Culture Meets Crypto #1 Josie Bellini, NDURE is the New FAANG, Yon Raz-Fridman's Awesome Podcast, & NFT.NYC 2022 - What We Are Talking about Today
Bits of Signum 6.23.22
Starting this morning at 830am ET, we are excited to Emcee the Gaming track at NFT.NYC 2022! This post is a summary of the key themes and topics that we will be discussing during the day and in our presentation. At the end of the week, we will send a follow up - What We Learned at NFT.NYC!
Also, congratulations are in order - Josie Bellini and her project CyberBrokers has just won an important award - Best Use of Emerging Technology. Fortuitously, we interviewed Josie in our first episode of Culture Meets Crypto with Signum Growth, which was out earlier this week! We truly loved everything about our interview with Josie. We had an unexpectedly deep conversation, maybe because we already knew each other, or maybe because we are mourning the loss of Alotta Money, who was incredibly influential to both of us. Many points that Josie made are in line with our thesis that creating real spaces, games, and content takes time, and the ones that will last will not include an up-front money making event. CyberBrokers is so exciting—Josie describes it as a “gamified IP brand,” and the art is actually being stored on-chain in custom contracts. The Cyberbrokers’ quests and lore are attracting a more tightly-knit community than we have seen before. Community members are not required to purchase anything at all, and the content is incredibly complicated and engaging (with an English narrator as a bonus!).
Also last week, I spoke with Supersocial’s Yon Raz-Fridman on his podcast, Into the Metaverse podcast, and it was one of those conversations that made me think for quite a while after it ended. We often talk about Web2 as the “zero sum game” mentality companies that will be replaced by an ethos of many stakeholders. Yon’s response, detailed below, was incredibly thought provoking and laid out the case for “stakeholder capitalism.” Many thanks Yon—we highly encourage tuning in - ironically the title of his show Into the Metaverse has been the exact title on Signum Growth Capital’s website for many years.
On Yon’s show, we discussed the idea that we have been wondering if the old FAANG will be completely unseated as we think more about new, disruptive business models in Web3. When we hear people mention the potential for Web2 to lose share to Web3, this doesn’t simply mean new internet infrastructure. Web3 is becoming a mainstream, catch-all phrase for a new set of business models. It might be hard for incumbents to see this coming because it is the youngest generation who is voting with their feet. As mainstream billionaire, Paul Tudor Jones, said recently, “the smartest and brightest minds fresh out of college are coming into Web3.” The idea that crystallized in Yon’s podcast is that a new group of companies, which embody this ethos, could dominate new business models and attract the best talent.
So who has the best shot of replacing FAANG? While this could change, right now we believe the best-positioned first challengers will be Discord, Unity, Roblox and Epic Games. It dawned on me that the first letters of Discord, Unity, Roblox and Epic together spell DURE, which means lasting. We haven’t yet done enough work on Nvidia, but the Omniverse product suite looks like an incredibly useful set of tools. Conveniently, if one adds an N to the acronym, it spells NDURE! Will NDURE be the new FAANG?
What We Will Talk About Today at NFT.NYC 2022
A lot has transpired since we spoke on the panel at the inaugural event in February 2019. The below is an attempt to encapsulate some of the key points we intend to make in our presentation, many of which were made on Yon’s show. We were also lucky to hose an exciting brainstorm with John Linden, CEO of Mythical, along with many others in the NFT & gaming spaces - AsyncArt, Blockade Games, MyNFT, Pixelynx, Ready Player Me, SmartSeal, ERC-721 Lead Author William Entriken, and esports company FaZe Clan, who just received a ground-breaking SEC approval of their SPAC merger, making FaZe the first major publicly traded esports company!
The first NFT.NYC conference lured attendees with rumblings that over 150 exciting NFT projects would attend. Last year, there were over 600 speakers, over 5000 attendees, and the conference included people like “Beeple,” the first artist to garner Christie’s and Sotheby’s-like prices when his ‘Everydays’ NFT sold for $69 million. This year, 15,000 people are here to attend NFT.NYC, and over 1500 are presenting!
Where is the Metaverse?
At SGC, we say, “We were Zoomed into the Metaverse by COVID.” It is really the first widely-used application that provides a metaverse experience. If we had to define it, we would say it is the Human, Multi-Sensory, Understanding of Authenticity. The reason multi-sensory is so important is because when we have multiple senses going at the same time, our brain tricks us into thinking that the experience is real.
The Bear is Back
Despite the growing number of attendees at NFT.NYC, we are in a bear market for crypto (along with seemingly everything else). Against that backdrop and to make matters worse, we have seen a lot of NFT projects go completely off-piste from our original thesis on the positive impact they could have on future innovation in gaming and in building the metaverse(s). In this initial experimentation phase, we admit that we have seen way too many money grabs, scams and frauds, as the CEO of Discord articulated when asked if he would be entering the space (answer - no, not yet.). Are we giving up? Absolutely not. During bear markets, the noise dies down and the builders remain—we will stay firmly put in the trenches, with a goal of helping entrepreneurs, developers and artists (key theme: developers and artists to the front of the line!).
Gaming is the Trojan Horse to the Metaverse
We continue to believe that gaming is the trojan horse to the metaverse(s) because gaming backdrops, and the game developers, 3D artists, and game engines that are used to construct them, are a natural starting point for beautiful, graphically-intense, online neighborhoods. Thank you, Tim Sweeney, for inspiring us on this point five or six years ago.
Decentralization Matters
On the topic of Web3, after joining the Web3 Foundation as an Advisor in 2019, our conviction that Polkadot will play a key role in building the next generation of the internet, or Web 3.0 as articulated by Dr. Gavin Wood in 2016, has only increased. This is despite the fact that it is often criticized for a “lack of marketing” —we agree and that’s ok. Again, we believe that the noise, which can be described as multi-layer marketing schemes, organized by a trifecta of market makers, entrepreneurs and their investors, will dissipate and the builders will remain. According to Electric Capital, the Polkadot developer ecosystem was the 2nd largest behind Ethereum in 2021, and it grew 60% YoY.
Interestingly, it seems like the concept of decentralization has become less important to people as the market becomes more drunk with money. As we navigate this bear market, our hope is that people will get back to the basics and focus on building the hard way. There is a very common triangle (“the blockchain trilemma”) which is labeled with “Decentralization”, “Security” and “Scalability,” and the current narrative is that one can only achieve two of these. Another Polkadot mantra that resonates with us: “Decentralization and security are not optional in the search for scalability.”
The Four Year Anniversary of the ERC-721 Standard
On the topic of ‘back-to-basics’ developers, we remember quite vividly our discussion with William Entriken, the lead author of the ERC-721 standard, in 2019. William shared our vision for gaming as a use case—people had been buying, selling and trading digital assets in games for decades. The initial idea back then was that players would want provable ownership as they spent more time in online spaces that would look increasingly like homes, neighborhoods and places to have shared experiences. See my ten year old daughter Seraphina’s dress station in Roblox - it is a place to hang out with friends, swap fashion ideas and “buy” each other’s creations. We were lucky to have William join our brainstorm on Web3 + Gaming earlier this week and we look forward to hosting him on an episode of Culture Meets Crypto!
Advertising is a Human Conflict of Interest
One of the key reasons we are passionate about Web3 is because Web2 is powered by advertising, comprising the bulk of the Facebook, Google, Twitter and other social media revenues. Advertising is a human conflict of interest between consumers and producers of content because it is an unnatural barrier between me and what I want to consume. We shouldn’t be surprised when “fake news” becomes prevalent when the current model is based on advertising, which is meant to convince, obfuscate, and change views. The vision for Web3 is to solve this problem by providing transparency; we won’t need to trust that the information is correct because we will have transparency on where information comes from, who the sources are, and what their biases are. We were very excited to see Frank McCourt’s announcement of Project Liberty, in which he committed $100 million to attack the existing structure of social media due data privacy and manipulation. It was described as an open-source, publicly owned infrastructure called the Decentralized Social Networking Protocol (DSNP) to center the internet around people instead of giant data-harvesting platforms, and it will be built on Polkadot.
NFTs as a New Window for Brands
Regarding brands, it continues to confound us that, year after year, roughly 160 billion dollars are thrown through TV screens in the form of advertising, only to land in empty living rooms. Gamers, meanwhile, have done a pretty good job of sending the message: “keep your ad dollars out of my games!” In Mythical’s groundbreaking collab between the Blankos game and luxury brand Burberry, a character called “Sharky” embodied the Burberry brand as a shark wearing Burberry pool shoes and floaties. The accessories and the shark itself were very popular among players, and sold out in 22 seconds. It is a very different experience because it allows players to build identity and social capital in the same way that luxury brands achieve this in the analog world. Importantly, what this is not is also important - it is not about bringing in products that already exist in the real world, but more about allowing players to own the look, feel and spirit of the brand as part of their social identity.
This week, Mythical and Burberry announced the next character which will embody the brand-
NFTs Create Proximity between Creators and their Fans
The idea of NFTs has expanded dramatically over the last couple of years as people started to understand that they represent not only real ownership of online assets, but multidimensional ownership. This refers to their ability to morph over time, unlocking new experiences and giving them a living, surprise-and-delight quality. They might even unlock opportunities to interact directly with creators, bringing them closer to their fans in new and authentic ways. We refer to it as multi-dimensional ownership. In our podcast with Yon Raz-Fridman, he mentioned that the NFT is valuable not as a static asset, but as a living organism with infinite possibilities.
Which brings us to Yon Raz-Fridman’s thoughts on on Stakeholder Capitalism
As mentioned, we joined Yon’s podcast last week and the conversation was wonderful! On this topic of brands, Yon commented that they can stop looking at communities as customers who need to purchase more and more of our items. Rather, brands can start thinking about consumers as proactive contributors to the value of the brand because consumers can co-create things that the brand may have not thought of itself. Again, this goes back to the idea that we discuss a lot, which is that it would serve companies and brands greatly to stop thinking about “leveraging” their users or extracting value from them. Instead, think about integrating them to the value creation and then recognize them for that value creation.
In response to my comments about leaving the world of the zero-sum-game, Yon referred to the idea of stakeholder capitalism. The idea goes back more than 50 years and was discussed in 1971 by Klaus Schwab, World Economic Forum Founder. He then authored a book alongside Peter Vanham called Stakeholder Capitalism: A Global Economy that Works for Progress, People and Planet. It is a form of capitalism in which companies do not only optimize short-term profits but aim to create long term value for all of their stakeholders and society at large.
Yon wondered if the promise of interoperability would change our ideas around platforms - in short, he challenges the idea of one category or platform winner. A world in which assets can roam freely from one platform to another may diminish the value proposition of owning all the data in a closed platform. The idea prompts an important question - how do we value companies? How does the concept of Enterprise Value change when you are not selling eyeballs to advertisers? This new Web3 way of creating value will introduce new business models.
Signum Growth Capital was started after a 20 year history in public equity markets so we have been thinking about this concept a lot. As Yon said, when we think about companies going public, what does that even mean anymore? What is the exit? A growing response to this question has been “exit to the community” - the community generates the value and therefore should garner the value. There are so many new business models that we can imagine in a world of stakeholder capitalism.