronic frame we have in our homes. I already use my TVs to display photos of my family, not much of a leap to display my NFT collection. Sorry, kids. NFT Kings tweets, amazing move by Samsung, to create a TV which supports NFTs. They realize no one has dominated the in-real-life display component of NFTs, so they took action.

Starting point is 00:04:00 Respect. Now, the Verge started their piece about this with a quote, staring at your non-fungible tokens on a smartphone or laptop screen is fine and all, but why not remind everyone who visits your home of the money you spent on digital art NFTs by showcasing them on your TV screen? And this is sort of a joke, but I actually think this is fairly significant. Usually, corporates doing things with new technology is a big whatever, or even a top signal. This to me feels like a genuinely natural integration.

Starting point is 00:04:28 People who are deep into NFTs have lots of reasons for their interest, and use cases are continuing to be explored. I think a lot of what we'll see in 2022 is NFTs as access to specific opportunities, spaces, communities, both in real life and online. You'll also see NFTs as an experimental new type of business tool. Gary Vee loves talking about selling the title to a house via NFT so that you get a piece of the resale forever. And even if that doesn't become a long-term trend, you're certainly going to see a lot of experiments in that vein. But the Samsung TV hits on at least two use cases that are a thing right now.

Starting point is 00:05:03 The first of those is status. Showing off you own an ape or punk is something that a lot of people value. Now, whether that digital status translates to offline status, who knows. But you've got to think that just by human nature, a lot of folks who think that, owning an ape or a punk is cool, are also going to surround themselves with people who think that is cool. There's another even less cynical use case that is a thing right now, which is that there is a lot of NFT art out there, and for as much as people focus on the prices or the action in the space, there are some people that just genuinely like this new canvas for digital art.

Starting point is 00:05:35 So, in that context, with those two use cases, this sort of massive, big-screen way of showing NFTs in your home actually ticks both of those boxes. The box of it being something that you enjoy and want to put art on your wall and the box of it being something that you want others to see. And that has always been the one-two punch of art ownership, right? I enjoy it and I want you to see I own it. It feels to me like something that will seem extremely obvious in retrospect. We've got CES, the Consumer Electronics Show in Vegas coming up, the big place where brands always show whatever new gadgets they have coming, and I'd be shocked if we don't see more announcements there, or at the very least in the months to come, from Samsung's comparison.

Starting point is 00:06:16 editors and frankly, probably other digital platforms that we're not even thinking of yet. And even if that doesn't happen, there is still something pretty remarkable about going from March of last year when you had Pete Davidson wrapping what the hell's an NFT on SNL to nine months later, Samsung announcing an NFT integrated smart TV that while people certainly have strong opinions on, no one is surprised about. That's an unbelievable rate of mainstreaming awareness of NFTs. Nexto is a trusted and easy-to-use crypto platform where you can buy cryptocurrencies at the touch of a button and start earning up to 17% annual interest that is paid out daily.

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Starting point is 00:07:57 FTX is the safe, regulated way to buy and sell Bitcoin and other digital assets. Trade crypto with up to 85% lower fees than top competitors. FTXUS is also the only leading exchange that supports both Ethereum and Solana NFTs. You can trade NFTs with no gas on FTXUS, and gas is subsidized when you withdraw off the platform. Help support the breakdown and visit FtX.us today. That's FtX.us. Next up, news of OpenC's new funding round broke last night. They've raised $300 million at a $13.3 billion valuation. Now, this funding was long rumored, and it was thought to be somewhere north of a $10 billion valuation, but we didn't know exactly where. This keeps

Starting point is 00:08:45 OpenC in the trend of crypto companies raising their valuation extremely quickly. It raised at a $1.5 billion valuation just last July. The round was led by Paradigm and Kowatu, and in many ways, just reflects the growth of interest in the space as a whole. Joe Pompliano tweeted out OpenC's annual transaction volume. In 2018, it was $474,000, in 2019, $8 million, in 2020, $24 million, in 2021, $15 billion. And it's worth noting that the NFT markets are starting the year off again in a blistering way. OpenC has seen more than $1 billion in volume in just the first five days of the month. Now, one of the things that I'm keeping an eye on is to what extent NFT market cycles really are different than other crypto cycles.

Starting point is 00:09:27 I sort of have this NFTs as splinter asset theory in which I think that NFTs might be the first quote-unquote crypto technology to have a life outside of crypto in which people don't even really understand the crypto rails going on underneath, or at least not most of the people who interact with it. To the extent we see another big boom for the next couple months in NFTs, especially if we see crypto more generally staying flat, I think it'll support the fact that there's some amount of separation in these assets, that everything isn't just moving in lockstep. We've already had a lot of that evidence from last year, but I think 2022 could be a year that gives us a sense

Starting point is 00:10:02 of just how separated or still connected NFTs are from the larger crypto market. That gets us to our third big NFT bit of news, which is a little bit more about an internal cultural competition. For a long time, the biggest profile pick collection has been Cryptopunks. They were the gold standard, the OGs of the space. They signified that you were there early and you got it. Now, in many ways, the only PFP in their league was Bored Apes, but even those Apes were pretty far behind. However, over the last six months,

Starting point is 00:10:30 the list of celebs owning Bored Apes has grown and grown and grown. On December 27th, 11 partners, the company behind Uber popular Miami Nightclub 11 announced that it purchased, yes, board ape number 11 for 99th, $396,000 at the time of purchase. On January 1st, it was widely reported that Dave Chappelle had joined in based on the fact that the holder of Davidchapel.Eath had spent 99Eath on an

Starting point is 00:10:53 ape as well, but it hasn't been confirmed that that's actually him. On January 2nd, however, it was confirmed that Eminem has bought a bored ape that many thought looked like him, and which had even been called the M&Ape for $425,000. The seller G. Gaza had basically been manifesting this for months, tweeting in November, I still think Eminem is destined to buy my bored ape one day. And as all this happened, it was sort of secondary to the big news, which was that at the end of last month, the floor price of apes flipped the floor price of punks for the first time. That was something that many thought would never happen. Like I said, punks were positioned as the OG, a must-own status symbol, and apes are the new kids.

Starting point is 00:11:33 So what explains the flipping flipping? Well, one board ape yacht club member tweeted, Apes flipping punks is a sign that community and roadmap can be stronger than historical significance. It's a milestone, but let's remain humble. The NFT space is very new. Things can change very fast. the project that might flip apes may not even exist yet. Dijan Spartan was a little more cynical. In December, he had tweeted, going to be interesting to see what happens to the historical significance premium when, not if, apes flip punks.

Starting point is 00:11:59 When that happened, he claimed his analysis was pretty simple. Apes are ugly, punks are way uglier. Look, for my part, I do not know whatever the future of these things is going to be. And apes flipping punks is about as micro a power shift as this show can get into. But to the extent that NFTs are providing a door into this crypto space, and to the extent that part of the energy around that comes from the intersection with culture, it's at least worth the footnote. Finally, though, to politics, the leading candidate for the South Korean presidency, Li J. Myeong, will be giving NFTs to campaign donors. This is not a direct sale. Basically, these donors will be receiving an NFT of a picture of him and his policies as a thank you. you for their donation. Now, I dug in a little bit, and it is pretty tricky to get a handle

Starting point is 00:12:50 on the South Korea NFT and crypto regulatory stance. It's not super clear, and in fact, seems rather confused. So rather than do too much analysis on South Korea specifically, I'll just leave this as something interesting, and something I'd be shocked if we didn't see more of in the midterms in the U.S. A lot of the conversation on the end-of-year extravaganza was about how we might see crypto-fundraising DAOs, basically as PACs, political action communities during the U.S. mid-term. terms, and I think probably this sort of NFT-ized fundraising is going to be a piece of the puzzle as well. Now, as all this happens, as NFTs enter the world of politics, and as you have more celebrities getting in and more visibility and higher prices and all this sort of stuff, you would expect that

Starting point is 00:13:32 NFTs will also get more regulatory focus. And that certainly seems to be the case as well. SEC Commissioner Hester Perce, aka Crypto Mom, did an interview recently with CoinDesk where she indicated that she expects the SEC will look into NFTs this year. There might be a particular case where they overlap with securities, such as in the case of fractionalization. But there's also a broader question of whether the presence of a roadmap and a collaborative effort to accrue value by an NFT would actually mean that somehow the NFTs themselves pass the Howey test.

Starting point is 00:14:05 The TLDR here is that if you think things were confusing before with securities regulation, you ain't seen nothing yet. I want to thank my sponsors once again, nexo.io, Abra, and FTX. And I want to thank all of you guys for listening. If you want to join the conversation, come check out the Discord bit.lee slash breakdown pod. And until tomorrow, be safe and take care of each other. Peace.

The Breakdown - We’ve Come a Long Way Since ‘What the Hell’s an NFT?’

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