A Sober, Bullish Conversation on NFTs w/ Matt Silverman

**Speaker A:** Hello and welcome back to the Strange Water Podcast. Thank you for joining us. I'm going to be honest with you here. I am pretty skeptical about NFTs. I can list off a few reasons, but my biggest issue is that if there's anything real here, it's covered up by an almost insurmountable amount of scams, toxicity, and just predatory behavior. For me, it's pretty tempting to just write off the entire space. And yet, as much as the temptation is there, my boundless optimism for blockchain won't allow me to ignore a technology primitive as fundamental as the NFT. We have already seen NFTs unlock new ideas, features and communities, and we're still in the opening act. More the real world that we all live in is not a fungible world. Most of the things that we care about are not interchangeable. But the real reason I can't ignore NFTs is because some of the people that I consider the most level headed and wise have gravitated exclusively towards NFTs. People like today's guest, my friend Matt Silverman. Matt and I met in the Bankless Discord sometime in the last couple of years. He has been my go to guy on all things NFTs. What's interesting, what's a scam, what's coming. I am so grateful to be able to share one of these conversations with you, a sober but very bullish reflection on non fungible tokens. One more thing before we begin. Please do not take financial advice from this or any other podcast. Ethereum will change the world, but you can easily lose all of your money between now and then, especially in the realm of NFTs. All right, let's get the conversation started. Matt, thank you so much for joining us. Welcome to the podcast. **Speaker B:** Yeah, thanks so much for having me. Appreciate it. **Speaker A:** Cool. So before we get started, would just love to kind of get the basics of your background and kind of the 0 to 60 on Matt, who've never heard of defi or crypto or NFTs before, into getting involved in the space. **Speaker B:** I guess when I first got into crypto it was like just hearing about bitcoin but not understanding it and I ended up always interested in entrepreneurial schemes. So I ordered one of those ASIC miners from Butterfly Lab. They were shut down and like we had it mining in my brother's dorm room. It earned like a full bitcoin which we promptly sold at $800 to pay off the ASIC. And I think you know, for most people when you have a story like that like when you sold too early, like the earlier you had that happen, the sooner you learned it benefited. And that was definitely the case for me. So that was like 2013 or something. And then fast forward to like, you know, a few years later, I started just buying some eth. I didn't really understand what smart contracts were, but I knew it was like different than Bitcoin. And that was interesting to me to like have like almost like a Internet, so to speak, built upon crypto. So yeah, as we got closer, like 2018 or 20, 2017, I had this ETH and I believe it was, I want to say 2017 that I discovered CryptoKitties. Again, not really understand what NFTs were, but I knew it was. You could. It felt different because you like purchase this thing and it was in your, you know, in the Metamask plugin or whatever plugin I was using at the time. But it like, it just felt different than like it wasn't like using a regular website where you just sign up with an account and you have this thing. Like it existed outside of just the website. And that even though I didn't understand what it was, it felt different. And it brought back a little of that nostalgia for me of like collecting pogs or stamps or whatever, you know, coins as a kid. Just like something you could feel you could have it and it had some value. So then that was the pause of NFTs for me for a few years. I started just becoming interested in defi. Like it had some Ethan. There's all sorts of schemes going around. So, you know, started messing with decentralized exchanges and, you know, this concept of being able to trade ETH into other things without with them just like with the decentralized exchange, just knowing your public wallet address. I mean, the concept was so insane to me. You don't sign up for an account how you could deposit ETH into AAVE and then borrow stablecoins against it. So it's like a decentralized bank. And all this stuff just like got me super interested. This is probably beginning of 2020 or 2021. Polygon. Yeah, when Polygon was kind of just kicking off. And so I was able to try out AAVE with Polygon and not worry about the gas fees and stuff. So that's how I kind of got into defi. And yeah, and then it was early 2021 when I started listening to like the Proof Pod. I mean I had been listening to all the proof. Kevin. Kevin Rose's Modern Finance Podcast we'll take a Pause here. **Speaker A:** Because like that at this point of this story is like when, you know, at least when I met you, but too I think like your passion really morphed into seeing NFTs as like something that. So anyway, but one, I just wanted to say that like I. Everything you're saying resonated with, resonates with me. Except for, you know, as you know, I'm on a much more recent time frame. But it was that. It was that same thing to me as well. The decentralized exchanges and like, you know, I. This deep into the, the cycle or the narrative or whatever, it's like, it's just so basic that we like lose sight of that. But like, at the end of the day, like I even started caring about what Ethereum is because Hayden, I heard Hayden Adams explain Uniswap on a podcast and it was just this idea of like, like this is different. Exactly what you're saying, like, this is different. And like, I'm not even understand if I really think that like we need to be able to trade all these like long tail assets into the future. But like it's different that there's an option there. And so, you know, I think as we've discussed, like the, a lot of the, the bulk of this podcast is going to be talking about like what I don't understand about NFTs and like what everyone like, should, how they should like kind of reframe how they think of them. But it is like so funny to hear that no matter like where we stand in our careers right now, it was like the same things that got us excited and bought in. **Speaker B:** Yeah, totally. I mean, it's wild. **Speaker A:** Yeah. Yeah. So anyway, okay, so you're. Now we're in like the, you know, like Defi Summer kind of late Defi Summer in NFT world. And like, I know for you like a huge kind of like catalyst or like turning point or something was like your introduction to Kevin Rose into the Kevin Rose universe. And so can you tell the audience like a little bit about one, who, who Kevin Rose and proof is two, like what, how you, how they just caught your eye and like why you knew that was something you needed to be around. And then most importantly, like, why are you so energized by it? **Speaker B:** For sure. Yeah. So Kevin Rose, let's see. I mean, he started digg.com back in the dot com boom time or somewhere around then and that was shortly right before Reddit. And so I kind of, I knew of him from back then because, you know, he's A young tech guy got famous for doing Digg. And then I just kind of followed him ever since on probably Twitter and Instagram. And then he started doing podcasts and I started listening to them. I think he called it Modern. First it was Kevin Rose podcast and then he did Modern Finance. And I just like loved the way he interviewed and just the way he thought. And so I just was a fan and just started listening to all of his stuff. And fast forward to, I want to say this was 2020 was probably when he started Modern Finance. And then eventually as he got more and more into crypto and NFTs, he started the Proof podcast which focused exclusively on, you know, NFTs. And he announced the Proof Collective on, on the podcast kind of months before it actually launched. I believe it was December, I want to say December of 2021 when proof launch. It might be mixing up the years. Crypto is all such a blur, but. And so he, you know, it was like a Dutch auction from 5 ETH down until it sold out. And I knew I had to get it. So I had like MetaMask loaded up with 5 ETH that day. I kept watching it and then it minted out between 1.25 ETH and 1 ETH and I like rushed on OpenSea and bought it. But I just knew, you know, I'd looked, looked up to him and all of his kind of NFT thoughts and so I had to be part of that group. **Speaker A:** So, you know, the Proof Collective. Right. Like just like to put it really simply from an outsider, it is just like like a group of people that are like really, really passionate about NFTs at this price point, but like really passionate about NFTs and have just decided to like congregate together. Right. And I guess, let me take a step back and can you describe like what is the Proof Collective and like what is it more than just like a group of people that have agreed to like trade NFTs, like kind of in concert? **Speaker B:** Yeah, well, I think it's definitely evolved since where it started. I think where it started was there wasn't much of a promise and it was literally from the get go, a three year membership club that you, you know, buy as if you own the nft. You can go to these events and all sorts of other token gated things, but nothing else was really promised. It was all just an experiment. Over time it's evolved to more art focused NFT collectors. So generative art, photography, all that stuff. Yeah, at the time it was really just people are interested in collecting NFTs and fans of Kevin Rose and the team he was building. **Speaker A:** And then. So for all of you who thinks you don't know what the Proof Collective or Kevin Rose is, like, the most famous thing that came out of this is Moonbirds. Right? And. **Speaker B:** Yeah, right. **Speaker A:** Or maybe most famous is a, is a tall, tall bar to clear. **Speaker B:** Yeah, no, I mean, definitely. I think that was probably made the most outside of pure art collecting. That definitely made the most headlines for sure. **Speaker A:** And so, again, like, outside of pure art collecting, you know, I think, like, what was interesting about Moonbirds when they, like, first hit the scene was it seemed like it was like moving from just NFTs as PFPs into, like, NFTs as PSPs, but as something that are, like, dynamic and grow with you. And, you know, I, I would love to kind of hear your feedback on, like, what, what the promise was and, you know, how they've delivered, but I think, like, more holistically first, like, when you think of what's exciting about NFTs, are you, like, more excited about, like, looking how we can combine art and like, smart contracts and programming a la Moonbirds, or are you much more, like, bullish on how, you know, like, your, your fidenza is like, represented as an nft? **Speaker B:** I mean, so I wasn't interested in, in collecting anything of any high value before NFTs. I mean, like, as a kid I collected basketball cards, but, like, keeping track of the values. And then if you ever actually wanted to get liquidity and sell it, you know, it's just like, it was totally crazy. So I didn't get into that until I realized that NFTs kind of unlock and solve this key problem of collecting any digital good, which is being able to trust. You don't have to worry about a third party authenticating something. You just know that it's legitimate because of how the blockchain works. And then also having just the ability to get liquidity instantly is also insane. So that trustless, decentralized marketplaces like OpenSea allow you to sell or buy from someone that you've never met. You don't have to trust that they can't rip you off because everything is there and verified. **Speaker A:** So with the caveat that, like, you need to have been around the block and have some experience. Like, right now, you and I could go list like bored apes that look exactly the same and like, oh, totally. But, but point taken. **Speaker B:** Yeah, I mean, yeah, the user experience is a long ways away from being widely adopted, so that's a whole separate story. But yes, so I was able, you know, kind of just get over that hurdle and yeah, so to me then all of a sudden it made digital art much more interesting. Both like standard digital created in Photoshop for example, or glitch art or generative art where the artist is actually a coder writing scripts and not using a digital brush or anything because NFTs allow you to actually prove the scarcity of that. And it's not just a metadata from a computer that's saying when it was created that anyone could fake. **Speaker A:** And in this, how should I phrase this? In this kind of unnuanced take of NFTs where, look, bottom line, let me just zoom to. The question is how do you respond to people that say NFTs? I can just right click and save as. How can you say that any of this means anything? **Speaker B:** Yeah, I mean I think that that's a common kind of meme as people kind of start to wrap their heads around what NFTs are. I think almost everyone who's ever gone into NFTs first had that same thought and they kind of eventually passed in. It's, it's, I think it's, it's common. But the simple analogy is, you know, you see a painting in a museum, you don't just take a photo of it and then say why would I ever buy a painting? Like maybe many people wouldn't buy fine art but like it had, it's worth what people are willing to pay for it. It's no different with NFTs. Like so I just think that that probably takes some time for, for folks to, to get used to that, the right click save aspect of it. **Speaker A:** Yeah. And I honestly, like, I just think it's like just like a real mid curve take. Right? **Speaker B:** Yeah. I'd say the more reasonable take is NFTs are a scam. I think that there's a lot of people who feel that way, that they're not necessarily wrong. I think so that, that was definitely. **Speaker A:** That's interesting. Like what do you mean? Like in what way are they a scam outside of like the people that are actually running scams? **Speaker B:** Well, I think it's more like that because first of all, I mean people are generally avoidant of I think, new technology that they don't understand. So when they hear about NFTs and they hear about all these scams, they just associate NFTs in general with being a scam. And I think that's a really common take for people who don't collect them and it's unfortunately, due to just human nature. I mean, if there is a way to scam people out of money, some people will take advantage of it. And there's been plenty of that with NFTs. A lot of bad stuff that naturally I think just has to. The market has to go through that to get stronger. **Speaker A:** Yeah, and then you, like, then we need to start to address the wild gray area in the middle. One example off the top of my head is the Goblin Town thing, right? And I guess just like for posterity, I will explain that like Goblin Town was just this like ridiculously stupid NFT product project that came out of nowhere and like took crypto Twitter by storm. And then my understanding was that like six months later, after we'd all even forgotten that this happened, like, someone went and basically like changed the underlying photo to be. I don't know if it was like grotesque or gruesome or just like unrelated to the original thing. But like, Matt, you might have some more background on that, but bottom line is it begs the question of, well, was that a problem? **Speaker B:** Yeah, well, I don't know specifically, maybe. I vaguely heard about some sort of thing like that, like maybe unplanned metadata change. But Goblin Town is by this company called Truth Labs, I believe. I think all the intentions with that are a fully legitimate project and I think they're still working on stuff and doing stuff. But let's say if something did happen with the metadata, I mean, at the end of the NFT itself is just a token, right? And it has metadata associated with it that has an image. The best way to kind of secure that image is using decentralized metadata like IPFS or arweave. So your actual image is stored on chain and it can't be changed. And so that's like kind of probably the, to some extent, maybe the holy grail of like how you can store images and attach them to NFTs. But some, some providers use like an Amazon S3 link or whatever and that could be changed. So like, at the end of the day though, it doesn't really matter. It's. When you buy an nft, it's only as strong as the person who has or company who has created it. So regardless of if it's centralized metadata or not, like you're buying it because you, or you should be buying it because you trust who has created it and you trust that they are going to do something interesting or keep supporting it or whatever. Um, and most of the people who've lost money bought it for other reasons, like they just were speculating and wanted to make money and they didn't do research on the crater. **Speaker A:** Well, it's interesting. How do you reconcile, like, being so passionate about this space? Exactly. Because, like, we're creating a space that is predicated on you don't have to trust anyone. And yet, like, your specific niche within it is like, yes, the technology means you don't have to trust anyone, but the value is, like, entirely based on that very squishy trust. Yeah. **Speaker B:** I think where it gets to be nuanced is I think once a project or artwork, whatever, has kind of proven itself or made it, so to speak, that's when you're no longer necessarily reliant on the original creator. It has a life of its own. So examples would be cryptopunks. Larva Labs no longer is doing anything related to them. They sold it to Yuga Labs or whatever. But Yuga Labs could also do nothing related to cryptopunks. And they still have this provenance and historical value that people will always value to some decently high degree. Same with artwork. You know, like the fideza. Like, Tyler Hobbs could stop producing or produce a bunch of stuff, but there's still some unique value to what has been created. You can't ever go back in time and create more before it. But there's a lot of stuff in between there that's kind of on the fringe, that is really dependent on output from the current creators. A lot of the PFP groups right now are in that boat where, you know, it's just a totally different story. And. And so I think that's where, like, once it has a certain. Has crossed a certain chasm. That's when the trustlessness of the network has a huge value. **Speaker A:** Yeah, that's interesting, that. Yeah, and it's really interesting to think about, like, cryptopunks specifically. I mean, one, like, they're the biggest in the OG and whatever. But two, it just, like, it does kind of work where, like, it was created by one entity, a community formed around that and gave it this, like, massive, massive valuation. And then they sold the ip. And like, we all have to ask ourselves, like, well, what does that mean? **Speaker B:** Yeah, I mean, I think. I don't know that. I can't. I don't recall the specifics. I think with punks, the IP is like, the owner of the token still retains a right to use the ip, if that's my understanding. **Speaker A:** But. **Speaker B:** But that IP is a whole separate can of worms. But, yeah, no, it is. I mean, it's very different. **Speaker A:** Yeah, I think like, once we start actually talking about legal stuff, that, that is like a can of worms. But I guess what I'm like specifically referring to is like, the value of this community is supposed to be expressed through the tokens. So what does it mean that you, like, theoretically you could even sell the ip? **Speaker B:** Like, what is the value of being able to sell the ip? **Speaker A:** I guess, like, what did, what did Yuga Labs buy? **Speaker B:** So, yeah, I mean, with crypto punks, I guess it's, it's the. I mean, it's the right to create derivatives of it officially. You know, so, like, it. If they wanted to make merchandise or cartoons or, you know, stories, anything, only they could do that because they own the official IP and then the holders, you know, have that, like, what is it? Like revocable or license or whatever. But yeah, I mean, it's, it's not dissimilar to any major brand like a Disney or something, like in how they have their characters and they could sell the IP of those characters to another company. It's then on the other company to figure out how to then. **Speaker A:** Yeah, Well, I think the distinction here, though is that, like, if Disney sells the rights to Lion King, right? Like, there isn't also this associated claim of, like, everyone, every consumer who's watched Lion King also is supposed to, like, own, like, have the financial value of Lion King. **Speaker B:** I mean, so, yeah, what you're touching on there is definitely something I put a lot of thought into, which is that most NFT companies probably should need to recognize the NFTs they've issued as a liability and not as like an asset by any means, because literally you have an army of, you know, thousands of people are expecting something from you and it's not reflected at all in your company's financials. So, like, that's a whole, you know, interesting discussion, I think, is, is how that works from a corporate standpoint. **Speaker A:** Yeah. Well, so how does it work today? Like, you know, not picking on anyone specific, but, like, what's your understanding of what the average case is? Is that, like, when, as an NFT project, I mint like a thousand tokens to my internal treasury, I call those assets and then I sell them out into the market. **Speaker B:** I don't, to my understanding, in most cases, like, they're not actually necessarily taking possession of them because it's like the contract is minting them. **Speaker A:** Yeah. **Speaker B:** But what I do know from understanding, at least for US tax law, is that NFTs are an incredibly inefficient way of raising capital because you're Literally, like it's taxable earnings for you as the company when you sell them. So if you sell a million dollars worth of. You mint a million dollars worth of NFTs, you're paying whatever, 30, 40% of that to the government that year in taxes. And it doesn't work the same way. If you're raising money as a company, you don't recognize the money you're raising in equity as income. And so it's very inefficient way to raise capital for a company. **Speaker A:** Now and wait, just to be clear what we're talking about again, not picking on anyone, but just Yuga Labs every time they issue a new nft, they should be recognizing and assuming they're domiciled in the US or whatever, but they should. **Speaker B:** The mint cost. Yes. So I think for bored apes, the mint cost was very low. I don't remember what it was, but it's some very small amount. So it was probably inconsequential there. But then secondary, whatever. The royalties, that's all taxable income. But a lot of NFTs, projects that were created when royalties were still the dorm are now completely having to find a different business model because you can't depend on those. **Speaker A:** Yeah, well, actually, thank you for the segue. So one of the things that, like, I do think is, like, particularly interesting in the NFT world is like this whole conversation around royalties. And like, there are two separate conversations, which is like, what is just. And like, whatever, like, we can have that conversation. I think, like, everyone roughly thinks the same thing, unless, like, you're super radical about like, you know, the free transfer of information or whatever. But the, the other conversation is about what the technology, like, is capable of enforcing. And I remember when Blur first came out, there was like, so much just like, about like, okay, like, can you enforce it on a smart contract level? And like, okay, basically, like every time you build a mousetrap, like the, you know, it's just a game of cat and mouse and that kind of thing. **Speaker B:** And so race to the bottom. **Speaker A:** Yeah, yeah. And so I guess, do you have any thoughts on, like, what commission, like, means for nft and like, more importantly, like, what. What is the world that we should be working towards? And does that, like, sit in the social layer or in the smart contract layer? **Speaker B:** So, I mean, I didn't understand this when I first got into NFTs. I just thought the royalty was. You couldn't get around it. And so that's something I've definitely had to completely come to grips with. Changing entirely how I thought about it. So to my understanding, there's no technical way to force royalties because if you could do that, then you would also be restricting valid transfers of an NFT from the person's own wallet to another wallet they own or whatever. So to my understanding, there's no technical way to do it. I could be wrong. So let's assume that there is no technical way to enforce it. I think the only answer today is that it has to be on the creator to first of all they have to know and acknowledge that they can't restrict the sale of it to certain places. In the long term there are always going to be ways to get around it. If they block certain marketplaces, that's just whack a mole because another marketplace could pop up. So the creator has to decide if they're going to be providing utility to the owners of the nft. They could also see if the royalty has been paid and if the royalty has not been paid for certain holders, they could decide that they're not. They don't get to, you know, bear the fruit of any utility that is provided. I think that's probably the most logical step and particularly for like community groups and PFP groups like that. I mean they're going to have to earn revenue somehow and it's not going to be coming from royalties. So as soon as the crazy amounts of revenue that they did make over the last year or two go away, it's going to be a day of reckoning until they figure out how to actually make money. **Speaker A:** So I mean it sounds like the implicit message under that is that like due to the realities of like the technology and human nature and like whatever, like it just is probably not possible to build like a real viable long term business based on like royalty sales. **Speaker B:** I think the only way you could do that to my understanding now is if you developed an NFT marketplace that enforced these royalties and you convince people that buying it on your marketplace is the only way people want to buy it. And there you could kind of force a royalty. And I think the long tail of NFT adoption will be lots of different niche marketplaces. Like each brand will have their own and they'll own that experience and they can then enforce the royalty on their own marketplace and people trust them because they want to go to the, you know, Yuga Labs marketplace or whatever it is. **Speaker A:** Speaking of like marketplaces, like I'm excited to say for like the first time since we are in NFT world like that there are like viable alternatives for like different NFT marketplaces and you know, like, specifically, I don't know. I mean, I guess, like, looks rare and like, there's a couple that like, people use. But, you know, like, Blur was the first game, like, in my opinion, the first legitimate challenger to OpenSea is just like absolute Monopoly. And I think that's a good thing for everyone except for the VCs that backed OpenSea. But I guess my question for you is, when you see this whole new era of NFT marketplace wars or just more variety in options, what are the things that are exciting to you in terms of features and trends and what are some of the things that, like the, what are some of the directions the industry is pushing in that, like, you wish you could kind of like nudge in a different direction? **Speaker B:** Yeah, I mean, I don't like. So. So I think an important aspect of royalties to at least touch on is, is the whole other category, which is artists and individuals who are literally making their living off of the art they create with NFTs. And you know, if people are, are buying and flipping those and not contributing anything back to the artist, you know, I, I do feel strongly against that. Um, and so I think it's a balance. I think eventually, you know, a lot of artists, they reward their holders by having them qualify for whitelists for future artworks they release. And I think as tools become more sophisticated, they will probably inevitably have to, you know, some artists will choose to, you know, use tooling that makes people who didn't pay royalty not qualify for, you know, those future whitelists and stuff. But to answer a question, so stuff like as the marketplaces evolve, I mean, I think it's just like how phone apps have worked or social apps, in that people will always just kind of inevitably head towards what's the best user experience. And it's been very interesting to see how Blur has focused more, a little bit more on like a kind of trader type experience, whereas OpenSea is still a little. I mean, they've adapted now, but, you know, a little more of a retail experience was at least how they started. But yeah, I mean, I've used Blur a whole lot and opensea so can kind of double click into any of those sides, but I think the user experience is huge. **Speaker A:** What do you think, like, Blur like, got right? And I don't want to hear like the same stupid thing that we can hear from the Blur co founders on every podcast that is like, oh, it's for institutions, but like, like, what do you think is like the fundamental thing that like opensea missed because they were like the only game in town. **Speaker B:** Well, I mean, I think part of it is that, I mean, Blur was able to incentivize all this activity with their token and OpenSea for whatever reasons, for regulatory or whatever, they weren't able to go in that route because of how they were started. And so that was just an inherent massive advantage Blur had that there's nothing really OpenSea could do about that. So I think that was probably the biggest, if we're being honest. I mean, Blur has done an amazing job with the features they've released and the quality of their product, but like, if it wasn't for the token, I don't see why it would have displaced so much of the volume of OpenSea. That incentive is what got, you know, the vast majority of NFT volume going to Blur was to, to farm that token. **Speaker A:** And honestly like, I just use Blur now because I like that. I like, not only can sweep floors, but I can like pick the specific ones that I want. **Speaker B:** Yeah, absolutely. I mean, I think the big feature that it's missing that I know is coming eventually is putting a bid on a specific trait within a collection that you still can't do. To my understanding, you can't do trade specific bids, so you can only bid against the whole floor, which is not as good for various art. And you know, it's not good for people who want to collect to own long term because you generally want to actually pick the specific one you want, but you don't want to pay the buy now price. **Speaker A:** What do you think about all of the like, financial products that are being built around NFTs and like the first one that I'd like you to respond to is this like, thing that's coming out around Blur and Blend and I don't even really know how like related they are, but then also just like the longer tale of like fully like on chain and just like more like like for example, JPEG and that kind of stuff. Like is this the type of activity that is like really exciting to you or is this like starting to like turn already like kind of questionable art pieces into like truly like degenerate ways to gamble? **Speaker B:** Yeah, I think it's, I mean, I'm always for more technological innovation regardless of what the outcome is, because it kind of naturally has to allow the market to mature. Do you have to go through these cycles? I'm definitely conflicted though with the financialization because I think when you have these competing groups, you have the people who are in Web3 in NFTs because they kind of are early adopters. They're the people who. I was just in a few discords today, and people were excitedly watching the Apple announcements, which is something I've always done for years. But it's people who get excited of that new kind of breakthrough in a VR AR headset. So there's a lot of people in these NFT communities who are like that. They just kind of like being part of this new thing. They like the ideals of Web3 and that's why they're there. But when you have other people who are just there to trade and make money, that inevitably does nothing to help the community generally. I mean, it maybe temporarily can inflate the value of the token, but it usually then causes it to crash down at some point if it's artificially inflated. And so those values aren't aligned. And I think this financialization of a lot of NFTs has hurt the communities. But again, this is natural. I mean, the market's just naturally letting this happen, so there's no way to prevent it, but it definitely is happening. **Speaker A:** Well, I'm always really, really concerned when more leverage is introduced and more financialization is introduced, because the reality is, is that like, those rails are going to be used by like, highly sophisticated insiders to like, extract money from, like, retail. And you know, I think like, the flip side of like, being like, there's a reason Gary Gensler is coming after us and like, I don't know what to tell you guys, but like, this space, now you were saying this earlier, like, this space is full of scams, you know, and I think that, like, the financialization, like, I guess on the plus side makes a lot of this stuff more clear, if you understand what to look for. And like, you can see the manipulation a lot easier because, like, the swings are a lot harder and faster. But, you know, the downside is, like, there's people on the other side of those trades. **Speaker B:** Yeah, for sure. But you know, when it comes to regulation, like, I think that's just such a slippery slope as well, because, like, what regulation is there in place to prevent someone from buying a $100,000 car when they can't afford it and when it loses, you know, 20% of the value when you drive it off the lot or whatever that figure is. Like, these are people spend buy things that they aren't supposed to. I mean, if they're legitimately just fully getting scammed, that's another story. But like, the legitimate purposes of buying these expensive NFTs, you know, I'm not sure there's any regulation that could. **Speaker A:** No, yeah, you definitely have a point where it's like, I. If I need to commute every day, like a Toyota, whatever, like a $20,000 car is going to get me there just as much as a $200,000 car is there. And, like, no one on this in this country is going to stop me from extending myself to get the more expensive option. But, like, I do think the place for regulation is like that. If I go spend $200,000 on a car, at least I can have faith that, like, when I walk into the store, like, someone is going to be, like, relatively, like, honest with me and, like, the safety standards are going to be up and stuff. And so I think that, like, look, like the reality of this space is that, like, it's not an option to say, like, hey, you're not allowed to sell stuff unless you're in this, like, regulated zone. But, like, I do think it's the role of regulation to create safe spaces and then allow people to leave them if you don't want to be in them. **Speaker B:** Yeah, I mean, I think potentially over time that the marketplaces end up, particularly if they're able to enforce a royalty on their individual marketplaces, they will then have more responsibility to protect users from bad actors. So I think naturally that will play out. But yeah, if the question though is like, can regulation help people from NFT scams, I think it's hard to say if that really makes a difference. At the end of the day, if someone's saying they're going to provide something and you buy it and they don't provide it, I mean, that, that's illegal. You know, there's all sorts of established precedent for that. **Speaker A:** No, fair point, fair point. And I think the, like, underlying thing and what you're saying is that, like, for every argument that, like, you could conceivably make that, like, regulation creates, like, a better space for everyone, like, the reality is, like, look at history, look at the people that are making these rules. Like, nobody is looking for that. Like, the, the Goldilocks solution that is, like, perfect for everyone. They're, like, looking to come in here and just, like, fuck shit up, you know? And so I, like, I very much understand and empathize and, like, depending on what side of the bed I wake up, like, agree and support with, like, the proposition of just, like, stay out and like, regulation is bad and get out. But I don't know, man. Like, the deeper I get in this industry and the more I see, like, what These daos and companies and projects actually are the more I'm like, oh, my God. **Speaker B:** Yeah. I mean, yeah, there's a lot of things that I think are experiments. Many experiments will fail. **Speaker A:** Yeah. Anyway, this is the point of this conversation is not to be Debbie Downer about that kind of stuff. But so Anyway, back to NFTs. Like, when you think of categories of projects, like what, what, like, gets you excited and like, cat to give you some structure, like a category being like, okay, pfps, like, that's the original category that like, we kind of defined and like so much hype and blah, blah, blah. But, like, what I'm really excited about is like, we're starting to see NFTs that are like more than just like, slap it on Twitter. And like, the one that I'm thinking about right now is the llamas familiar. **Speaker B:** Okay, Is that I've heard of it. **Speaker A:** It's like associated with the Curve ecosystem. And they're doing two things that's super interesting. One is like some auction style to do the mints. And like, they're all minting for like 2ish eth a piece. And like the whole concept is they're taking that eth and they're basically buying Curve perma, locking it. And then like the rest, they're going to like, farm that stuff, like farm those assets in Curve and create like real yield for NFT holders. **Speaker B:** Yeah, I think that's incredibly exciting. Use case and evolution of NFTs. **Speaker A:** And then the second piece is they're using it to do like, reputation. So, like, your llama will gain, like, traits and if you contribute to stuff or like, you know, like poap style stuff. And so anyway, I, I, we can talk about that specifically. But also to say is like, I'm starting to see like, more than just pictures that you own NFTs that really take the technology and run with it. And so my question to you is, what sort of things out there are you seeing that really energize you and make you excited about this? **Speaker B:** Beyond art, one would be, I mean, anything to do with staking of tokens or eth, for example, to my understanding, based on some, I can't name the EIPs or whatever they are, but there's some advancements coming with Ethereum where you can kind of do pooled staking, where you could kind of group up with some friends and have this kind of secure way to combine your ETH to. **Speaker A:** Do a staking node, distributed validator technology or. **Speaker B:** Yes, exactly. And so super excited for that with NFTs, because then you can kind of, if you belong to this community, you can all pull ETH together and for the thought of decentralization and do it securely without trusting, worrying about someone taking your eth. So that's exciting. Just literally today, Kevin Rose tweeted about this concept of doing an NFT where you purchase the NFT with eth. And this kind of sounds similar to what you're describing with the curve llamas. The ETH is immediately swapped for steth Lido's liquid staking token. And then the yield goes to the artist. So the artist who created the artwork gets the majority of it, maybe the holder gets a little of it, but that's where the royalty is from the ETH residual. But at any time, the holder could then exchange it back, kind of burn the NFT and get their original ETH back. And so I think that's a super interesting primitive to kind of explore. It's like, then it actually does always have that value behind it and the artist has to convince people to hold it and they earn their income. I mean, I think that's like the best of both worlds. **Speaker A:** Yeah. And it also creates, like. Yeah, that's really, really cool because, like, it creates, like, a revenue stream that can, like, compensate the artists without, like, eating away. And like, the idea that you, like, could mint NFT for 2 ETH. And then if you just decide ever, like, I'm done with this, like, I get my money back, is like, you definitely create a permanent floor, just candidly. Exactly. And yeah, man, that's very cool. **Speaker B:** Yeah. So it kind of blew my mind. But I think anytime you're thinking about NFTs, you have to be thinking about what is possible for value creation out there. And when you start to think about that, you start to think about these unique ways that NFTs can create value that you couldn't have done before that. And understanding who owned the NFT before that provenance, understanding when it was created, and then the interoperability of allowing you to get access to something because you own the nft. Or you could network with other collectors from the same artist and actually, like, prove that they own it. Like, you can't do that with traditional art. So it's just like opens these whole new layers of kind of community and stuff that, to me, does create value. **Speaker A:** And how interested how much are you tracking projects that are leveraging NFT technology but aren't really related to art or visual stuff at all that aren't related to art? **Speaker B:** I'd say vast majority of what I focus on is definitely art. I mean the proof community is the big one that I'm in, that's more of PfP, but they're actually interestingly enough now pivoting, I mean pretty much exclusively about collecting art which aligns with my interest. Yeah. So I think, Sorry, yeah, I'm not. **Speaker A:** Trying to trip you up there. I'm just wondering is you know like the first PFP was or. Sorry the first NFT was a PfP. And that's because like it was easy, you know, and now we're like coming up with some other projects that are essentially like take the PFP and then make some like social promises under it like with you know and like we're very quickly going to realize that this technology like doesn't need to be used for art. And then like man, like I don't know, maybe this counts as art. But like watches like just looking at your hand there, right? Like that could be represented by NFTs or you know, I guess like, you know the, the like kitschy line that we've all heard at some point before is like our world is not full of fungible stuff. Like the world is a non fungible world. And so like what NFT technology is like much more representative of like real life than anything in defi. **Speaker B:** Yeah, I mean absolutely. I mean I think physical collectibles, I mean there's a whole, whole different world out there. As to how NFTs can help solve problems for that, I mean but I guess so non art ones that I'm following. To get back to your question, the Starbucks Odyssey program, I got into the beta of that really early. **Speaker A:** Oh yeah, so wait, tell us about that and like because like why I find that interesting is like it's very easy to never have worked for a big company before and just like think that everything that like large corporations do is just like stupid and lame and by like some marketing executive that. But like I don't know, like I feel like if you can get over that like very American. Like if it's big, I hate it like vibes and like you just like look at like we need people like Starbucks to be building projects like this. So like I'm super interested and curious and like what are your thoughts? Like are companies figuring this out? **Speaker B:** Yeah, I mean it's happening pretty slow, but it's happening. And I have to give props to a company like Starbucks that like it's a pretty big risk particularly with all the negative sentiment or NFTs like for them to get into this so early. And I think what they're probably seeing is that when you add this kind of financial incentive around creating an NFT that has value along with an existing retail business, I mean you see people participating like crazy. And while some of them may just be in it for the money, like there are people who are probably legitimately feeling stronger about Starbucks because of this experience and owning kind of the special historical stamp that they earned for participating. I mean, just to give you an example, I got into the beta right at the beginning and I didn't know what I was doing, but I just like completing tasks or whatever. I wanted to get the full stamp. So I just did it that first month that came out and I earned one of these holidays Starbucks cheer stamps. And it was in addition to 5,000, but only I think a couple thousand people actually earned it or maybe, I'm not sure exactly the number. And now the price floor of this thing which costs nothing or I think I actually had to pay maybe for a cup of coffee or something like that. And it's worth a thousand dollars so you could sell it. Right now I think the floor price is literally $1,000. I'm looking at it right now. **Speaker A:** Is it like a utility thing or. **Speaker B:** It's no, there's zero promise utility for it. That's what's kind of crazy. It's the value creation is purely in the provenance. That's the first ever holiday stamp from Starbucks. That's it. **Speaker A:** Wow, that's pretty cool. So if you have anything else to say about Starbucks, please do. But you know, there's like a lot of big companies that have either like made announcements or like actually done stuff with NFTs and like announcements. I'm thinking like Disney and basically swoosh. **Speaker B:** One is the one that just this past week, which I also did the Nike. **Speaker A:** Yeah, what's going on there? **Speaker B:** Yeah, so they, they basically had a mint where it wasn't capped at a certain quantity. So you didn't kind of have the same like mania necessarily like you, you could only mint four and I think you had to be part of their beta or, or whatever to be able to do it. And they were $20 each. You could mint four and you chose. All you could choose is the classic box or the like new age box or something like that. And so I minted them. Um, and it was just using like a stripe powered thing to, to, to purchase it. So super smooth experience. You didn't have to know like a. **Speaker A:** Credit card or something. **Speaker B:** Yeah, exactly. There you couldn't pay with Heath and they don't. And this is the other interesting thing, they don't mention NFTs anywhere with the whole thing which is I think showing you the direction this is going to head. Like it's okay. **Speaker A:** So they don't mention NFTs. **Speaker B:** Yeah, they don't. **Speaker A:** How, how do you experience that? Like why are they NFTS then? **Speaker B:** Well I mean for, for those who, who know about NFTs like you, you'll see the telltale sign of like a contract address, know it is and then you can see it's polygon that's powering it. But your average person, they might see that and it just be no different than like an item number on ebay. Like it just is some id, right? And they don't have to worry about it. But Nike very clearly kind of shows utility on these pages. And so they show like for this particular box your only guaranteed utility is a 3D file. And you'll be able to download that in July. July. And your license to use the 3D file is a benefit of owning the collectible. And there's not really much other information. I think the idea is maybe in the Metaverse or any games potentially you could equip this shoe that you own in a virtual world. Perhaps that's one of the ideas. **Speaker A:** Well, God, I'm trying to decide if I want to keep badgering you about big company stuff, but I think this might as well do the segue that I've been waiting for, which is about games, right? And I think like so I never actually had any real doubt about NFTs. Like, like man, like I don't believe in bored apes, I don't even believe in crypto punks. But I never had any doubt on NFTs, right? And that's because from middle school until 20 minutes ago like I play or sorry to be clear, like 47 minutes ago I play World of Warcraft, right? And like I understand that like people like Bill, you know, like they, they build like characters that like have so much time and so many like of these like real in game assets that have like real value. And like World of Warcraft is like a good example because you can buy gold and like it's so long lasting. But like the real example that makes NFTs just like not arguable is Eve online, right? And that is a game that without getting into it like there is like a whole dynamic economy with like huge, huge like multi million dollar ship. Like literally you can buy money and it's like cost millions of dollars to like create like some of the most like expansive ships and stuff. And so like if all of this stuff exists today, like you just, you have to be like so close minded to not think that if we can tie these things to real value that are not related to Activision Blizzard or whatever, people wouldn't opt into that. And so one, I'm wondering just like do you have any overall theories or thoughts on what the intersection of web three and gaming is? And then two, I'm tired of just watching like companies just you know, like create like, like not even like a real effort game but then just throw something with tokens on there and expect it to do well. And so like what do you think it's going to take in order to like create a. Just like you were talking about with Nike, like a real experience where NFTs are part of it but not like the whole thing. **Speaker B:** Yeah, well I think when we look at what's happening with AI right now and how within probably a year from now or I mean, yeah, probably within a year, anything you see that's visually appealing could be created by a 3 year old and up. Like prior to now it actually took people with graphical skills and so just if something looked cool, that was because a person made it and that made it also cool. I mean, but now this is going to change a little bit once anything you see could be made by anyone or artificial intelligence. Like I think people are going to care a lot more about who has created it because if it's just a computer then it's going to be much less interesting than if it's artist with a story. And so if that continues to play out, I think in all these games where you have wearable skins and everything, people are going to care. It's either a brand they recognize, like if they want to wear a Nike skin in Fortnite or whatever, or an artist, you know, a special design of a shoe or whatever it is. But when you combine those, you know, especially let's say a Fidenza Nike shoe or something, something like that, I think that's the direction we're headed where these big brand names that we know today are going to have this interoperability with games in some way. And I think when we talk about the Metaverse, I think part of the evolution is just having these worlds that have digital assets or wearables that kind of relate to what we know today as the NFT world. **Speaker A:** Yeah. And in this world, because I think that if you start to like, think of it as, like, okay, so, like, in World of Warcraft, like, I have my sword and you're telling me that, like, I'll be able to, like, sell my sword. Like, I can already do that. But now you're saying with crypto, like, I'll be able to sell it and somebody will be able to use it in, like, a different game. And it's just like, don't think like that. Don't think like that. The way to think about this is like, in Fortnite, in World of Warcraft, in Eve Online, like, all your characters have shoes, right? And, like, let's say that, like, because of your relationship with Nike, whether that's like, loyalty or you gave, you have their Nike pass or whatever, like, they say, like, we will enable you to, like, use Nike shoes in whatever game you choose. And Nike shoes always have, like, a 5% speed bonus in, like, the game that they're in. Like, that is like, the world that I see that, like, Web3 empowers that, like, you can have these, like, complex, like, unmediated economic relationships that, like, get expressed in these online spaces. **Speaker B:** Yeah. Or. I mean, what gets me the most excited, though, is the inverse example, which is, let's say any day you use your sword with the Starbucks insignia, let's say, to like, complete a mission, that same day you get 50% off your iced beverage or something, like at Starbucks, like, those types of things where they reward you in that type of collaboration between, let's say, World of Warcraft and Starbucks could have never happened, because making custom APIs to integrate with the point of sale at Starbucks and with World of Warcraft, they would never bother with that. But to have this kind of standard API under the hood, which is NFT technology, it's abstracted from the user, but that allows unlimited collaborations to happen. And that's what gets me the most excited, because you could have these things that are literally just from a technical standpoint were never possible. Bridging retail with the digital world. **Speaker A:** Well, you know, one of my favorite exercises is just to be, like, as reductive as possible when describing Ethereum. And what you just said is, like, so funny, but it's so true. It was like this, like, crazy advanced distributed computing technology that we're like, really? We're just like, building an API. **Speaker B:** Yeah. **Speaker A:** And I do think that, like, yeah, the. We're in a moment of crypto and of Etherium where all you can do is, like, get within the EVM and like, just, like, spin things around, you know, whether it's like Defi or just like trade NFTs or whatever. But I think like the, the really interesting thing happens not from just building more complex stuff within here, but it's like we have Ethereum, we have the world that we live in, we need to find ways where they connect. And I do think that that's what an API is. And I don't know, I'm rambling just because I loved your point right there. That was very good. And, and yeah, exactly right. Who on this planet would ever go to individual point of sale providers and integrate those to a specific game. But this, but that is what composability and the EVM and Ethereum allows. **Speaker B:** Yep, and that's exactly why I mean crypto has taken off because these decentralized exchanges can build on top of curve protocol or whatever and aggregate yield opportunities. I mean that it's the same idea that happens in Defi is the same reason why I think NFTs will evolve to this massive part of brands marketing and loyalty over the coming years. **Speaker A:** So the last like five or so minutes here, what would you say you are most excited about in the next, I don't know, let's say for the rest of 2023 and what are you like most excited about? Moving on from. **Speaker B:** Moving on from? Yeah, well, I couldn't say for sure if it'll be 2023, but I'm the most excited for something to change the user experience of NFTs and crypto for the end users. And I don't know yet what that'll be, but if I had to guess I would say it's any major bank or a Google or Twitter or major tech company having a custodial wallet solution or non custodial that essentially just makes it easy for people to hold NFTs and not fully worry about the safety of them. **Speaker A:** What do you think about this Coinbase Wallet? **Speaker B:** I mean Coinbase Wallet's really cool and it does a great job of making it as easy as possible, but at the end of the day it's still similar to a metamask in that it's just a fully non custodial solution. So I think maybe if you combine social recovery with having a big company be one of the parties that can help you socially recover your wallet, that's where it gets into mainstream adoption. Seed phrases aren't gonna be it to get to a billion users, you know, like it has to be for sure. **Speaker A:** And like I can totally imagine a world where like, like you just have your Ethereum wallet with Google and they just manage it for you. And like, from your perspective, you don't even know that it's crypto or not. Or you know, in the same way that like, you know, in the US we only have US like dollar accounts, but if you go to any other country, they have like foreign dollar like foreign money accounts. And so if you're in Europe, you'll hold Euros in your domestic account, but you can hold dollars and yen and whatever. And of course the way that this actually works is that you just add the Ethereum line. You add the USDC line. **Speaker B:** Yeah, exactly. I think particularly for lower value stuff like your Fortnite skins or whatever, you don't have to worry about needing hardware, wallet security and stuff. And so that's where just having a simplistic solution for someone to a company or somewhere to help you hold that securely will really bridge us into the next era of digital collectibles. **Speaker A:** All right, what are you most excited to move on from? **Speaker B:** I'm excited to move on from, I think a lot of the kind of toxic FUD behavior that happens with NFT communities and people speaking poorly about other projects and stuff, that just gets really old. As someone who follows NFT Twitter a lot and it just kind of, if you were an outsider and you're trying to get NFTs and you just start looking at NFT, Twitter, some of the influencers out there, like it's, it's not a good look for, for anyone involved in the space. So I think you start to see some communities now rallying behind more positivity and less focusing on degenerative gambling of floor prices and stuff. So I'm, I'm excited to get away from that obsession of is that like. **Speaker A:** Kind of a bear market problem or is that like a cultural problem in NFTs that existed before for like we all. **Speaker B:** It's a cultural problem, for sure. It's a cultural problem I think because it just, it becomes much more clear in the bear market because the euphoria that everyone has from, you know, being on, on paper, so to speak, worth a lot of money shields it. But even in, in bull markets with NFTs, like there's a lot of people who are there not because they are interested in the art or the project or the creators, and that just creates a bad community. If you look at any of these discords, I mean, you just see crazy negative stuff and these are from the people who just care about money. **Speaker A:** Yeah. And like this negativity is like, at other communities and projects or like at the, like, their own creators or both or everything. **Speaker B:** Or it's all the above, actually. I made a Twitter thread on it. If you have shownotes or whatever, we can link to it. But I like, use ChatGPT to help research kind of like, what are some of the psychological factors at play for these things? And there's, you know, it's like eight different factors at play, but they cover everything, including people who are fudding talking badly about the project they own. So they actually own it, but they're talking badly about it for a variety of psychological factors, most likely. And it's fascinating, but it's happening. And people also will talk badly about a project they previously owned, but they sold it because they want to further validate that it was a good reason to sell. You combine all this and it's really. It's really nasty and it's not helpful to anyone. **Speaker A:** Well, let's. Yeah, let's definitely hope we move on from that. But like, I'm sorry, man, I'm not gonna hold my breath. **Speaker B:** Yeah, no, I mean, when there's money involved, all bets are off, I think. **Speaker A:** Yeah. And especially when. When there's there's like only blood in the water and like, no. No rising tide, it's like, oh, man. **Speaker B:** Like, I'm just pretty dark out there. **Speaker A:** Yeah. And. And with Twitter falling apart just like at the infrastructure level. So. Yeah. Anyway, Matt, thank you so much. This conversation I was excited about, but like, has a. Far exceeded my. My hopes and my expectations. So. Thank you, man. I definitely will put your thread in the show notes, but can you just share your, like, where we can find you? **Speaker B:** Yeah, best place is just on Twitter. Attsilv M A T T S I L V And yeah, it's usually either NFT takes or some poorly generated memes, so enjoy it. **Speaker A:** Nice, man. Well, it. It was an honor and a pleasure and yeah, man, just thanks for being a friend and thank you for. **Speaker B:** Sure. Thanks so much for having me, Rex.