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I'm Patrick O'Shaughnessy, and this is invest like the best this show is an open-ended exploration of markets ideas stories and strategies that will help you better invest both your time and your money invest like the best is part of the Colossus family of podcasts and you can access all our podcasts including edited transcripts show notes and other resources to keep learning at join Colossus.com Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management all
Genes expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions clients of O'Shaughnessy Asset Management, May maintain positions in the Securities discussed in this podcast. My guest today is Jesse Walden the founder of variant in early-stage Venture firm focused on crypto networks and platforms building the ownership economy with all the hype surrounding
And if T's and given Jesse's background in the music industry and his focus on the Creator and ownership economy. He's the perfect person to teach us about the future of NF T's we discuss the basics of one of the N of T is what new creative paradigms. They may unlock and where we are in the NFC hype cycle. This episode is the first in what will likely become its own show that we are calling primers. Our goal for primers is to bring investors and operators from a0 to A7 understanding of a topic concept or industry. The goal here is for the education around these topics.
Pecs to be fast and entertaining. I hope you enjoy this discussion with Jesse Walden and hopefully the first of many primers to come our mission with these episodes is to provide access to the best ideas and people and business and investing. We will soon be significantly expanding the scope of this effort to make it possible at Colossus. We're expanding the team in hiring to critical early roles. The First Position will be our lead mobile software developer. This person will lead the development of our mobile applications, which will change how people learn together.
They're the second position will be our lead designer because the existing team lacks ux and UI design experience. This person will have a blank slate to creatively designed new applications from the ground up to learn more about both roles. Visit. Join Colossus.com forward slash careers now on to the show, so Jesse, I think just to level set is probably appropriate to begin with just a simple explanation or definition of an mft from your standpoint and then we're going to jump a little bit.
It backwards in time to your origins in the music industry to help the audience understand this interesting New Concept.
I think a really simple way to define n ft is our as a file or a file type that lives on the blockchain you have MP3s you have jpegs. These are files that live on your phone or computer and if T is our new file type a digital media file that lives on the blockchain and that's technically not correct, but it's a good metaphor for what we're describing ideas.
You upload a file to the box chain. It becomes a token that can't be meddled with just like Bitcoin is a digital token that is provably yours independent of any third party. So in a nutshell and ft is make it possible to own a piece of digital media in the same way that you are able to own a digital currency like Bitcoin,
maybe click One Step deeper on the fungible piece of nft. So if I think about Bitcoin,
Guess it's not perfectly fungible because you could trace each individual Bitcoin back through time, but one is sort of like another right it's worth the same amount. There's not a difference between one versus the other and of T's is quite different than that. Just draw that distinction one. Click further and how a JPEG is so
different a pixel is worth a thousand words what I mean by that is one pixel differentiator in a JPEG makes that image unique from any other dollar bills in your wallet or fungible for one another but an image of video or song these are sort of like unique
Years that can come to be represented as unique tokens. So what we're talking about is taking unique digital things and making them individually ownable on the internet for the first time without any third party fungible tokens benefit from blockchains, because the technical properties of blockchains enforce their scarcity the fixed supply of Bitcoin. Well with NF T is you can reduce that fix apply to 1 of 1 a
lot of the attention and ft's has been around visual art whether
it's an artist like people or NBA Top Shot or something that you can see on your screen and now it's scarce that can't be replicated at least in the meaningful sense for the first time, but I actually think a really interesting area for you and I to draw the line here is around music you started your career in and around music worked at Spotify for a time. I just think this is a great way to understand digital media maybe Begin by just describing the importance of your background in music what it taught you about when there's a
Let's just take a unit of a song Lady Gaga creates a song or something what the value chain looks like for a song and who owns the rights to that thing who profits from it why music is sort of a fun way to explain what this might all unlock
I think before we get into all the complexities of Music royalties, I'll first offer up just a bit of context of how I came to be involved in the music industry in the first place. And that was through piracy like a lot of teenagers in the early 2000s. I was of course.
Downloading music, but I was also part of a much smaller cohort of people who are uploading a lot of the files that everyone else was downloading and through that came face-to-face with the way media was going to come to propagate on the internet before YouTube existed before Spotify existed. There were these top sites FTP servers that we're sort of limited in terms of who could access and on those top sites you have every piece of media will every album every video game TV show movie itself.
And it was very clear that this was the future of all media. It was that it was just going to all be available. So this was early 2000s what happened shortly. Thereafter was we got platforms social media platforms like YouTube and Facebook and Instagram and someone came along and they solve this critical problem that piracy had which was piracy did not have any mechanism for the participants the people creating the files and distributing them to communicate with one another in the FTP protocol or in the bit.
Torin protocol that was all sort of happening ad hoc and what these social media platforms came along and did is they bundled the ability to distribute media post a photo to Facebook post a video to YouTube with an identity, which is your profile and the ability to communicate with fans and build an audience what then happened of course is those platforms came to sort of dominate the relationship that creators have with their audiences often times those platforms were at odds with the Legacy Distributors of media and
Whole Saga there where the music industry is suing all these platforms Spotify as the one who got it through all that to say that the platforms today dominate that relationship and nft is I think our this new way of Distributing media that inverts that relationship that gives the Creator's and their audiences the means to correspond and transact directly with one another. So now getting back to your question on what are the implications for music. Well, it's interesting because music is
probably the most complicated type of media when it comes to Rights Management in music. There's rights to the song a recording and then a song can be recorded by 10 different artists. So separately there's also the rights to the underlying composition. Those are the publishing rights. So you have recording rights and Publishing rights and each of these rights have different rules and different countries and different organizational bodies that administer those royalties and it's just this complicated mess. It's such a mess.
Like that a platform like Spotify which is global often doesn't know who to pay royalties to four songs on their platform because the information is just not available. It's siloed and all these databases that are maintained nationally in different countries. It's been this major problem for artists to monetize directly because of the complexity of these various copyrights artists have had to depend on third parties, whether that's the royalty Administration bodies or the platforms that distribute their music or both to get the money that
That's due to them and of keys just kind of explode this whole model because now it's very easy for Creator to go on Twitter and say hey, here's my Purdue address and I'm publishing my work as an mft and then suddenly the whole world can see. Hey that's their thing and I can buy it directly from them. And we just saw Jack do that with a tweet Jack was like, here's my original tweet. And here it is as an mft and anyone can bid on it. That's an example of how all the complexity of Rights Management and music just kind of gets exploded by
Of peas,
I want to make sure play this back to a little bit make sure I understand it really thought about the interesting angle that what the platform's did was bundle the identity of the creator with their creations and by doing that have a legitimate direct path to Their audience build this relationship directly with your audience and it's clear that you produce the X Y or Z. But that in that relationship. The platform itself is still capturing an enormous amount of the value of not the vast majority of the value. I think YouTube
pays out a ton of money each year, but also makes a lot of money to your right. It sounds like what you're saying is that the nft represents an opportunity for media creators for artists will call them generally speaking to keep a higher percent of the value that they are creating is that fair.
I think that's the bottom line of it. Again. It's dependent on the idea that the Creator their identity and their media can be discovered and interacted with
Any third party platform in the same way your Bitcoin is yours without having to depend on any third party to verify that
let's take an example of a piece of media where the artist or the Creator is being paid in proportion to the number of times. That media is consumed. So simply speaking like on YouTube. If you've got a billion views of a video you're going to get paid more than a million views or something like this for the most part. That's a cut of AD Revenue. That's generated.
Serrated against that underlying piece of media. What does that look like in the nft world so I could sell a song If I'm Lady Gaga perhaps I sell that song for The Collector that wants to own the official original copy of it for a ton of money. How am I in the same way going to be tied to the popularity of my Creation in the same way that the platform's enabled
you sort of have to suspend your disbelief and sort of break with the ad based model of web to in order to understand how this
Might come to passing web 3 or crypto. So most platforms are a driven monetization and there are certainly economies of scale there. Right like you want to be on YouTube because they have the most advertisers in the most eyeballs. You can make the most money there and of T is enable you to monetize directly with your super fans. Someone who really wants to patronize your work can do so and pay a ton of money to you directly and probably more money than you might ever make even with a billion views or listens on spot.
Defy, that's the day one incentive for creators to try out this new Marketplace. But you have to remember these assets these n FTS our permission asleep programmable. So because they live on the blockchain anyone can build an experience that you can bring your nft to for anyone who's familiar with Bitcoin or any other cryptocurrency. This should be familiar because if you have Bitcoin in a wallet you control you can take your Bitcoin.
Bring it to coinbase or you can bring it to bond. And so you can bring it to any other exchange the same is true of an mft. Once it's in your wallet. You can bring it to any third party application and so developers can build all kinds of new exciting experiences to attract you to come and bring your stuff there what I think we might start to see that might resemble royalty or ad-based revenues that you have in web to is that you might see applications that pay some portion of the revenue that they're generating.
Going back to the nft holder for the ReUse of that asset in the context of their building today that doesn't exist by and large but I think that's where we may be heading. And what school is all these like new revenue streams or New Roads UFOs can be sort of programmatically administered in a transparent way compare that to the way copyright is administered for music today where it's very opaque and goes through 10 different middlemen. Now, all of that is transparent and automated and as a result, hopefully the
There's an IP owners will be able to retain more of the value.
It's a really neat idea that's off to dream of an example just to make sure I understand. So what would be the motivation of a consumer? So let's say there's some cool app that gets built and it's an experience that's built and and and ft owned by somebody else is part of that experience from the consumer standpoint. Let's say it's a song or something visual whatever it might be doesn't really matter. What is the incentive to pay more to see the quote?
Unquote original version of that thing versus just a normal copy like I don't really care if I'm listening to the original song. I like I just want to hear the song. I like talk me through that piece of this because that's still not clicking for me.
It's important to note that owning. The original may not be for everyone. Like you said, you're totally fine. Just listening to the song but somewhere out there. There's a Super Fan who really wants to own the original like the sort of Infamous story of Martin shkreli buying the one of one Wu-Tang album
Million dollars that's one example. There's also the example of Art in museums anyone can go to the museum and see the painting for free or you can look at a postcard of the painting or look it up in an art book but someone wants to own the original painting. It's true that physical work is desirable because you can like put it up and on your wall or whatever but soon we're going to see experiences that allow you to Showcase your collection anywhere on the internet where you get attribution for being the owner so that little placard in the
IAM that shows here's the painting title. Here's the owner was contributed by so and so that's going to be everywhere on the internet. So there's social status involved in being the owner of a popular idea of a popular image video or song and I would argue that the value of an NF T is in fact directly correlated with the number of times the image the video the song has been shared. So the more viral it is the more value. There isn't owning the original and today I think empirically that's what has driven.
The markets for nft is to grow so quickly a platform for our Marketplace for sewing and of T is sold Nyan Cat which is a famous original internet meme for $600,000 because that idea is so borrowed such a court in part of the internet Consciousness. Someone wanted to be the owner of the canonical instance of it
may be a way of thinking about this is just that right now, I could be the biggest fan ever of a certain recording artist and my
My payment quote-unquote to them is kind of limited. Like I'm paying them the same per stream as anybody else's and maybe I go to a concert or two. So I'm paid them a bit more but it's potentially orders of magnitude more. It's very hard for that to be a thing. So what you're saying is for artists what this does is unlock the demand for them or their Creation in a way. That just hasn't been possible before
that's right. Yeah, and I sometimes refer to this idea as patronage plus so
And the internet today you can be a patron a Creator using something like patreon or sub stack where you're paying a subscription to support their work in a sense you're renting access to whatever they put behind that pay wall. What nft is do is they allow for the content that the Creator is making to be open to anyone but allow for patrons who really want to support their work to do so and this is the plus part of patronage plus do so with the benefit of
of potentially profiting in the future because when you buy an mft you actually own some digital property that can be transferred. You can't do that with your subscription to sub stack or patreon, but when you buy an FDA, you're buying digital property, even if you don't plan to resell there's this vague idea that maybe in the future someone else will want to buy this may be the Creator becomes more popular. I have one of their early works. So this plus is an incentive to become.
A patron in the first place. So I think a lot of the incentive to participate in nft marketplaces is that idea that one you can support the Creator's whose work you admire and that's no different from web to but there's a much stronger incentive to do so because you actually own something and you can benefit potentially from the resale of that ownership value.
It's really fascinating and it makes me think of this idea. I think the term you used is programmable media just an entirely New Concept kind of like programmable money or
You is one of the original blockchain Concepts but it made me think of this idea that so intrigued me which was let's say it's a visual artist that sells the painting part of the programming of that and ft could be that when the painting changes hands in the future the artist always gets some cut of the transaction. So even though they've given up their thing maybe it becomes hyper valuable. The artists themselves could potentially in a programmatic way be attached to the success or the popularity of that thing.
Talk through that concept and whether or not you find that to be key or
interesting today that exists on a lot of nft marketplaces where you can programmatically specify a royalty rate that goes back to the artist or even back to the original collector in any resale event that happens in the future and again because this is all specified as code. It's administered automatically by the blockchain on which then ft lives those are royalty streams that are flowing consistently back to whomever they
are do that's why I'm fundamentally new thing. We're in the Legacy Media world. You're very much dependent on all these third parties to collect a royalties for you and they all take a cut. So the artist is left with whatever fraction of the day. I think that's one early example of these assets taking on programmable utility for the Creator for The Collector, but you're going to see all kinds of new interesting ideas that people will program into these assets one very popular idea in
World of defy our decentralized finance is that every application every Marketplace whether it's exchanging tokens or borrowing and lending cryptocurrencies. These are open permissionless marketplaces that anyone can build on top of and this concept will be familiar to anyone who has around and early web to we had developers building on top of the Twitter API or building on top of the Facebook API those were platforms which had a lot of users and you if you wanted to get users for your app, you're going to go
on top of them. But of course as those companies need to monetize they shut off those apis in crypto and defy you can build on top of any Marketplace without fear of it getting shut down because these applications live on the blockchain and as a result we've seen what has come to be known as money Legos or developers stacking these building blocks on top of each other and as a result Innovation compounding really really quickly the same is going to happen with NF T. So if defy
Vacations are money Legos and I think NFP is are like media Legos where royalties are one new application. You can build on top of them, but another might be the ability to display your paintings or display your end of keys in a virtual world that some third-party developer bill. This is all going to move very quickly because any developer can permissionless Leary mix these assets and bring them into new context.
Do we do just like a quick sidebar on the actual technical thing that is going on here. So we haven't
Said aetherium yet. We haven't said the place where this is actually happening. You've mentioned some of the benefits especially permissionless building. We haven't mentioned any of the limitations file size or some of these things. So just walk us through like the literal technical thing that is happening here. How is an NF t quote unquote minted. What does that mean? Where does it live? Why is it secure etcetera
earlier? I said NF T is like a file that you upload to the ball chain now is an important opportunity to say that's not actually what's going on.
What's actually happening in most cases is you're taking what's called a hash of your file to Hash is a fingerprint of the file and that hash is just a string of 24 characters or so, and that's what lives on the blockchain so that's a very small piece of data. It's quite expensive to put data on chain that hash then points to the file somewhere else. Where is that? Well, it could live in a decentralized storage Network like are we've it's a boxing specific.
We built for file storage where you can look up the file based on its hash the nft on the blockchain is a pointer to the actual file which can live elsewhere. It can be replicated. Infinitely a good way to think about what's technically happening is you're creating a unique ID on the blockchain and by and large this has been happening on aetherium the ethereum blockchain and that unique ID is what is being bought sold traded unique ID is the token and
Unique ID has certain metadata hooked to it metadata could include who made it what it's about. You can put anything in there a good example of this is the first block in the Bitcoin blockchain Satoshi put some metadata in which was the headline Chancellor on the brink of bailout for bangs that's metadata in the first Bitcoin block. Similarly. You can put arbitrary metadata into the blockchain and associated with this unique ID. That is the file that you're uploading.
Jeez for veering into the technical here, but I just think interesting and important in the same way that with Bitcoin if you can demonstrate with your private key. I assume in this case that you own the public hash that is then pointed to the art you can sort of take the original art and confirm it somehow. How do you confirm that is the same way that it would work in Bitcoin and proof of
work. Yeah. Exactly. Right? What do you make a transaction in Bitcoin or etherium or any other cryptocurrency? What you're actually doing is you're signing a mess?
Edge with your keys and you're saying I approve this message. Please process it you send that message off to the blockchain and that message then gets put into a block and now you know, you have one less Bitcoin and I have one more and that transaction can be attributed back to you because your signatures on it your cryptographic signature the same is true of an mft when you meant an mft you're signing a message that says here's my file. Here's the hash of the file. It's mine. I'm signing it.
With Mikey and that lives on the blockchain for anyone else to see so it's very much like painters signing their work in the corner. You can verify its there's by looking up their signature and comparing if it's authentic that can now I'll be done Sir programmatically with cryptographic keys. So, of course that mandates that you know, the Creator's public address. So what you see happening often is as creators mint on these platforms they say this is my public key. You can verify that the work is truly mine in authentic.
How do you think
It will be for those that are the super fans or the super patrons even will call them that are going to be the ones delivering the most Direct Value from will call it the audience to the Creator. Where will the Creator's all themselves aggregate one of the beautiful things about all the big platforms out. There is that I can be pretty confident like if I'm interested in someone they're probably on Twitter or they're probably on one of these places. What will be the equivalent here for Discovery and how much will that then just be history repeating?
That the aggregator somehow ends up extracting a lot of the
value. It's a little too early to call but I'll offer some thoughts. So first off is it's important to come back to this idea touched on earlier where web to social platforms they bundle your identity with your media and the distribution and ft is undo that bundled so now the media lives on the blockchain and any developer can build an interface to that media on top a good analogy or good way to think about it is the blockchain is becoming this Universal.
Media library on top of which developers are building all kinds of new applications and services. So there are marketplaces like Open Sea for example looks at the blockchain and Aggregates all of the media and puts it up for sale eBay style and you can bid on any piece of media on the internet and then separate there's other marketplaces that are more focused on primary issue inside Foundation. That's where artists come to MIT their work and put it into the library and there's also Marketplace functionality to buy in.
well there as well but I think this idea of there being this Universal media library means that developers can build on top of this Universal media library and by default the creators are there what that means is that we're going to see a lot more experimentation around the types of social media experiences that we can play with right now Twitter is the only company that can play with the feed of content that we see on Twitter and likewise for Facebook and Instagram when you unbundle the content from the platform
One can sort of experiment with new ways to organize that information and new ways to present it new ways for us to consume it this question. Where are the creators going to be? They're going to be everywhere. I think the better question is where the consumer is going to be and I think what the answer may be that it's going to be a lot more fragmented. There's going to be a lot more competition for Consumer eyeballs and ultimately more competition for consumers is a really good thing for the internet.
This might just promote fragmentation and focus on niches. So someone's a huge NBA fan.
Shots plus the 10 other media and ftes that exist in that General space. Someone could just build a really interesting consumer experience on top of all of those things and deliver. Just something that could never be delivered on Twitter or something like that.
That's right. One other thing. I'll add to this is in the web to world. I think there's a lot of things that haven't been built because VC is wouldn't fund them because it's like well, hey if you're going to compete with Twitter you're going to get crushed and we're not going to fund that one other interesting property of crypto.
Sort of adjacent to what's happening within a PS is the ability to pool value very easily write like you can send value in the same way. You send an email what you're going to see is people funding the experiments or the experiences that they want around the media that they own there's going to be a I think a very long tail of consumer media applications built on top of this Universal media library and then appease because the funding for them to exist
will come from the people who want them to exist as opposed to having to come from VCS and critical to note. These may be very long tail and they may not be huge businesses, but they don't need to be so long as the people using them or members or patrons are happy to fund the operations that
cost if half of this is true, you have to think it's one of these friction reducing unlocks that tends to create an explosion of Behavioral call it what this sounds like is sort of the ultimate.
Scenario potentially for creators for artists with that in mind. I'm really curious to hear your thoughts on some of the most interesting things that you've seen very early on. Like I feel like probably three months ago. No one had heard of NF t s almost nobody now and really truly incredible Pace everyone's aware of these things all at once kind of like crypto and 2017 or something. So I just love to hear what experiments are versions of this have your attention most. Are you just thinking like wow is that?
Tavor interesting use of this
technology. There's so much happening. And so let me preface first by saying we're definitely in hype cycle for nft is right. This is classic Carlota Perez technology Financial Hub Cycles where the markets for these things have exploded really fast and there's going to be a correction that said the technology and the utility of this technology is very real and developers are going to keep developing it regardless of what the markets do. I'll start with that and in terms of interesting experiments. There's just been an explosion of them we
At variance under investors in a platform called Mirror which is a community on blogging platforms. It's think of like medium or sub stack but where the user is actually on the platform and what they've done is they've enabled writers to tokenize their essays as n FTS. There's a Twist which is they then enabled writers to crowdfund ownership of their essay as an N of T. So in effect say you want to see an investigative journalist piece done on some esoteric topic that nobody's covering in the mainstream media.
You can now crowdfund get people from all over the world to send some crypto into mirror, but about job to get the journalists to write the piece and in return for your patronage of making that work happen. You get a share of the nft that represents that piece. And again, what is the value in owning an essay? Well, imagine Marc Andreessen it's time to build this canonical sa someone might want to be the proud owner of that artifact of History. That's kind of interesting.
Is where you're marrying crowdfunding to NFP ownership and I think that concept will be generalized will go beyond just essays but potentially all kinds of media on the internet can be crowdfunded and where the crowd funders actually own a stake in the success of the work that's produced on the back of it. So again, it's like Kickstarter patreon, but with this cost being you actually own a piece of what you helped to create then outside of the world of Art and essays. There's Collectibles, right? There's Topshop which is doing two hundred million dollars.
Volume in the last 30 days and that's just taking basketball cards. I used to be a collector as a kid. So totally resonates with me and making them digital and by doing so making them a whole lot more engaging and interactive and again like because there's tons of experiences getting built around them people building fantasy leagues around the assets before collecting. So that's another category and there's also more crypto native versions of these Collectibles instead of the NBA. There's stuff like crypto punks which are
The first back in 2017. They were the first crypto collectible. These are little avatars which are limited in series and there's different types. Some are more valuable than others. There's crypto zombies, but essentially the behavior is you want to own a piece of the set of this limited edition collectible. So beanie babies but digital age. So here's another one. I talked to an artist manager friend of mine from the music is they just did a big drop on Nifty Gateway, which is where a lot of the hive.
Value artwork is selling but they recognize the fact that on Nifty Gateway where work is selling for hundreds of thousands of dollars. Not all their fans can participate what they did is they decided to Mint a series of Works. They sold some of the series and they took the others and they fractionalized ownership of them. So they took a non fungible one of one and turned it into fungible tokens. This is known in the finance world the securitization and then they gave the fractional ownership to the fans for free.
Gave it away and say hey now you own a piece of this work, which is interesting because it's a strong loyalty or alignment incentive in you now feel like you're part of the club another version of the same idea is people taking the list of nft owners, which is publicly accessible on the blockchain and saying hey if you own one of my nft S you can join a private group chat with me. So access to the Creator is another sort of interesting experiment. There's just so much happening in all of this is moving in a lightning clip. It's really hard for me to keep up.
Even though I'm knee-deep in
it. What about I'm going to call the category culture assets. I just think it's like a interesting way to put an umbrella over all essays art. Music Etc. What about culture assets which are physical the Mona Lisa 1980 Something fancy French wine valuable physical things which are created by artists. Let's call it. Is there a role for this technology mapping onto the physical world. Do you think
in the
Span of time. Absolutely. I don't think that's going to happen anytime soon reason being the physical world has endpoints that are not connected to the blockchain sure. You can tokenize a physical painting and say hey this token represents that physical painting and I can by that token from you. But how do I know with certainty that I am now the true owner of that painting there's still some connection to the physical world that has to be worked out and now you're in the world of lawyers and
Tional legal contracts there's this kind of dissonance between smart contracts and the idea that you can enforce rules as code. You can express ownership as code. There's dissonance between that and the way rules are enforced in the physical world, which is through the Legacy legal system in the full span of time. I think the Legacy legal system will come to interoperate with smart contracts on the blockchain. But right now that friction means the digital native world is just going to move out of
10x faster Pace than the physical world.
How do you think we'll see I'll call it Legacy Brands start to experiment here. So I was always fascinated by the artists and Fortnight that hosted concerts Travis Scott or whomever else are using this new place or new platform to meet their fans and do something valuable and I'm thinking here about luxury Brands Gucci or Chanel or something like this. How do you think we'll see?
See the old world players start to experiment with testing these Waters and have we seen that yet.
I was reading a headline this morning that Taco Bell minted a series of nft Collectibles be honest. I don't know the details beyond that headline, but they're definitely experimenting. We know that digital Goods not nft is but just digital Goods generally or multibillion-dollar Market Place in Virtual Worlds, like Fortnight robox and others and there are Legacy brands.
There were for example, you have fashion designers creating skins that you can put on your Fortnight character and so on. I think what we'll start to see I think these Brands will recognize if you give your customers true digital ownership where they can own digital Assets in the same way. They own a Gucci purse or a Gucci outfit that can be resold that there will be actually much more consumption that takes place because property rights are the foundation for a functioning market economy, right? We haven't had that in the web to world.
Your items that you buy in Fortnight can be taken away from you. And anytime you can't take them with you outside of fortnight and bring them somewhere else. Once these are start to realize hey, I bought this item now. I can bring it with me. I can reuse it somewhere else. I can wear it to any game that I want to be in or any virtual world. They're going to start to see a lot more value in digital items. And so the market will expand that's the functioning market economy growing. So I think Brands will lean into that because they realize they can make more money and I would zoom out to go beyond Brands and just say I think the
Is an N of T is are inevitable and will become the sort of port of entry for all internet media is because everyone involved can make more money the Creator's issuing the assets can make more money because it comes directly to them the patrons who are buying the assets of the customers buying the assets can make more money by reselling or they can realize more value through all the programmable utility that gets built around their assets and then developers who are building for prior to developers building for creators.
Or building for consumers can step into the flow of this growing market economy. So everyone involved makes more money and that's what draws this whole thing forward.
I want to make sure I understand exactly what you mean by Port of Entry. Can you just describe specifically what that means in this
context? We will get to a point where every photo you take on your iPhone enters the world as an mft every piece of media that's created will be registered on the box and to you as the Creator and that gives you an option on it.
Becoming socially valuable and as a result financially valuable in the future. That's what I mean is right now. We have files on our phone files on our computer and the future all files will be incepted on the blockchain as n of T is
I understand now, so if I post a photo on Twitter and post the same photo somewhere else rather than that order of operations, I would originate it somewhere or canonical and as a Nifty and then I would just use that in all the other
apps. Yeah. What I would say is it's probably be even more likely.
That Twitter and all social media platforms just integrate this functionality natively. So you don't have to think about where your minting as a separate action from posting is just the default and
how does this all fit into your concept of the ownership economy. It seems like entities is a really important piece of this kind of vision for the future. Can you just outline what you mean by the ownership economy? Sure. So the ownership
economy is this broader thesis that the next generation of Internet platforms are going to be built operated and
Owned by their users. This idea is what's at the core of the success of Bitcoin and etherium to date both of which are multi-billion dollar networks where there is no company. There's just independent users all over the world many of whom were developers and technologists who in the early days built the network operated it ran the mining Rigs and as a result earned an ownership stake in the network for doing so which was their incentive to build it in operate in the first place and that same economic.
Model is now starting to sort of cross the chasm from developers and technologists to Consumers and and if keys are really good example of this where now creators and collectors are their fans are realizing. Hey, I can own a piece of the internet value that I create. I can capture that value directly by sewing to my audience and you're starting to see the same idea of ownership as a keystone of new product experiences manifest in a number of other verticals as well. So a touched on
Earlier defy art there's a bunch of marketplaces uni, swap is a good example of an exchange that's very similar to coinbase. But the business model is take a fee on transactions just like coinbase, but what's different about uni swab is what's done with that fee instead of it going to shareholders. The fee is distributed directly to the users who put liquidity into the marketplace and bootstrap the network effects of the platform, which again is a very strong incentive.
I-i've for users to join and help grow the platform the ownership economy. Thesis is that platforms that are built operated and owned by their users can grow to be much bigger much faster than their institutionally owned counterparts and this is uniquely unlocked by the fact that crypto tokens enable us to distribute the value of ownership in the same way. We distribute information, which is instantly to anyone anywhere in the world. So that's what's happening with NF dies and it's what's happening.
At the very foundation of the internet products and services we use everyday.
So we all need to go back and study Jack Bogle and Vanguard again because he had this right very early on effectively. The company was owned by its investors that created a very specific kind of outcome. That's very very different from any other asset management firm.
That's totally right. I think the analog here are cooperatives and mutual's there have been tons of challenges with each of them and very few major success stories. Visa is another one that's little-known started as a sort of
Member owned Cooperative. But yeah the benefit of smart contracts as you can now scale these things up without the cumbersome overhead of having to correlate a zillion members in it Legacy institution like a Vanguard.
What about and if he's have we not covered that you think is important for people to understand.
Do you want to come back to the hype cycle thing because it is going to end soon and by the time this episode airs, who knows where we'll be. I think there's going to be a market correction and there's going to be a lot of people saying I told you those
Has NF keys were stupid who wants to own a digital asset when I can just copy paste the original. So I think really important to stress the idea that we've seen Market cycles and crypto number of times now after big run-up in prices, there's always a correction and there's always naysayers Who come out of the woodwork saying I told you that was dumb, but what you see if you stay in the space long enough is that the technology just gets better and better and better. There's sort of a Moore's Law going on with crypto technology and that goes for enough to use to these markets cycle.
Are good in that they drive sticky fundamentals developers keep getting into the space. The technology keeps getting better and the result is more experiences more competition for consumers. I guess just reiterating the idea here that while we're in the thick of a bull run for an FTS and there will be a correction this technology is here to stay and I think it's going to happen fairly quickly because the incentives for people to participate are there and directly economic
glad you pointed out in that way like you look at some of these things and I think
A lot of crypto people love to speculate and they love to trade when frictions to do. Those things are very low. You see a lot of activity and hype Cycles like what we've seen and there's a reason I haven't talked at all in this conversation about investing returns or anything like that associated with these things, but rather just the deeper fundamental interesting features that they bring to bear. I'd love to close with a trio of questions on an FTS assuming we're going to do at the end of a lot of these the first being a lesson for investors a lesson for Builders and
A resource to go read more you're an investor to how does this make you change your view of the world and where you might find return etcetera
a lesson for investors is we are entering a paradigm shift where everyone is an investor used to have to be a public market expert to really have an edge on the stock market now everyday people using social media platforms can have an edge in investing because they're closest to what's going to go viral and where the value is on social media. So everyone is becoming an
investor thanks to crypto where again you can now send value and transact value in the same way. You transact or send emails. Everyone is going to become an investor and if keys are demonstrating That Wall Street bets is demonstrating it outside of crypto. And this technology is just going to accelerate
it and how about for Builders out there? So you've mentioned developers number of times their key part of this ecosystem for sure Krypto broadly speaking software broadly speaking and ft specifically, what do you think? The one big lesson here is for Builders out there?
the one I'll take away is NF keys are not a new idea for anyone who's been in the space for a hot minute since 2017 or back when I started media chain my company in 2014 the same idea as we're being explored then I think the lesson here is stick with it because this stuff can happen in the flash of a pan and suddenly the whole world knows and cares about in ft's if you were there from the get-go and stuck with it, you're seeing a lot of the benefits of
that if someone out there is super interested in this topic and they want to listen read
watch learn more. Is there a resource that you think is especially beneficial to go straight from this conversation to continue learning.
There are number of nfte thought pieces out there. There have been thousands of them written over the last couple of weeks. I will shamelessly call out one that I wrote which is titled and of keys make the internet ownable and it's all about why crypto media is becoming the quote port of entry for all internet media. I think Chris Dixon also wrote a really great post a primer on a Nifty is where he goes into some of the details of the market dynamics and where
That might go and then there's another really good primer by Linda Shea which is also published on mirror the decentralized blogging platform. I mentioned earlier and that gives a sort of detailed view of a lot of the different categories of NF keys that are out there right now.
Awesome. Well Jesse, this has been incredibly informative. I'm leaving the conversation with models for thinking about this that are much more clear that I came in with which was the goal. I really appreciate your time. Thanks for breaking down entities with us.
Thanks so much for having me on this
phone.
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