A retrospective on NFTs in 2021

Before we get started — I want to invite everyone to watch this video. It’s the single most important update we’ve given in the history of the Universe. :)

Moving on…

Meta

The future will be different than the present. This much I know. The subjectivity of the degree in that difference is sub infinite but it is closer to an infinite amount of variability than it is zero.

Temple — A retrospective on NFTs in 2021

Temple is the name of a content curation machine we are building at Universe.XYZ. I wanted to name this article in honor of what is coming and I wanted to give some perspective on where I think we are, where we came from, and where we are going as an industry.

2021 was a wild year for us in crypto & Web3. NFTs blew up seemingly out of nowhere for those who weren’t hanging out in the LarvaLabs Discord in early 2020. For those who were, you could tell a revolution in cultural relevance was brewing even if it was esoteric at the time. It was a fringe club of extremely passionate hobbyists and tinkerers. You didn’t have to know what it was to tell it was special.

My interest in NFTs back then were as a financial instrument. I’m not sure who was talking about NFTs in depth as financial instruments back then or where I drew influence but I realized if something had a maturity, strike price, or was a loan type for a single asset (like a car or house) it would probably be closer to an ERC720 (NFT) than a ERC20 (fungible token more akin to a currency). Houses would be NFTs, insurance contracts would be NFTs, deeds, titles, intellectual property, business contracts, employee agreements, and so much more would be NFTs.

At scale, I still believe anything that isn’t a currency is an NFT.

By the time we get there the semantics will be so misused by popular culture that nobody will know what they’re talking about. So I should say, functionally, I think we’ll be right but it will be far too blurry to ever go back and figure out what meant what or what fit where. The misunderstanding that comes with mainstream adoption turns misunderstanding to memes, to cultural relevance, to manipulation, and later politics, and whatever else comes with that.

We can’t and won’t sit around ignored forever because nobody knows how to govern any of this, more will come from the fringes & since nobody has the ability to monitor all of the fringes, its hard to see it stopping.

Crypto is here to stay because NFTs are here to stay. It’s like Crypto Kitties broke Ethereum and that Punks Discord resurrected it. Even if it wasn’t the Punks creators themselves or even LarvaLabs who were very active in there.

Then came Hashmasks, then came Non-Fungible Pepe (the blue chip that never was), then came Bored Ape Yacht Club, and Cool Cats, and Meebits, and Pudgy Penguins, and DickButts, and Polymorphs, and Flufs, and Aifa Boxes, and brains and backgrounds and beats and burrows and celebrities and parties and art curators and nobody could keep up with any of it.

At times it’s hard to tell the difference between war and revolution. I’m not entirely sure they aren’t the same thing. I watch my dogs “fight” and they simulate biting each other in a symbolic but angry sounding dance of visceral growls as they pretend to bite one another on the neck in a sign of dominance to see who would win without ever truly clamping down. They’ve never made one another bleed except if by accident. We like to think that us as humans are so much more advanced than the beasts who walk the earth but the subjectivity of the degree in that difference is closer to zero than it is infinite. Whether its war games in the South China Sea or on the border of Russia between Ukraine, or how people position themselves to get ahead in business in war rooms and meetings, or how rappers drop diss tracks and get in fights at clubs.. its all signaling. Signaling helps determine outcomes before they need to result in blood.

In the case of NFTs & the gatekeepers of cultural relevance, they knew they had lost a war they didn’t know they were fighting before they even asked themselves whether the first battle was worth the fight. It was inevitable. It was over.

The cope was entertaining but ultimately the smarter ones joined what they couldn’t beat.

And most people missed the signal in the noise. When NFTs won, crypto won. It’s NEVER going away at this point.

Non-censorable “Tokens” (that just so happen to also not be fungible).

And while I’m here thinking crypto IS the world for the past 5 years leading into 2021, I didn’t realize how few people gave any fuck about what we were doing until I saw the impact of NFTs. I realized, in retrospect, we were the fringe. The powers that be saw what NFTs did to art and culture and realized we were tinkering with something dangerous to them.

How NFTs disrupted art & culture, the financial industry is arguably MORE rife with grift and bloat and anointed members collecting fat checks at the expense of the populace. This is nothing new it has been happening for hundreds of years. The concept of 7 being the timing of when debt forgiveness would reset debts along with the mathematics of the Persians has been debated for a millennium. People talk about the 40 year bull run in bonds. It should have ended at 7 years, biblically, or we’d need a jubilee at 70.

I think when we look back at 2017 to 2020.. it’s clear, in a way only 20/20 hindsight creates sobering clarity, that, of course, Defi would be the first killer application of crypto. We know we’re on the wrong side of a path to jubilee & we know that the central banks printing money at an increasing clip is shortening the reset. None of us truly know when though.

I think when we look back at 2021, the reason why NFTs became so popular will be just as clear. People are sick of the censorship powers of world governments & private companies subsidized by an elite few affecting a much larger censored populace. It wasn’t the non-fungible piece that was so enticing. Nobody even knows what that word means. It was the immutable part. It was the unstoppable part. It was the uncensorable part.

And to this day, I’ve bought maybe 5 NFTs for the art. I own more IRL oil paintings. It’s always been the applications of the technology that interested me.

Where To? Up only?

The future will be different than the present. This much I know. The subjectivity of the degree in that difference is sub infinite but it is closer to an infinite amount of variability than it is zero.

Anyone who tells you with certainty that they have any idea what is going to happen tomorrow is a liar. There are literally sunbeams and universal extremes that we’ve never observed that could wipe us out or completely alter our reality tomorrow. Van Wilder once said, “Don’t take life too seriously, you’ll never get out alive.” I think those are wise words to live by even if the medium wasn’t in any way philosophical or profound. We’d all be wise to listen more in rapidly changing times than being so certain and sure of our affirmations. It’s not always about the end point, sometimes the means & the journey itself is the prize.

Just enjoy it.

With that said, I’ll give some insight into where I think this goes & areas I’m particularly excited about:

Token Gated [Everything]

I’ll get to DAOs later on in this but, for now, I’ll just say that the less explored areas around token gating communities, token gated content, on chain verification of activity for access to communities and content.. and how fractionalization affects that particularly excites me. I have no idea what Stani is building in terms of a social network. It excites me how that type of gating can affect loans and on chain identity which is why I think he is working on it, or maybe he hasn’t made that lapse yet to understand how serendipitous it will be for AAVE if he pulls it off. I just pray its not dystopian.

In general, the ability to be in a group, or see content in an encrypted way based on X, Y, or Z excites me even if I worry about it a little.

I see what Hyype is doing and think it’s a precursor. I think Fractional and the things Andy is working on excite me for where this can lead. Without fractionalization, how do we grow the original NFT communities past 10,000? It seems like a lot now but it is far too small of a populace to gate everything by.

This will be pushed forward in ephemeral blips in meetings and conversations around Discord.. but something will come out of this that is profound and game changing. We’ll look back and it will seem obvious then.. whatever it is.

AI & Gaming

I should honestly just loop these together. The AI component also scares me a little. But I’m here for it.

Oddly enough, this was all kicked off from us fighting the NPCs (artificial non intelligence called non player characters) of censorship with single spliced talking points that were so repetitive they were redundant. The term came from gaming and the technology came to affect exactly where the term came from.

I admittedly know less about AI than what Aaron McDonald has told me and Elon Musk scaring the shit out of me about it on the Joe Rogan podcast. However, I do know that we’ll have better NPCs in games which should make that experience better in times where we want to detach from reality and enter flow states.

I could go on all day about this but I’m still extremely bullish on games. After my D64 thesis that started to formulate in October of 2020, I don’t think I could have been more right on this one (if I do say so myself).

I know it’s been bid up in the past couple of months but often bubbles exist because people get caught off guard with just how much something is advanced in comparison to their prior understanding of the requisite.

Axie is a D+ game with A+ tokenomics (for its time). Dapps & kudos even if I troll Jiho on Twitter a bit. It was tongue & cheek I never knew he’d become a god. Gg king.

But A+ games with A++ tokenomics are coming.

Illuvium is coming.

Eternal Return is Coming.

AIFA is Coming.

Altered State Machine is coming.

Flufs have arrived already.

Polymorphs cope will be real.

EnterDAO is building guts for it all.

Facebook changed their name over this. The Metaverse is here and we are all still early.

Fungibility to Real World Assets and Experience.

I’m excited about how EnterDAO will essentially create a rental market for digital spaces. I think by the time the real estate industry figures out that all real estate will be tokenized, along with everything else I mentioned before, the guts needed for physical spaces will be there. Because we are building it for digital spaces and the technology is mostly copy paste. The Zillow of the Metaverse will become the Zillow of the Universe. The IRL one.

You can also add this to the talent component above. Kids who essentially get architecture degrees building in the Metaverse will pick up skills that are synonymous to the IRL.

Kids will learn to make music, they’ll learn to make art. They’ll learn to make games. We’re blowing the door off walled gardens. Some child prodigies and superstars will be born in this new Eden whose talent will be transferrable to IRL. But if the Metaverse is where this is going and where they’ll be, that’s where it will come from.

It’s already happening.. i.e. Beeple.

Defi

I think NFTs and Defi grew more distant with the rise of NFTs and I can’t really figure out how Defi missed the boat so broadly. I think I was one of the only founders who saw the market demand for NFTs as something that was more organic than the levered ponzis in defi.

I almost feel like the Defi industry went deeper and deeper into ponzis and wrote off NFTs. The problem is that if you are going to build a brave new financial ecosystem, there has to be inherent demand or we are financializing financialization. Meaning we are building lending systems where we are financing more complex versions of financialization.

I understand that we want real world assets. They aren’t here.

Instead we have real demand driven in art, gaming, and the Metaverse and it feels below many industry leaders in Defi.

And while Defi didn’t pay enough attention to NFTs in terms of bringing Defi to NFTs (I get that many of them became flippers and influencers), the NFT community didn’t take the time to learn about Defi either.

They both have their own slang and lingo and its honestly confusing for newcomers to both.

In my opinion, that is an opportunity for those in NFTs, more than Defi. Because many NFT people are already all in. They understand the value. Defi people need to cross that chasm to figure out where to even provide value or what the value is or where it comes from or why it’s valuable. However, the NFT people that get into Defi will immediately see use cases that will help NFTs. I’ll give you some examples:

Renting & Mortgage + AirBNB — EnterDAO

Collateralization — Probably something we work on through BarnBridge.

Yielding NFTs — Charged Particles.

Play to Earn/Rent to Earn — Some are playing in the former, few in the latter.

Fixed Income — Again, BarnBridge will work on this.

Financing — Not sure anyone is doing this yet (at least well).

Fractionalization — Andy’s Fractional.

Floor bots for hire, cross market arbitrage, Prediction markets for gaming, fantasy sports for e-games (LeagueDAO).

In general, things like LeagueDAO that are defining a category while nobody is paying attention are normally attention arbitrage opportunities.

In an up market you are punished for not paying attention to what everyone else is (the hype). In a down market, you’re rewarded. If you do it in both markets, you become a cockroach.

The object of crypto is to survive — be a cockroach.

And all along this hyper ADHD year in crypto, we did the Kansas City Shuffle.. everyone was looking left in defi, and we went right… to organic demand. I think that bodes well for the next few years despite if it seemed like a distraction at the time. In NFTs, our team’s understanding of defi absolutely gives us an edge. Soon, that edge will extend to defi for our understanding of NFTs.

DAOs

I think I had a profound impact on helping the NFT community learn about DAOs by educating the educators. My interest in DAOs was originally as a financial tool less than a cultural one.

PleasrDAO certainly adjusted that to some degree for me.

I’m planning on releasing a much more in depth article about DAOs and the state of them which I think we can append to this article because conflating DAOs and NFTs in one article would make this an unreadable document in terms of length.

So let’s just say DAOs, or some similar type autonomous structure, will be a part of the future of NFTs. That much I know.

Curation, Talent & Education

I’m not going to comment on curation much since we are doing work on that and I don’t want to drop too much alpha that is internal to us. However, I think OpenSea showed this is a gap in the market.

I’ll also say that after I reflect on talent (which is the most scarce unit in this entire industry across the board) I think someone can deductively extrapolate why I think educational resources are a huge gap in this industry.

So let’s get to the talent part…

Everyone constantly asks me how we staff so many talented people or roll DAOs out so quickly. A big part is incentives, a big part is the people we already have around us.

I, personally, get a lot of credit but we have a really amazing team. Much of this team was forged in the depths of hell in 2019 when we had to go and take on SAAS clients to make it through the down market. This team is also extremely loyal to us and believe in the vision… not because of some top down hierarchal boomer structure we have in place but because they watched all of us take care of each other when we were in the fiery pits of hell. Some of those people started working in 2015 for $10/hour helping to design e-commerce products & they upsized their lives when we got into cryptocurrencies in late 2016 & watched everything explode in both good and bad ways through 2018. They watched the passion and energy as we made the concerted effort to stay in the industry when we had clients coming in and every reason to leave the industry.. and we took on crypto clients for LESS than what NYC/SF SaaS groups were willing to pay us. They also saw the passion in our friends who later became partners. Still, some would often ask “why?” and I said it was where I thought the future was headed.

One thing that was important in the down markets is it helped us sniff out (internally and externally in the industry) who were actually in it for the right reasons and who were the grifters (it was easy because most of the grifters left). In mid-2019 to early 2020, the only people LEFT in the industry were the “passionates” who dreamed of a better world coupled in with some people who took profits at the right time, and rich kids who could do whatever they wanted. And the latter buckets were easy to tell from the true passionates. This allowed me to build a network, internationally, of people who we thought were talented & in this space for the right reasons.

I didn’t take notes, but I paid attention & I very seldom brag but will say that I do have a very very very good memory.

Down markets are when you should pay attention to what people do and say. That is when their true conviction shows.

The next point I’ll make is Web2 vs. Web3. In a down market, we lose true Web3 talent. It’s harder to recruit Web2 talent. The “passionates” have their roles already. So you have to develop talent. We also saw that in the later stages of this most recent bull. We began to develop Web2 talent and teach them about Web3. This has to be the way forward to guard from being an esoteric echo chamber.

Keep in mind, none of us really were working in Web3 6 years ago, for the most part. We all learned on our own and were developed by the industry.

So keep an eye out for the real ones, and develop talent around you. If you want to be successful in NFTs for years to come, you have a generational opportunity in front of you.