Unchained - How NFTs Are Revolutionizing How Creators Make Money - Ep.220

Episode Date: March 16, 2021

Jamie Burke, CEO of Outlier Ventures, and Mason Nystrom, a research analyst at Messari, discuss the NFT craze that has enveloped the crypto world over the past few weeks. In this episode, they talk about: their backgrounds, and how they became involved in crypto (1:19) the major catalysts -- specifically Beeple and NBA Top Shot -- that have brought NFTs into the mainstream (5:29) why NFTs are a “megatrend” and not just another ICO-like bubble (13:35) how to explain non-fungible tokens to normies (18:06) what someone is actually purchasing when they buy an NFT (24:46) the reasons behind NBA Top Shot's success and why it is so difficult to withdraw money from its platform (36:27) the best way to scale NFTs and why Ethereum, despite severe storage limitations, will most likely remain the most popular blockchain on which to mint NFTs (41:44) why the gaming, fashion, and music industries will be disrupted by NFTs (49:37) when the current subscription-based business model for content creators will transition to the ownership economy (55:10) the differences between the marketplaces and platforms that make up the NFT economy (57:06) whether NFT valuations will go to zero and the challenges of appraising digital art (1:03:39) their predictions for the market capitalization of NFTs by the end of 2021 (1:15:23)   Thank you to our sponsors!  Download the Crypto.com app and get $25 with the code “Laura”: https://crypto.onelink.me/J9Lg/unchainedcardearnfeb2021    Square: https://square.com/go/unchained    Episode Links:    Jamie Burke Twitter: https://twitter.com/jamie247  Outlier Ventures: https://twitter.com/OVioHQ  Content: the open metaverse: https://outlierventures.io/research/the-open-metaverse-os/  100xARt: https://art.art/blog/jamie-burke-and-100xart-a-true-story-of-the-rising-art-order  podcast: https://outlierventures.io/podcasts/    Mason Nystrom Twitter:  https://twitter.com/masonnystrom  Messari: https://messari.io/  Content: NFTs as an investment strategy: https://twitter.com/masonnystrom/status/1310942572429312010  evolution of content: https://twitter.com/masonnystrom/status/1361692703025729536  psychology of crypto art collecting: https://twitter.com/masonnystrom/status/1365028848509870080  the current state of NFTs: https://twitter.com/masonnystrom/status/1363283887691038720    NFT Sales Mentioned Beeple: https://www.cnn.com/style/article/beeple-first-nft-artwork-at-auction-sale-buyer-intl-scli/index.html  Previous Unconfirmed interview with Beeple: https://unchainedpodcast.com/beeple-on-how-and-why-he-raked-in-3-5-million/ Taco Bell: https://www.theverge.com/2021/3/8/22319868/taco-bell-nfts-gif-tacos-sell  3LAU: https://edm.com/gear-tech/3lau-record-breaking-nft-sale  Jack Dorsey Tweet: https://v.cent.co/tweet/20  Kings of Leon album: https://www.maxim.com/entertainment/kings-of-leon-releases-album-in-nft  NBA Top Shot: https://www.actionnetwork.com/news/nba-top-shot-blockchain-nba-highlight-marketplace    NFT Guides New York Times: https://www.nytimes.com/2021/02/22/business/nft-nba-top-shot-crypto.html?utm_source=morning_brew  DappRadar: https://dappradar.com/blog/what-are-non-fungible-tokens-nfts  Andrew Steinwold: https://andrewsteinwold.substack.com/p/-quick-overview-of-the-nft-ecosystem  Decrypt: https://decrypt.co/resources/non-fungible-tokens-nfts-explained-guide-learn-blockchain CoinDesk: https://www.coindesk.com/nfts-became-art-everything-nft    Miscellaneous Links:  Chris Dixon blog: https://a16z.com/2021/02/27/nfts-and-a-thousand-true-fans/  NFT market cap: https://nonfungible.com/market/history  Outlier Ventures decentralized accelerator program: https://outlierventures.io/base-camp/  Top NFT marketplaces (DappRadar): https://decrypt.co/resources/non-fungible-tokens-nfts-explained-guide-learn-blockchain  Jesse Walden’s “Ownership Economy”: https://variant.mirror.xyz/T8kdtZRIgy_srXB5B06L8vBqFHYlEBcv6ae2zR6Y_eo  Flow blockchain: https://www.onflow.org/primer Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained, your no-hype resource for all things Crypto. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto five years ago and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. Subscribe to Unchained on YouTube, where you can watch the videos of me and my guests. Go to YouTube.com slash C slash Unchained podcast and subscribe today. The Crypto.com app lets you buy, earn, and earn, and buy. and spend crypto all in one place. Earn up to 8.5% interest on your Bitcoin and 14% interest on your stablecoins, paid weekly. Download the crypto.com app and get $25 with the code Laura.

The link is in the description. Building a web application to sell products or services, integrate with Squares robust and secure APIs to easily take payments. Learn more at square.com slash go slash unchange. Today's topic is NFTs. Here to discuss are Jamie Burke, founder and CEO at Outlier Ventures, and Mason Nystrom, research analyst at Masari.

Welcome, Jamie and Mason. Hey, thanks for having me. Finally got on here. Hey, Laura. Hey, Jamie. Great to be on. So, Jamie, let's start with you. Tell us how you got into crypto and how you came to have NFTs as one of your focus areas and what

outlier does. Yeah, well, I'll give you the abbreviation. version because I've been in the space for about seven and a half a year. Well, I founded Outlier seven and a half years ago, I've been in crypto personally for a little bit longer than that. And the short story is, you know, seven and a half years ago, when we founded Outlier Ventures, we were the first institutional investor in blockchain in Europe. But there wasn't really much to invest in from a startup perspective. So we were a bit more of a studio because we were getting applied learning. We thought, well, maybe this will help us be a better investor,

day, understanding the technology's limitations. As the space matured, we began to believe that a lot more infrastructure had to be built before these wonderful applications would be possible, theoretical applications would be possible. So we incubated protocols and like primitives, lower down in the stack. And as the spaces matured, our model has moved up the stage. back in the kind of middleware and our application layers as an accelerator. So this year we will accelerate 100 Web3 startups, 50% Defi, 50% NFT, and many of them blurring that in the middle. And that is three times what we accelerated last year.

So God knows how we're going to do that. And specific to NFTs, obviously have been aware of NFTs, like everybody in the space for that long, for a while, kind of lost interest in them with when CryptoKitties broke Ethereum, like many other people got distracted by things like Defi. And then it was really summer of last year, where I came back to the space and was just blown away by what had been happening in what was supposedly an NFT kind of winter.

Platforms had been built. Whole new artists had been onboarded into the space that knew nothing about crypto. Many of them, they were discovering crypto as a consequence of being onboarded into, say, super rare, and became very quickly convinced that NFTs would represent a super cycle, as we were just kind of saying off air, NFTs for the first time make crypto accessible to the masses, the concepts, the type of assets, the behaviors of collecting are going to on board billions of people that would have never otherwise gone to finance and bought

Heath, right? They end up with ETH as a consequence of buying this collectible. So it's a crossover moment for us. It's the gateway drug. It's the red pill, a blue pill, red pill, and I believe this will be a mega cycle that will at least 3x, 2017, long term, 20xit. Wow, that's really interesting. And I do remember last fall, I, do remember last fall, interviewed Jake Brookman of Coin Fund, who was saying that NFTs were going to bring in what we would call Normies here in the crypto world. And I understood it in an abstract way, but really now I feel like I'm truly getting what he's saying. So yeah, we will see just how big this can go, because I agree with you. I think it can get quite big. So Mason, what about you?

How did you get into crypto and come to specialize in NFTs? Yeah, definitely. I would say I'm a former Normie first got into in crypto in 2017. I was doing my MBA in Hong Kong and started working for a local cryptocurrency exchange out there. Felt in love with crypto as I'm sure you both have. And subsequently decided that this was an area I wanted to commit a large portion of my career too. So came back to the States, joined consensus for I was on their marketing team, and then joined Masari last year where I specifically work as a research analyst focused on Web3 NFTs and a couple of those other emerging trends. All right.

So let's just dive right now into this NFT news. So I'm sure most of my audience is aware that in the last few months, the NFTs have really taken off with the mainstream. We're seeing these non-crypto artists and bands and companies such as the NBA, Taco Bell, Kings of Leon, Grimes, Banksy, etc., getting in on the action. So Mason and Jamie, how would you guys describe? what's been happening in the recent months. What would you say have been the major catalysts,

the major jaw-dropping moments for you, and then just kind of zoom out and also give us like the big picture of what's happening in terms of what people are now calling this ownership economy? I'm sure I can maybe talk at more high level and then I'm sure my fellow panelists will be able to go into much more detail at kind of the market level, right?

The nuance, if that works for you guys. At a macro level, I think clearly last year, a lot of the attention around NFTs was primarily around art as a use case, be it like one-to-ones or additions, and primarily through platforms like super rare. And again, offline was kind of semi-joking, not joking about this distinction of, pre-beeple, before-beel, and after-beepal. And of course, when is the after-beepal? Maybe it was yesterday in the context of his Christie's sale. Yesterday to that, I can't remember. It was yesterday.

Yes, for listeners, the day before, yeah, we recorded. And also for listeners, super rare, I believe focuses just on visual art in terms of NFTs. Is that right? That's right. Yeah, I'm one-to-one since. stuff like that. So, but, you know, he had a sale on Nifty Gateway that I think over a weekend, the sale equals what Super Ed done the whole year prior to that, right? So that was a watershed moment. And the reason was effectively, Beeple is a market in and of himself, right? It has this back

catalog of every day, so he has the supply. He has millions of followers, so he has the demand. And To be honest with you, he didn't need Nifty Gateway, if anything, Nifty Gateway needed him. But, you know, they were able to service that demand without it falling over. And so, you know, big respect to them for managing to make that happen. But that was a watershed moment because effectively he was one of the first mainstream artists. I'd even argue, you know, to an extent he wasn't necessarily as mainstream, certainly as he's going to be now. Prior to that, a lot of crypto art had been very introspective, very self-referential, arguably kind of crypto-meem art. And speaking from a personal perspective, when I began collecting, so I started collecting proper summer of last year,

ended up accidentally creating a Discord with 200 of the world's top NFT collectors, and we ended up accidentally creating an art district in Decentraland with 20 galleries. and very little coordination. But a lot of them were collecting artwork, which was voxilated, pixelated, like meme art. And to be honest you, I didn't fully appreciate at the time. Like, that would have value. I kind of thought, well, this is just like the first gen gen and the place is going to mature,

more sophisticated artists are coming into the space with a higher aesthetic. And as a consequence, all this stuff would be left behind. What I didn't fully appreciate at the time, which I think now is really evident, is the way to look at NFTs, I kind of use or evoke the Marshall McLuhan quote.

It's, you know, the medium is the message, right? So you don't need to put too much attention on the actual content of the artwork itself. Cryptopunks is highly voxilated, pixelated, two-dimensional. but what that represents is status in the story of NFTs. And that's why Mark Cuban will come in and pay a premium to be part of that club and to pay homage to the industry and its journey. So it's almost irrelevant what the art is at the moment. What NFTs represent is a stake in a native social layer to the internet, born out of crypto, which is kind of highly oriented towards memetics.

And really these things form a kind of social currency. And so I've actually stopped paying attention to the aesthetic as much, to be honest with you. And if you look at my personal collection, it has literally degenerated. I am a DGEN. It's gone from like very, you know, high-end 3D multimedia to pictures of twerking rare pepets, you know. Okay. And just for listeners, in case you missed the interview I did with people, when he did that fall sale where he made three and a half million dollars in one weekend, you know, that was the first money he'd ever made from any of his every days. And it was, you know, quite amazing at the time. And now, you know, here that the piece of the first 5,000 every day has generated $69 million for him and Christy's. So quite remarkable. Which, by the way, makes him, that's the third, the third, the largest sale of a living artist ever.

I mean, that's just mind-blowing. Sorry, I just had to throw that in. No, I know. It is mind-blowing, for sure. So, Mason, what is your take on, you know, what's been happening in the recent months and also what this means in the bigger picture? Yeah. So I think Jamie kind of hit the nail on the head. NFTs are really in the cultural zeitgeist right now.

and so that just draws in a lot more people than say your average defy project or application. I think that there's multiple narratives playing out because if you look at NFTs, it's just a token standard. It's a way to like transmit a file on a blockchain. And so it has dozens of applications from gaming to art to financial products like carbon credits. And so art has definitely been one of these like watershed moments. But I would argue that it's not as retail driven because if you look at like super rare, and look at their like users. They have probably like 100 different artists,

like 20, 200 to like 3,000 collectors. And, you know, so like art, just as in the traditional world, is a very wealth but gets wealth type of sport. Not to say there's anything wrong with that, but it's just it's not as, you know, like consumer retail driven, versus something like MBA's top shots,

which, you know, has brought over a well-known intellectual property in the NBA, two NFTs. And so that is very retail-driven because everyone can connect with that. That's something that, you know, you probably watch a game on a Wednesday versus like talking about art on your average Wednesday, unless you're a non-normy like us. Yeah. And one other, like industry, I think that is probably going to have a broader appeal also as music, which is why we're seeing, you know, like Kings of Leon and stuff like that already.

getting into the space. So just out of curiosity, you know, I think for so many of this, like looking at this, it's very new. The prices are really eye-popping. Well, for certain things, but also even for things like, you know, like hash masks or whatever. So what do you think? Would you say we're in an NFT bubble right now? Or do these prices and does this activity make sense to you? Or do you think it's like just the beginning and it's going to get way, way, way bigger? I would say that it is the beginning. I would argue that we're also in a slight bubble where things are maybe like not being priced or valued, you know, in like the correct way.

And in part, part of that is just like the fever around it. Collectibles in nature and art are very subjective in value. And so like there is no, you know, utility or theoretical value to it. Over time, like whatever remains a collectible will still accrue significant value. And so I think it's really just a matter of time frame. Yeah. And Jamie, do you have an opinion? Yeah.

I mean, so we're at the beginning of a megacycle. And what's interesting about it is it's interplay. So the interplay of NFT and Defy, and that hasn't properly begun yet. You've got things like NIFTIFI, where some of these things are now being used as collateral for borrowing and lending. And that will increase as it becomes like a blue chip class of NFT. but also now you're seeing people earn NFTs in gaming. And so, for example, axes, you know, I need that NFT to play the game, to churn. I need to hold the good cards.

I can't sell them. So increasingly people are going to borrow against them to pay rent or whatever they want to do in the real world. And so these things begin to collateralize defy. And as a consequence, I think NFTs will then feel. fuel defy. And so you'll see this financialization of almost every form of creative media. And if you think about that in a gaming context, think about all the digital wealth that's currently locked in gaming platforms. Skins, wearables, you know, they are constrained, limited to

these platforms, billions of dollars of value. And with and without the permission of these platforms will increasingly become financialized off that platform. And Tim Sweeney, CEO of Epic, he's already talking about the open metaverse. He's well aware of NFTs. Actually, there are many innovations that I'm seeing being proposed whereby you can create synthetics off platforms. So you can actually trade these things as if they're not constrained to a particular platforms. There'll be workarounds. And you imagine when that hits the NFT space, that hits defy. I mean, that is a huge megatrend. And so one of the interesting things, things as speaking to non-fundgible.com a few weeks back. And I was really surprised this has

already happened. So I proposed the NFTs as an asset class as not like an alt asset would decouple from wider crypto at some point. And I thought, maybe that'll be in a year's time, maybe that'd be in 18 months' time. They argue that it's already happened, already happened in this quarter. So what I mean by that is the price of NFT, are not correlated to the price movements of Bitcoin or ETH. And you could argue even NFTs now driving the price of ETH. And so not only are they decoupling, but they're becoming the main driver within the wider crypto asset class.

And so that is, I don't know what that means, right? But it feels substantive. It feels different to ICO mania. And you mentioned audio, for example. I know several artists, some going through our portfolio, major artists that will be doing audio drops. I know there's aspirations to have the first platinum NFT, million sales of an NFT.

That might happen in the next quarter. So you think of music, you think of gaming, the demand for these NFTs is totally uncorrelated to demand of Bitcoin. And so that's why I think there's a real potential that this cycle is, going to dwarf anything that we've seen with crypto and also because of the nature of this asset, because it's thinner liquidity, there's kind of less sensitivity to price discovery. They might hold value a bit longer. So they might be a little bit more resistant to the kind of the volatility that we see

in kind of fungible assets and wider crypto. That's above my pay grade to speculate on that. But it feels like it could be, this time it could be different. There'll still be a correction. Wow. Okay. You just said so many things that I want to unpack. But I kind of already have a lot of this in my question.

So before we get into all that, there was actually one really basic question that I want to ask you guys just because I want to hear your answer. Let's say there are some of my listeners who may be less familiar with NFTs or there are people who kind of, you know, like did a search and they found this show. I want to hear you describe what an NFT is to somebody who. who doesn't really know crypto, who's like a normie? Sure. I think the simplest explanation is that it's a file format for transferring data and information on blockchains. So just in the way that we have file formats like JPEGs, PNGs, MP3s that just transfer data and information on the internet, like that's all an NFT does. And so like the fundamental level, it's just a way to transfer data.

Okay, but then it's like, well, so then what makes it different from a JPEG? The fact that you have, A, it issue on our blockchain, so it comes with like all the great things that that comes with, whether it's transparency, permissionless nature, I think that the concept of ownership is evolving. And so, like, owning an NFT and having like this like probable, like proof that you own whatever this NFT is, say it's a piece of art, is a really powerful. concept. And then there's also kind of getting into it, what Jamie alluded to earlier is you have this trend where you can financialize every piece of media or content. And if it's an NFT, you can now like incorporate that into other existing protocols, other software applications. And that's really powerful when you talk about how innovation progresses. Jamie? Yeah. Yeah. Yeah. So to understand what a non-fundable token is, you need to understand what is fungible, right?

in your life. There are very few things that are fungible in your life, like maybe the petrol or the gas you put in your car, the electricity you use in your house. You don't really care like at the atomic unit of what it is. You just need to know it's available and it's cheap or like affordable. Pretty much everything else in your life is non-fundable. And so what that means is that it's unique.

And by being unique, there's a degree of scarcity. But also provenance is important. And so I always look at this in the context of digitalness, right? So digitalness, especially in the context of media files, digitalness has brought like huge benefits. So, you know, near to zero distribution, ubiquity across device. But it basically fundamentally undermined the value of anything that became digital. So it was like an audio file or a movie file. It could be copied in your old.

times, it could be shared innumerable times. Basically, if it touched the internet, it basically immediately lost value to the point of almost becoming free. And again, if you look at the behavior around digital things, we now largely just consume them. We don't own them. And therefore, we don't really value them. Like owning an audio file doesn't mean like an MP3 or MP4, it doesn't mean what it used to. It doesn't mean the same as owning an LP. Now, the really interesting thing about an NFT is that for the first time you can have something that is digital. So it benefits from digitalness. But it also has the qualities of the internet broke. So I like, if you're talking about an audio file, you could almost think of it as a digital LP, right? So LPs of

hell value for a reason, some of them have grown in value, not just because of the superior audio quality, but because I can own it, it's tangible, it has provenance, it has status, I'm discovering it, I'm sharing it, it's a social thing. And so I think there's this, it restores all of those qualities back into music, for example. So does that mean that you will have to have the NFT to stream at the moment? No, maybe in the future. So you might still stream the audio file on whatever you listen to music on, but you still own the Blau LP drop, right, because it gives status. And then I kind of extend it one step further, which is, it's also beyond the specific programmability or characteristics of the individual NFT.

So on the one hand, the creator can program in rules to that particular asset that extend beyond any one platform, right? So the price, the number of them, the scarcity, the royalties, perpetual royalty rights, how they're distributed and executed by smart contract. not just for me as a single artist, but potentially a collaboration of artists on an album, for example. But then once that's in the hands of the owner, the collector, it becomes a way for me to directly interface with them. So you end up with direct-to-create a communication.

So I'll give you one example and then I'll shut up because there's quite a long-winded way of answering your question. But like if I'm Blau and I know you own this LP, I know you're a super fan. Now, all of a sudden, the fact that you have that NFT, I can then give some permissions for people that own that NFT. It's like a key. It's like a VIP card.

So, for example, I can let you into a concert in Decentraland, only if you've got that thing in your wallet. I could let you into a physical event, scanning you at the gate, right, because you've got that thing in your wallet. So it can be a pass into the metaverse. It can be a pass into the physical world. I can then drop you other things into that wallet because I know you've got this VIP NFT. So I think there's these whole layers of engagement that are going to be built in to

and around just the initial drop or construct of an NFT. And so like when you think about it in that context, these things are social assets. They're like loyalty and rewards. The actual individual functionality of the NFT itself is almost, very relevant. This is really interesting because to my mind, especially your definition, Jamie, kind of highlights what the benefits are to creators. But I'm sure you've come across, and I share a fair amount of this skepticism as well,

a lot of people don't really understand what it is that somebody is buying when they're buying an NFT, because if NFTs are digital objects and there are already many copies that exist of that on the internet. For instance, you know, Jack Dorsey here is selling the first tweet ever, which was his tweet. And it's something any of us can go online and see for free. And yet right now, or at least as of yesterday,

the current bids on it were two and a half million dollars. So what exactly will that person be getting when they buy that tweet, right? Are they really getting so? I mean, other than the fact that they'll have parted with millions of their own dollars, you know, are they? getting anything different from what we are, minus the fact that we don't have to give a million dollars of millions of our dollars for it. It's status, right?

So, again, like, ignore the content of an individual NFT. It's like what it represents in the context of a community, in the context of a meme. And so, you know, owning the Jack Dorsey tweet, just like Justin certainly tried to buy the B-PEL one, right? You know, that was trying to buy state. in the community that derides him largely and, you know, to bad effect. But still, what it represents is it represents that kind of status.

But I would also say, like, coming back to it redefines creativity in a digital context, but it also redefines ownership in additional context and belonging. And I think, like, coming back to the thing that the internet broke, right, there is this definite nostalgia. You speak to anybody that's really deep into NFTs and they turn into a child. They like start talking about, I used to have these baseball cards and like, you know, they regress. And I think there's this like real, this kind of sentimentality, this, the world that the internet broke, right? And I think this restores that in some way.

And not only does it restore it, but it kind of puts it on steroids because now you've got a load of grownups with disposable income who are basically being kids again. I was going to say in some context, it's just owning a piece of culture. And that's pretty common throughout, I mean, history. Like people by art because it is representative of some cultural movement or some phase in time. And like even if you look at like sneakers, like Michael Jordan sneakers are valuable because he is a cultural icon, not because they're the best shoe. And so, you know, how value evolves is very subjective. Jamie mentioned earlier, digital skins like digital fashion in Fortnite is a multi-billion dollar industry for essentially something that gives you absolutely no utility in the actual

game. And so what's interesting is there are examples where you have like So Rare, which is a fantasy soccer league where they have the actual trading cards, but it's actually useful in the game. And so like there's ways that you can now add value to, you know, these historical collectibles that people have always wanted. And Laura, I'd build on that, right? So at the moment, these things are like very nascent.

So you've largely got a 2D file or a linked association to a token to a 2D file in a wallet. And like that's not very social. It's not very interesting. But increasingly, these things are becoming multimedia. They're becoming 3D objects that can be. experienced in virtual worlds like Decentraland. They're, as I mentioned, becoming like a pass into experiences and socialness and being viewed with more social qualities.

And I think what will also start to happen is as royalties get baked into these things, they become income-bearing instruments. So by owning them, you'll actually derive an income from them, potentially. you know, I think with time, certain rights to the underlying IP will be built in. So again, at the moment, like Blouse Drop, for example, I forget how much it sold for, but this was to an album he released two years ago. It's not even new music, right? He just minted some old music.

But to his fans, that was like, you know, that was a great album. They loved it. They wanted a piece of it. They wanted the first NFT. There's no right to the underlying IP, just like with Beeple. there's no right to the underlying IP. He could reuse that in commercials and adverts and you get nothing from it. With time, that will change.

People will start to bake in rights to the underlying IP. However, it's monetized, especially in a digital context. And we're also seeing there's a lot of criticism at the moment, largely by Bitcoin Maxis, to be honest with you that hate Ethereum, having any success, which is right-click save. Well, you think you own it, but I can right-click save that, and now I've got it. But what that misses is that, yes, you can right-click save, you know, the image.

But ultimately, you know, you don't own the kind of the real value of that thing, which is the kind of associated status that comes with it. It's easy to kind of poo-poo these things as I think the layers of functionality and value that will be built into these things over time is going to increase. And as I said, you can do that retrospectively. You don't even need to kind of have that all figured out in the initial mint. Yeah, something that's interesting to me is that I am kind of like personally skeptical of this, maybe because I also kind of, I like to think of myself as a minimalist,

whether I actually am as, you know, a for debate. But yet despite my skepticism about this, like I'm a fan of Kings of Leon. So I haven't done it yet, but I do, it's on my to-do list to get the Kings of Leon and Even at the same time that I'm like, why are people buying these when you can, you know what I mean? So it is funny that my brain is like, well, you know, you don't get all this stuff. So like, why would you do that? And yet the emotional side of me is like, I want to get the Kings of Leon NFT. And the Kings of Leon NFT is interesting because it comes with not like they issued a few

NFTs, one of them, which comes with like perpetual front row seats. And so like there's actually a nominal value on that that someone could theoretically like just do a discounted cash flow on if they wanted to. Exactly. Yeah, yeah, but I think that was very limited and it was like only for a few days where you could enter. I clearly missed that window. But so, you know, just to stay on this topic and it's funny, Jamie, you mentioned

that Bitcoin maximalist because I did see Whale Panda tweeted and I actually retweeted and I thought was a great tweet. He was like, what if someone sells an NFT of a tweet? And then the person who originally tweeted it deletes that tweet, the original tweet, then what? So, yeah, can you answer that question? Yeah, I mean, so obviously, specific to the tweet, right?

So, again, the tweet happened, even if you delete it, it's capturing a moment in time, right? And that is the provenance of a meme, emetic, and part of that story. But what I'd also say is, again, at the moment, the idea, you know, people can reuse an image, they can repurpose it, and owning the NFT doesn't,

give you actual control or permissioning of how that thing can be used in the general digital world or the metaverse. But again, that's going to change, right? So there are a number of different approaches that are being explored. I was speaking to some people at Nvidia who are, of course, like big in gaming. And they were saying, well, actually, look, as increasingly gaming experiences a stream through the browser, nothing actually will happen locally. And therefore, actually, you can control permissioning on the server side.

So if it's being streamed through a server by having access to, let's say, the 3D file, it can be streamed into this 2D experience through the browser. But it can only be captured in a 2D sense, right? So you could just record that streaming happening into the browser, but you would never actually have your hands on the 3D object. And so again, I think as more things migrate into the browser in the cloud, in cloud and away from kind of local, localness and local files, you'll be able to actually control. You'll only be able to experience a particular NFT if you own it or the person that owns it gives you permissions. And so I expect in like a metaverse context, so for example, I have a gallery at the moment in Decentraland and I just pull the NFTs that I own into,

frames on a wall in a virtual gallery through OpenC. Now, anybody can do that. So anybody could clone my gallery, pretend they own my artwork, unless somebody was really bothered to kind of click the link and actually see, well, does this person really own it? They would never know. Now, that's okay for now, but the reality is that fundamentally undermines the value of the thing, if that's possible. And so I think increasingly there are going to be innovation coming through because there's enough economic incentive to solve it, whereby you will only be able to experience this thing in the Metaverse if you own it or somebody's giving you permission. That's like coming. It's inevitable. It's not there now, but it will be solved.

That's super, super, super, super interesting. All right. So in a moment, we're going to talk a little bit more about some of the kind of technical and sticky issues around NFTs. But first, a quick word from the sponsors who make this show possible. There's a lot to think about when building a commerce web application. Integrating with Squares APIs to take payments, however, is a no-brainer. Trusted by millions of sellers worldwide, Squares APIs are now available to developers, making enterprise grade payments accessible to everyone. They also have your back.

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And so like you open up like a pack and each of those like digital trading cards are like, pieces of like actual games. So like it could be LeBron James doing a dunk. Stefan Curry like shooting a three-pointer. And the right now they just exist as collectibles, but the idea is that they're eventually going to make it into a game. And so MBA Top Shot's HardCourt is hopefully going to provide some sort of utility, some sort of use for those actual moments.

They still can have value as collectibles, but it'll be really cool once the users can have a better experience. So this goes back to the question of what are you buying exactly when you buy an NFT? Because I don't know if you saw this. There was a user going by the name DFI Ted who wrote a long medium post about how he was attempting to withdraw the $45,000 he had made in his NBA Topshot account. And even though he had completed the know your customer process, you know, in which he provides identifying documents that are meant to satisfy into money laundering regulations, he wasn't able to, and he had like screenshots of his conversation with the CEO of Dapper Labs, Roham Gosselu, who not only actually created NBATOPHSA, but also Cryptokhities,

and Roham responded saying stuff like, oh, you know, the reason that the removal of your funds is being slowed is because this is how we protect against credit card fraud. And I wondered what you thought of that response. do you think that that was the answer? Because if so, then, I mean, if he completed the full KYC process all the way back in the fall, then why is this a problem now? And so I just wondered, you know, and also, you know, like what are the rights that people have when they purchase something from NBA Top Shot? Yeah. I mean, I can say, obviously, I don't know the ins and outs of that. I know Roham, generally speaking, is a good actor. I think at the end of the day, you know, they are a

startup scaling. And I mean, this was just unprecedented demand. And so there are some people on that platform with millions of dollars of value. And of course, they want to cash out, but like to move millions of dollars off a platform, sometimes in a matter of days, you know, like weeks or months. And for that to happen with, I don't know, tens, hundreds of people, thousands of people, that's going to put a strain on any startup, like even if it's just a classic web two, startup. I expect that most of the constraints are not necessarily technical. They're more a point of process, right? So I don't know how you insure for that kind of money being withdrawn off a platform and especially credit cards, you know, because of course, if something is fraudulent,

they're going to have to underwrite that. So they are going to be like a pain in the ass to this platform now. It's like, well, what do you mean you want to move a million dollars off a platform for a trading card, even if they've already signed up to it? So I just think it's, I think it's to be expected. Of course, it must be incredibly frustrating to have like all that cash that you can't move out. I think they'll solve it. But yeah, I don't think there's anything worrying about it. And maybe to use something that's analogous, if you look at Robin Hood and what happened with Robin Hood, right, you know, everybody thought it was this mass conspiracy. I don't know. Maybe it was, but the reality was that they just didn't have enough money, right?

To kind of handle that level of trading volume. And I don't know the nuances of it, but the indemnify it and all various things. The reserves are required. And so I wouldn't be surprised if it's just the same situation with what's happening over there. It's nothing nefarious. One thing's for sure. I'm sure Rohan would love people to be able to be moving millions and dollars on and off the platform because they're probably making fees on it, right?

Yeah, yeah, Roham actually did talk about the scaling issue. And I do think there's some echoes of even things from like Coinbase's early history. I think pretty much any crypto platform basically needs to ramp up their fraud protection when they end up scaling and they become popular because it is true that fraudsters, I think, to send on new crypto platforms. And so if your algorithms aren't very good at detecting that, then, you know, you can. get eaten alive. And so speaking of scaling issues, NFTs also have kind of like a scaling problem because each item is unique. So for instance, you know, if you sell, send either one or 100 ERC 20 tokens, it's pretty much the same in gas costs. But within NFT, the data is more linear. So if you want to send 100 ERC 721s, that's like 100 transactions. So when it comes, to things like games and these other NFTs that aim to be cheaper, what do you see as the best way for them to scale? Yeah, I mean, kind of to give a broad outlook,

a gaming on Ethereum has been like relatively challenging to say the least. And you've seen that to an extent with pretty much any game studio or game, they've either built their own for-purpose blockchain. So with example like dapper and flow, or they're building out their own layer two, which is a case of like Axi, infinity and Ronin, gods unchanged and immutable X. And so, like, it's definitely a hard problem to solve

because if you have, like, gaming specific, these assets should be worth, like, in the dollars, in most cases. And so in order to do that cheaply, scalability has become, like, a concern. There are, like, better solutions in terms of not everything has to be an ERC-721, ERC-1155, which was pioneered by Engine, is a much better token standard for like gaming assets,

because you can send a hundred of like a sword or a card that all has like the same kind of like value in the game at once. And right now, would you say that there are going to be some blockchains that kind of look poised to take advantage of the NFT boom and maybe even take some market share from Ethereum? because, you know, as for instance, we mentioned, flow is the blockchain for NBA Topshot. What do you think is going to happen to Ethereum based on the scaling issue?

So, I mean, clearly there are already contenders coming through. As you say, Flow. There's also things happening at layer two with Matic and, of course, with PolkaDot now and parochains, there's going to be, I know for sure, because we're looking at investing in one, you know, them set up specific, specifically for NFTs or specifically for gaming and these kind of things. So I think that's definitely

going to happen. But the one kind of watch out is that like circling back to this idea of NFTs and defy, like the home of defy currently is still Ethereum and there's a very good argument. It's going to be the global settlement layer for maybe ever or certainly for the next decade. And so it's all well and good having a solution that allows for better minting, transferability of NFTs, low value, NFTs, high volume. But when these things are collateral, people want them as collateral, they want to borrow and lend against them. That's currently Ethereum. And so, you know, you're going to have to create very powerful bridges. And I know most are, you know, most are kind of looking at interoperability. They're not looking at outright trying

to replace Ethereum. So I think we're going to see a world of greater interoperability. And I think that's the defy component and the settlement layer is probably the moat for Ethereum to preserve a place in what I would broadly call the Metaverse, right? This kind of open metaverse that's virtual environments, gaming, digital fashion. I think it's going to continue to have a place. Yeah, I think this is a really interesting question because it kind of poses a bunch of other questions, like what makes an NFT valuable? Is it the fact that it's issued on like the most

permissionless network? And so you might want that with something like a 69 million dollar piece of art. Like you want a pretty censorship resistant blockchain for that. But when it comes to gaming and just the demand for like a higher throughput application, like if you wanted to build anything like a Fortnite and use like a blockchain network, like Ethereum right now is is not going to enable that. I'd also build that the, so one of the challenges that's happening in the NFT space now as platforms, all platforms are kind of basically experiencing exponential growth, right? And they're having scaling issues.

And they want to remove friction because most of the users are not crypto people, right? You know, they don't want to have to understand or tolerate all the stuff that we've kind of got used to as natives. And so one of the challenges with layer two solutions like workarounds, largely to Ethereum scaling problems, is that you lose a lot of the associated metadata to these things. And at the moment, that hasn't been a problem, or at least it hasn't been perceived as a problem. But now these things are going for millions of dollars, metadata is increasingly important. For example, things like royalties.

So if some things kind of minted effectively off-chain by a platform, and you don't kind of have the associated metadata, which would allow for royalties to happen in perpetuity on any environment, then effectively you're relying upon an individual to honor that. And we've had several instances where people haven't, right? It's the collectors sold it in open sea, and they're like, well, you know, so what? They keep all the proceeds. So again, I think these things will be solved for. We've got like a project in our portfolio, NFT-42.

They're working on something called the Infinity Token. And these guys are pretty die-hard, like die on a hill, you know, on-chain gang. And it's all about royalties and as much metadata as possible. And they're committed to solving that problem rather than workarounds. And so, again, I think these things will be solved for. The reality is that these are things probably only relatively sophisticated, like DGens, care about large mainstream retail, don't care about it right now. And most platforms quite rightly are just saying, well, you know, why add friction when people

don't care for now, right? And this is like the position that we're in. I was just to say, the one point I would push back little is that I think that there's going to be like some severe limitations to just on-chain data storage, particularly on Ethereum. And so I think there will probably some sort of like necessity for robust like off-chain storage, whether that's from like a file storage protocol. So I think that's like a really unique problem to NFTs. I do agree that it gets solved over time, but definitely, definitely not trivial.

Well, you're seeing with, I think RWeave is doing quite a lot of integrations now, obviously IPFS, but Areweev are doing some really cool things? We've got a project called Coy, which is specifically looking at how you can kind of have this link between Arweave and it's perma web and NFTs on Ethereum or any other chain. Yeah, and Jamie, in terms of what you were saying about how that project, I think you were saying it was NFT-42, is kind of really focused on the royalties for artists.

I would imagine that then that would cause a lot of the creation. to flock to a platform like that because I mean, as a creator myself, you know, with my content that's been stolen in the vest, I would prefer to work with a platform like that. You know what I mean? So I could see how even if right now a lot of the platforms don't care that eventually if they want to get creators to work with them, then they will have to care about that. So speaking of, I was curious to know because just if I think about all this, I just imagine so many industries are going to be disrupted. So which industry or industries do you think stand to be most disrupted by NFTs

and how do you expect this disruption to play out? Yeah, it's a really interesting question. And I don't know if it's disruption or transformation, it's like maybe a bit of both. I think music is right for disruption. So I think that's most likely, I mean, you know, Kanye West before he kind of disappeared. off the map a little bit, was talking about creating templated contracts for musicians to emancipate themselves from record labels, right? He didn't connect the dots, at least not publicly,

that you could do that with smart contracts. So this is, there's already a groundswell of artists, whether it's Taylor Swift or whomever, that are basically trying to, you know, go direct to consume and, of course, Jay-Z with a streaming platform title. So I think music's, that's, that's that's already happening. There's so much momentum there already. And then I think everything else is probably going to be transformational. I think like gaming, as I said, like I know Epic and a real, Tim Sweeney's already looking at it. He retweeted something that I did on the Open Metaverse OS, which is a thesis that we published, only because I hijacked a tweet that he was in and I kind of made sure he saw it. But like, you know, he read it, at least he pretended to read it. And like he got its principles, right?

He knows the direction of travel. He knows that they need to open up more, and that that would be net beneficial. But obviously, they're a tanker and they've got a like turn. And, you know, a AAA game, like the quality of content, like the high, you know, it's a high-fi experience. It takes millions of pounds, several years. Like, that's very difficult to disrupt when you look at the empty worlds of the open metaverse, right?

DeCentraland is great. Crystal Voxle's fun. but like it's not a AAA game. And so they've got some time to kind of figure it out. And it's in their interest to gradually experiment and innovate. So I think you've got this spectrum of industries that can afford to have the time, that there's a very high barrier to entry from the content side versus industries that are already probably outdated that have somehow managed to kind of cling on to power.

I think you're going to see that spectrum. Yeah, I'd echo that. I would say gaming is going to be pretty deeply impacted by NFTs. There will be kind of a dichotomy, I think, between like these permissioned ecosystems, kind of the walled gardens and the permissionless ones. So I'm in particular interested how that evolves. And then I would also agree that content is going to be a really interesting one. Because, I mean, Jamie's right, it's pretty, like, outdated.

And there's this, like, key problem within almost. almost any type of like content creation where your most valuable piece of content is very much like venture capital. It'll outperform, you know, your other 99 pieces of content, but people aren't, and creators specifically aren't rewarded for that in an accurate way. And so I think kind of shifting that, especially whether it's the use of like selling NFTs or on-chain royalties, like Jimmy mentioned, is pretty powerful because like if you look at what's happening with people, like he has had this.

massive success, but he's been able to capitalize it on it in real time, rather than like, okay, now he's famous. Let's go issue some more NFTs and now capitalize on the fame. If you think of fashion, for example, right, sorry, you just kind of add on that bit. Like, it's, there's no downside for the fashion industry to do this, right? So, you know, they're not cannibalizing the wearing of physical clothes. they're able to produce digital clothes without all associated costs like one file, one 3D file. We're talking to a project called Artifact, spelt in a funny, cool way. And, you know, they've done a deal with Snapchat where you can buy an NFT as a wearable.

You can wear it in your Zoom call. And like, you know, why wouldn't the fashion industry be all over? that. It's, you know, they can take existing clothing and virtualize it from the same 3D model. So, and especially in the context of everything that's been going on with COVID, like where they're looking for new revenue streams, you know, they've got back catalogs of clothing. They don't even need to create new ones. They've got like 3D models for clothes. They've already created for decades. They just need to like make it available as NFTs for weird people like me or maybe I don't want to call you guys weird, but me to wear in a metaverse. And I'd pay a fortune for it, right? So

no-brainer. Yeah, I did see, I can't remember the name of the platform. Maybe it was one of your investments, Jamie, but it was something like a famous person can kind of like select what their outfits would be and then people can buy their outfits from the celebrity and wear them. And yeah, and I was like, clearly I'm not the audience for this because I'm all about like Marie Kondo in being a minimalist, but anyway. So one other thing, oh yeah, actually, just Mason to go back. One other thing that was so fascinating to me was like you wrote this piece about, you know, the different business models for content creators.

And what was interesting is, you know, you end, of course, with the ownership economy. But then right before that is this subscription model, which I feel like weirdly is only starting to gain traction for content creators. So it's just kind of fascinating that this is coming along so quickly. and I do feel like it is poised to disrupt it. I don't really have like a question, but I just, I remember being struck by that thinking like,

oh, it wasn't that long ago that I was reading that Substack is the new thing. But I was curious to know like, what do you think that will look like now for, yeah, for somebody who is kind of doing more of the subscription type thing. Yeah.

I mean, I think to iterate, reiterate, like we are on like the precipice of this. This is like the very, very beginning. This technology is in its earliest stages. and so the subscription era could continue for like another decade quite strongly. Oh. I think that it, the like cycles of in which like technology goes through are happening faster.

So like I'm optimistic that like the subscription phase might not last that long and we can get to better ways for content creators to like make more money. But like by the time it becomes like ubiquitous like this is like what everyone is doing. I think it'll take, you know, at least at least five years. Yeah, and one other thing that I wanted to add was I loved in Chris Dixon's piece how he talked about how content creators now will be able to capture more of the value of what it is that their fans are willing to pay. And he had this great line where, you know, the super fan is willing to pay a much, much higher price. And now the, you know, these NFTs enable content creators to set or to have. to capture the value that those super fans are willing to pay, whereas, you know, before, if you were going to sell a concert ticket or whatever it might be or a T-shirt or, you know,

whatever, that it would be the same price for everybody pretty much. And yeah, like, I personally actually do get donations from some fans, but it's like really, really, you know, not a ton. But I was like, oh, like maybe in the future I might see more of that and I might get, you know, more at different levels. But anyway, okay, so actually one other thing I want to be sure to touch on is, so we have a ton of different NFT platforms and marketplaces are out there now. Why don't we just talk through some of the biggest ones and then talk about like how they are differentiated in terms of both for the creator side as well as for the buyer's side? Sure. I mean, happy to give a general landscape. The way I kind of view it is you have a few different layers. You have like all these

different issuance protocols. And so OpenC is kind of at the top. They're an aggregator. You can purchase NFTs from pretty much any platform. And they do a pretty good job at passing royalties down to artists, but it's not perfect. And so like that's definitely like one major issue and kind of a key reason to use some of these platforms right now. From the art side, you have, you know, half a dozen. You have Maker's Place, super rare, nifty gateway, which is connected to Gemini. You have kind of these newer protocols that have recently launched the past couple months, which is foundation, Zora, Rarable launched last year and has released their token this past like summer. And I think that those, like there's kind of this dichotomy and between like

curation and more like open permissionless protocols is how I see it. And what I'm most interested for is how these permissionless protocols allow other companies and people to kind of like build brands on top of them and integrate them into different use cases. Because I think that's where we really compound and leverage the power of, you know, blockchain protocols. Jamie, did you want to add anything? Yeah, I was trying not to jump in straight away. I get to carried away sometimes. Give it a pause.

You'd invite me. Yeah, so, you know, at the moment, there are still only really a handful of platforms that are taking at most of the volume. And already with Nifty Gateway, because I know some ridiculously large artists who can't get on, right? Just like a waiting list. And so naturally, some of that is going to spill over into new platforms, origin protocol, for example, some people are using that. I think also some creators want more control over the experience. And so towards the end of last year, I was talking about somebody's going to do a Shopify NFTs now. There's 20 people claiming they're going to be

the Shopify NFTs. Our bet is NFT-42 create that because they just got the factory smart contracts that allow for this kind of configuration. But who knows? But that will then allow for artists to self-serve and you'll have this kind of long-tail. And I think this is going to be increasingly important, A, when there's an oversupply in the market. So there's definitely going to be an oversupply. And so how does that that long-tail is going to have to self-serve. as other artists come through or brands that want to have a control of their IP,

if you're a luxury brand, you're a Louveton, right, you're not going to want to sell that through the retail experience of Nifty Gateway. You want to control the retail experience just like you control your store. So you're going to want it all branded. You're going to want to look the same, feel the same. So they are going to want a branded storefront. They're not going to want to just go into a marketplace that has a drop from, Lindsey Lohan as well, right? So I think you're going to end up with people that want control of the

retail experience, not just a distribution channel. You've got this long tail serving. And I think also this, because of the oversupply, there's going to be a great importance on curation. And curation is going to increasingly going to have to be done by community and things like Dow's and, you know, you've got innovations happening with like Flamingo doubt at the moment, they're not minting NFTs, but they are buying them. You've got things like B20, which effectively fractalize the ownership of a B-Pool, a blue-chiple. And so you can imagine that these communities begin to curate and launch artists or creators to act as a filter on this oversupply that's going to be coming into the market. And then they'll capture some residual value

by membership. And this is why I think it's interesting. You're talking about subscription. I like to kind of think about it. It's like subscription plus because you kind of got that status component to it built in. So I think all these things are going to interplay. I mean, there's just so much supply that's going to be hitting the market. It's going to overwork, it's like a hose pipe.

It's going to overwhelm the platforms. It's going to overwhelm the collectors and buyers. And so you're going to end up with these curation layers. You're going to end up with these UX layers. and there's going to be so much opportunity for everybody. But what I will say is for sure, maybe it's Nifty Gateway, maybe it's somebody else, maybe it's super rare. As I said, like middle of last year,

there will be, in the way that there was like a finance or a coin base for the kind of ICO wave, there will be an equivalent unicorn that comes about from NFTs. And I think, you know, I was very envious of how quickly the Vigal Vos twins managed to move on Nifty Gateway. They always seem to have a nose for it. And, you know, they've certainly got a really good chance. But at the same time, you know, if they don't, if they're not more controlled and considered, like, who is their community? Is it the McDonald's of NFTs or is it going to be something like more high end?

I think the danger is if they just serve all the demand that comes at them, they will dilute a brand. And I think increasingly it's going to be like, what do you stand for? Artists are going to select platform based upon a number of variables that kind of match their ethos or kind of, you know, perspective on life or NFTs as a whole. All right. Now let's finally turn to the topic that you mentioned earlier. This is, I think, a very juicy one about how NFTs can be combined with Defi in a way where NFT owners can put their NFTs up as collateral and take out loans on that. Honestly, for me, I'm a little bit like, okay, so NFTs will probably fluctuate in value. And even, you know, like yesterday,

CZ did an interview with CoinDesk where he basically said, oh, I think eventually all NFTs will go to zero. And Andrew Steinwald, who's another big NFT person who he runs the NFT investment firm S Fermian and publishes an NFT newsletter. He even said the same thing. And so, So a part of me was like, okay, so you have this NFT, maybe once it was worth something, like the crypto kitty that you bought for, you know, like 10,000 bucks back in the day. But now, how do you know what the value is? So I'm so curious, how does this work? Yeah, I mean, I think the appraisal valuation of NFTs is really challenging.

And it's really just about, like, creating a robust way to value them. And so there's lots of different approaches, whether it's creating like indices, of NFTs that are of like a similar stature or, you know, having like actual appraisers and having like a human element to it could be one way. I think the, it really just depends on the NFT. Like if we're talking art and collectibles, that's totally different than if we're looking at something that can actually have like a discernible value, like a carbon credit. Like that's very easy to price.

Yeah, I think there's different vehicles of approaching it, right? So if you look at whale and whale shark, you know, that's primarily or initially a collection built up by an individual and increasingly is being devolved to a community. And that becomes increasingly important. So if you look at like generative art as an example in a subset of collectibles, I mean, that is highly specialized. And believe it or not, there are now like people who are specialists in like Repetepets or Cryptopunks, that's their job.

which is brilliant. I love how they explain that. Do you mean in collecting or in appraising? Both, yeah. I mean, you know, and I just love how somebody's going to have to explain that at Christmas this year to their wider family. But, you know, so increasingly this is like complex. There's like data points, of course. So we're going to see like big data analytics companies.

coming through. I think that's why it's interesting, non-fundgible.com. You know, they've got a really two years plus worth of data in this kind of thing. That's going to have an increasing premium. You're going to have to crowdsource a lot of this stuff as well. And again, that's the benefit of something like whale communities. You can end up with specialists within a certain category. Like, so I personally can't really participate in most generative collectibles, because I just have time to figure out rarity traits and like, you know, price differential between this rare trait and, you know. But like, if you can do that, you can make a lot of money.

Nate, who's part of NFT-42, is like made, I don't want to say how much, but like a lot of money flipping crypto punks. It's, you know, based upon understanding the nuance of, like, particular traits. And pranxies similarly notorious for kind of, you know, having an edge in that space. As you said, there are kind of now indices where you kind of transfer. tracking the kind of broad, like so hash masks as a whole thing or, you know, generative collectibles as a whole thing or a fractionalized stake in a blue chip piece. I actually disagree that they're all going to go to zero.

As I said, I think this is different to ICOs. I think there are already established blue chips. I'd argue Cryptopunks is one of them because of what they represent in the story of NFTs, and the story of NFTs is not going to go away. More people are going to come in and they're going to want to buy status. I actually think so I'm in the middle of doing an audio documentary interviewing the OGs of NFTs going all the way back to counterparty and colloquines with Bitcoin. And there are so many trends like trash art, spam art, that are references to themes that are going

to become really important in NFTs. like de-platforming, copyright, the fact that if I know you own a B-Pol, because I can see it's in your wallet, I can now spam you as stuff like NFT flyers. There's going to be loads of things that people have been considering for a long time making art about that are going to inform the future of NFTs that are, I would say, undervalued at the moment. So I think once all the kind of noise dies down around just like this host pipe of new, like, you know, Lindsay at Lohan or like Kings of Leon, I think the blue chip will emerge of people that are key points in the innovations that have moved NFTs as a medium forward. And there's going to be a mass

retrospective. I think like towards the end of this year, it's going to be mass retrospective of people going back and rediscovering the past of NFTs. And they will be blue chip. And if you look at Robness, who's like the pioneer of trash art because he got kicked off super air for copyright infringement. It created a whole movement of trash art well beyond him. It's like a meme in and of itself. I think he currently lists the original trash art piece at 300 million. Now, whether he'll get that or not.

I don't know. But, you know, that used to seem ridiculous. And now, I don't know, right? So I think it's not true. They're all going to go to zero. I do think many will, they won't have a buyer, but again, you don't have this price discovery that you get in crypto. They're generally illiquid.

So what will happen is nobody will buy it at the price you've listed at that. But you're not going to have this like this buy and sell wall for NFTs where, you know, you're going to be exposed to mass volatility. You're just going to end up with a load of NFTs that stay at a fixed price with no buyer during the next winter, and we will get a winter. I don't think it'll be two years. I don't think we'll lose 90% of value, and it might be like six, seven months.

Yeah, well, I mean, neither of them said all of them will go to zero, but that many of them would. But yeah, that's why earlier in the show when you said that you thought that, you know, just everything was going to have all this massive value, I thought, I don't know about that. I definitely think certain things will for sure. and many, many more things. But, yeah, certainly I think there's a lot of stuff being created that won't retain value.

But the question is, how I re-ask the question, it's like value to who, right? So will a particular NFT have value to a mainstream speculator? No, right? So there will be a group of people that are coming in and trading on things they don't care about just because they think price go up. Right. But many of these things, because of the social component, will have value to somebody because of what they represent in the context of community and status. And again, that's why I think if you're going to price these things, you need to look beyond necessarily the immediate volatility. You need to look beyond even the content of the NFT. It's like, what does this represent and to who

and how big is that community? And is that community growing or is it, it just kind of plateau. And what you end up doing is you're valuing memes if you think about it. And really what we're talking about are meme markets. We've actually got a startup called Marble Cards and our current cohort. And they are actually working on meme markets. And that sounds like ridiculous. But actually once you start looking into it, it's like, well, like Elon Musk tapped in,

like Tesla tapped into the power of meme, the most valuable company on the planet, or at least it was. the power of memes holds, and I think that's beyond any kind of market cycle. Yeah, I think the one thing I would just briefly add is that the value of a meme changes over time. And so, like, Cryptopunks are incredibly valuable right now because they're largely considered, like, the first NFT on Ethereum. But, like, you still probably have under 2,000 wallets that hold Cryptopunks. And so if those holders, like, you know, believe that they will retain value and like they're strong enough, they have diamond hands, if it were, to keep that, then, yeah, they could hold value. But, you know, if the prices do tank 70%, I imagine you will see some sort of sell-off.

Yeah, so I'm curious, what do you think will determine whether or not an NFT either not only retains value or just becomes more valuable versus which ones will not. retain value. Yes. So I just reiterate, for me, it's, is the value of that thing to a particular community. And so it is like the, the level of the breadth or level of depth within that community. And what that NFT represents as a form of status in that community. So as you say, like, some memes are evergreen. like rare pepe is it kind of just doesn't go away and on one minute it's an old right thing

and the other hand it's like another thing it's just like the thing that never never goes away right and then there are some that will kind of come in and out of favor and I think that's actually why what you're doing with nfts you are valuing the power that it's mean markets and once you understand it in that construct how you price these things is how you value memes and so I don't know how you do that yet, but like once you crack it, you're going to make a lot of money. Yeah, I think if you refer to like NFTs and like art collectibles, then it's, it's value in culture. And that is like subjective. And so like there's no, it's kind of like Bitcoin in a sense.

Like it's valuable because people think it's valuable. And the more people that think it's valuable, well, the more value becomes it's like this self-fulfilling prophecy. And so I think that applies to a subset of NFTs. And then the NFTs that become like gaming assets or music, content, like that I think is going to have, you know, a much more transparent valuation based on any sort of like royalties, cash flows and traditional models. So I think it'll be interesting to see how we value them over time. I think the gaming one's important actually because so something like axes or what have you. You know, these things are, you know, it's play to earn environments. you need that NFT to play at a certain level in the game.

So as long as the game's popular and growing, these things will hold value. If the game plateaus and most games have a shelf life, then you can assume that they'll depreciating value. So they're probably a bit more tangible, a bit more objective ways of measuring. Yeah. And I think when Marguerite DeCarsel was on my show,

I think she also talked about how, like, certain items could kind of like gain value by certain players playing them or getting up to certain levels with those objects or whatever. So, yeah, even just through the course of play, you can add more value to. But then, yeah, that's almost like proof of work in the sense that, you know, there's kind of like a history there with that object. Okay. All right. So last question.

And well, actually, I just realized I was going to say this is going to be a last quick question. However, because of what we were saying earlier about how hard it is to know what the value of any given NFT is at the moment, it is also hard to know with the market capitalization of the whole NFT market is at any given moment. However, despite that, how big do you think the NFT market will be by the end of the year? So I think for context, non-fundable, their 2020 report said that the NFT market, specifically like actual NFTs, like whether they be art axes, was. like 330 million, give or take. 338, yeah, which is hilarious. Because now everything is like way bigger than that already, but anyway. Totally.

I think we've easily doubled, if not tripled that already. I would say like the, it's tough. Like if we like let's, I'd say it's better to take like top 50 projects because then it's not just like, okay, everyone's just issuing stuff. So if we said like the top 50 projects, I think it could easily be a, a, billion dollar valuation. And then larger if we include all the NFT related, like, adjacent tokens. I'm going to give a much less sophisticated answer to that.

So, and I don't have the numbers to hand, but like last quarter of last year, I said that however you would measure like NFTs as a whole thing, with this run, whether this is a 12-month run or an 18-month run or whatever it is, will be three times crypto during the ICO mania. I don't know what that number is. I kind of still hold. Oh, I think it was like maybe $800 billion or something. I think, you know.

If I remember correctly, I think it was about $800 billion. I think it could do that. I'll have to look this up and all. I know that sounds insane. I know that sounds totally insane. it's, and I don't, again, how do you value these things? Are going to be very illiquid, but like, if it's like listed price, I don't know, like whatever it will last sold price, why not?

Depends how long the run lasts. I wouldn't say like necessarily the next 12 months, but like whatever this cycle is, like three X of ICS. I think long term, you're right. I think it just depends on, on, yeah, on how long the market cycle lasts. and what comes out next. Yeah, and actually, Mason, earlier when you said $1 billion, I realized, you know, when we were saying that $330 is where the market was at

at the end of 2020, and you said, oh, we're already 3x that. That is already at a billion. So let's go 10x more than that, $10 billion. Oh, but okay. But then Jamie, but Jamie's estimate was $2.5 billion, roughly. If my memory is correct, that it was $800. Oh, sorry, $800 billion. Never mind, right.

So I'm an order of point. Yeah, you are. So I'm just doing the math now, right? So you would, so when I'm saying ICOs, I mean like the kind of money raised through ICOs, right? So exclude Bitcoin and maybe you put Ethereum in there. I don't know. Got it.

But like, you know, whatever the amount of money and the capitalization of ICO tokens, maybe excluding Ethereum and excluding Bitcoin, three times that. Oh, okay. I'm making it up. It's not based on any science. And so that's, yeah, that's a much lower number, obviously. Yeah. Maybe like, I don't know, 10 to 20 billion somewhere in there.

Yeah. So. I think that's fair. Okay. Okay. So then 3x, that would be somewhere between 30 and 60. All right. Okay.

Well, we will see by the end of the year. This has been so fun discussing this with you guys. I have so enjoyed talking with you. So where can people learn more about each of you and your work? Yeah. I spend way too much time on Twitter. So feel free to, Tell me why I'm wrong or why I'm right about NFTs there.

And then you can check out a lot of... Give your handle. Oh, at Mason Nystrom. And then you can check out a lot of our research at massari.com. And Jamie? So at Jamie 247, the numbers on Twitter. A bit of a plug. If you are a Web3 startup working in NFTs or Defi apply to Accelerator,

outliveentis.com. And I have a podcast, which isn't as good as Laura's, called the founders of Web3 on iTunes. so you should check that out. And I'm doing a weird thing in VR chat called The Metaverse Show. And I think that's just through YouTube. So outlierventures. YouTube slash OutlierVentures.

Perfect. All right. Well, thank you both so much for coming on Unchained. Thanks so much, Laura. Thanks, Jamie. Thanks, thanks for having me. Thanks so much for joining us today. To learn more about Jamie, Mason, and Masari and Outlip.

adventures, check out the show notes for this episode. Don't forget, you can now watch video recordings of the shows on the Unchained YouTube channel. Go to YouTube.com slash C slash Unchained podcast and subscribe today. Unchained is produced by me, Laura Shin, with help from Anthony Yun, Daniel Ness, Mark Murdoch, and Dan Edelbeck. Thanks for listening.