CC#16: NFTs - 3LAU's $11.7m album, Beeple's $6.6m painting, NBA TopShots, and CryptoKitties.

3LAU tells the story of meeting the Winklevoss twins and being introduced to crypto in 2014, BEEPLE shares how he got into NFTs, and the developer behind NBA TopShots tells the story...

On the GOOD TIME Show last night, Sriram and Aarthi had an impressive panel of guests to discuss one of the hottest topics in tech right now: NFTs. The guests included Dylan Field, Founder/CEO of Figma; Kevin Kelly, Founder of Wired; Roham Gharegozlou, Co-Founder/CEO of Dapper Labs, which created CryptoKitties and NBA TopShots; Kayvon Tehranian, Founder of Foundation, a marketplace for NFTs; Mike Winkelmann (aka. BEEPLE), a well known digital artist who is blazing the NFT trail for other artists; Baron Davis, an NBA player; Chris Dixon, a partner at a16z with a strong interest in blockchain; and Justin 3LAU, a famous music producer/DJ who just sold a collection of album NFTs for a record-breaking $11.7m.

Sriram started off the discussion by asking Chris Dixon a simple question:“Why now?”

Chris: “I think it’s a combination of the technology, culture and infrastructure. A lot more people understand the underlying technology behind bitcon now, so it’s a lot easier for them to grasp the fact that the same technology can now secure another digital asset and give you a certificate that certifies ‘this is an original’. People spend so much time online but are used to this idea that they can buy goods in a game but then they eventually lose these goods. Part of this movement is simply that people have a desire to own things like they do in the offline world. For a long time, people have understood the idea of ownership in the offline world, such as owning a car or a house. For the first time in history, you can now own things in the online world”

Sriram: “I’d love to get Mike Winkelmann’s take on this—he’s a digital artist who has worked with Eminem, Katy Perry, Nike, SpaceX and many other big brands. One of the themes of this show is people who have been working for many years in a particular space and are now having their moment. Mike - how did you go from a traditional artist to suddenly becoming a pioneer of NFTs in a sense?”

Mike: “Well in the digital art community I’m pretty well known, I have almost 2m followers on instagram. I didn’t come out of nowhere, but it speaks volumes to how separate these two worlds were and how they are suddenly converging. One of the things that’s recently become a lot more popular is the Beeple Everyday—basically, I have created a new piece every day from start to finish for the past 14 years. Now we are auctioning these pieces as NFTs. These pieces range quite a bit, from weird buzz lightyear, to some more abstract pieces and even some inspired by current events that happened that day.”

Sriram: “Could you describe your aesthetic? I’ve heard that you like to say a lot of your work is crap, why is that?”

Mike: “I do believe a lot of it is crap and I really have so much room to grow. I always do these pieces in just a few hours so they never come out exactly how I would like them to, if I had spent more time on them. People are really nice though and seem like them.”

Aarthi: “Could you talk a bit about Crossroads, the painting that you sold as an NFT for over $6m?”

Mike: “I’m new to this space [NFTs], I just got into it in mid-October. A bunch of people had been telling me I needed to look into it for the longest time—when I finally got around to it, I said “This is fucking amazing!” Even though. I’m an artist, I have a degree in computer science. So when I discovered this, it was really a light bulb moment. The piece that sold for that price ($6.6m) was part of a first drop back in November that I said was going to change based on whether Biden or Trump won the election.

Kevin Kelly, the founder of Wired, asked “Do they have a built in contract for the resale?”

Mike: “It was originally sold for $66,666, but it just resold for $6.6m. There was a contract for the resale, so I netted around $660,000.”

Aarthi: “I’m curious to hear Justin (3LAU)’s perspective on this. What got you into this world of crypto and NFTs? And if I was a record label, how should I be thinking about this?”

Justin (3LAU): “I basically started my journey in the blockchain space in 2014. I was about to open up for Avicii at a club in Mexico when I met the Winklevoss twins. I met up with them in LA later on and they kept talking about bitcoin. I was intrigued by this idea that you could transfer money without the government or an institution being an intermediary. In 2017, we saw the ICO boom and we also saw a lot of artists releasing their own digital assets but most didn’t have deep ties in the music industry. I thought—why don’t we create a music festival where the fans can pool the money and collectively choose the artists for the festival. We threw this festival with artists like Zedd, Big Sean, and many others. We got the team from Stellar Lumens to create a 3LAU loyalty token and they also created a platform so people could scan QR codes and send/receive the tokens. I started giving them out and people were so interested—they started lining up and within 5 minutes all the tokens were gone. I had this moment in 2018—I thought this was it! But I realized later it was a bit too early. Fast forward to 2020, COVID accelerated this massive migration to the digital space. But nobody had done music before. So I called up my music director and I said let’s introduce audio to the NFT space. I started making animations for tracks we had never released. As artists, we often have ideas we worked really hard on and they go unreleased. We don’t want to put them on Spotify because it can skew the algorithm against our favor, but we’re really proud of the tracks nonetheless. So we took these assets and there appeared to be a native demand—the price for our NFT went from $23,000 to $11.7m in just a matter of days. COVID has accelerated this trend and the emotion that it creates for people.”

Sriram: “I’m actually very curious to know more about the NBA Top Shots. We have Roham from Dapper Labs here—Rohan, could you explain how this came about?”

Roham: “We started Dapper Labs in 2018—and the first 2 people who believed in us were Chris Dixon and Fred Wilson. We actually developed Crypto Kitties back in 2017, which was the first actual NFT to gain popularity. What really made us believe that consumers were looking for these digital assets was the fact that even in the bear market, Crypto Kitties still had 6000 MAUs (monthly active users). For NBA TopShots, a platform where users can buy and sell collectible “Moments”, we actually started developing on the Ethereum blockchain, but we decided we needed to go our own way. So we spent a year building our own blockchain and launched in October of last year. Since then, the platform has seen over $230m in sales. Just yesterday, there was over $1m in sales. What’s different this time around (vs. 2017) is the community. Thousands of people get it now, and they can help explain how it works and how secure it is to the millions that are just becoming aware.”

Sriram: “At what point over the last year did you think: “This is really happening?””

Roham: “We had conviction over the past 3 years because we had a lot of people rowing in the same direction when most people didn’t even know what NFTs were. I like how basketball has really made Topshots its own thing. You’ve got Shaq, Tyrese Haliburton and all these other players talking about it. I expected we’d need to prove things out over a longer course, but I’m so excited it’s happening this quickly!”

Sriram: “Kayvon - you are at the heart of crypto art. What is motivating collectors?”

Kayvon: “Collectors - as we’ve mentioned, its a totally new behavior on the internet that we’e never had before. All these incredible art works have lived on the internet with millions of likes, but now theres an opportunity for a true fan to come in and actually own that work. This creates a whole new relationship between the colelctor and the artist. Once they buy one, they feel how authentic that connection is, and they wanna go off and support other artists. In crypto, there’s this general desire to be the first to move, and you see all these artists and now you can own their work. It’s a very real feeling. I’ve collected from over 10 artists and I have a far deeper connection with them now because of this technology. It’s a special moment and I think that why this room is packed right now.”

Sriram: “Kevin, as the author of 1000 True Fans, you are one of the first people to understand the power of small communities of people. What are your thoughts on this?”

Kevin: “I wanted to explore a paradox I see emerging—it’s based on a general trend in the past couple of decades in the digital world moving from ownership to access. As it became clear that we could reach for any music, from anywhere in the world at any time, it started to become less important that you own the music and more important that you have access to it. The same is true for movies. Owning a DVD became a liability. The benefits of ownership have continued to decrease and the benefits of access have been increasing. NFTs is changing this. Most of the things that the majority of people buy are not resold. They’re worn out, discarded or we forget about them. We’re now going in the opposite direction of the general trend that we’ve been seeing.”

Chris: “Another important point is creator economics. Justin—I’d ask you about this, I believe for every million plays you get on Spotify you get around $1,000. The access models have not been great for the musicians/artists.”

Justin (3LAU): “You’re 100% right! Over the past decade, all of my income has been from touring. This is because the fans get an exclusive experience that they can only get once at that moment in time. What’s interesting about NFTs is that all of this media creates emotion in people and we can now capture the value of it—something that has been impossible since the inception of the internet. There have been a bunch of weddings from my fans where they’ll walk down the isle to my song ‘How you love me (acoustic version)’ and they’ll literally send me videos of it. It makes me think “Wow, the fact that I could create that emotional value in their lives, but theres no way to capture that. Is the emotional value actually worth that 1/3 of a cent per play if you really love it?” That’s why I’m excited about NFTs—when you own something, you have a different feeling about it. What are your thoughts Marc—I know you wrote about this in the past?”

Marc Andreessen: “An example is—Sriram collects sneakers he doesn’t wear. It’s like $5 of plastic at a $300 retail cost. There’s $295 of what? It adds up to emotion, a feeling, a sense of tribal identity, self expression, and being able to appreciate aesthetics, art, and culture. These examples aren’t new—if you go back in time, this is the origin of art. Once we have our material needs taken care of is when we start to think about what it means to express ourselves, be human and what things are most important to us.”

Sriram: “Baron—what are your thoughts?”

Baron: “I think the most important thing we’ve talked about is ownership, passion and emotion. Something that people feel holds a special value to them. For me, whether its a sneaker, a trading card, clothes, or digital art, they all play a part in the theme and narrative of your life. As a young kid, I grew up collecting basketball cards. I still have those today, cause it was my way of interacting with the NBA. Topshots allows my kids to interact with the NBA but hold on to the memory of that. Imagine Vince Carter having the ability to have ownership in something he created and he can authenticate and fans can be a part of. We are in a time where digital is actually taking shape, and there’s tremendous opportunity to help build the new infrastructure and a new time capsule for the future.”

Marc: “Think of it this way. In today’s world, it has become easy to make prints of original artwork that looks very authentic. Ask an artist this question: do you feel like your art is worth less because people have the ability to reprint? Is the Mona Lisa worth less today because of this? Of course, the answer is that the Mona Lisa is worth far more today”

Kevin: “Do we expect most of the music in the world to be collected and sold?”

Kayvon: “Massively so Kevin. The internet democratizes; we’re all so connected because of it. We’re moving into a world where everyones gonna have an art collection. I know it sounds pretentious, cause so few people can afford it but in the internet sense, everyones gonna want an expression and identity. We’re rapidly seeing it adopted at a compounding rate. I don’t know when we’ll hit the inflection point, but it’s happening. Art collection will be like your online identity.”

Dylan: “What is art? I’ve been observing since Fall 2017—we went from art, to games, to speculative communities, to art again. We’re going to see people really engage with communities they really care about. NFTs will be a way to have financial incentives attached with the fandom of their media, art, etc. It will end up monetizing creation in a different way. As we’re seeing—if you have financial incentives it creates rapid adoption. The communities and discord channels popping up are really interesting. People like 3LAU put out more art, those communities will continue to grow. Over time this will become even bigger as we get into gaming and talk about the meta-verse.”

Roham: “It’s important to note that this is not just about ownership, but also access. NFTs are keys owned by person who buys it—rather than living on 3rd party platforms like Facebook or Ticketmaster. Therefore artists can now sell directly to fans without being controlled by some large entity because the relationship is direct.”

Avichal: “How will this play out for creators?”

Dylan: “We’ve hit such an inflection point in people adopting and collecting NFTs. We’ll first see a bunch of independent creators and then bigger brands and franchises. This will come in waves, or “hype cycles”. Over time, if you can maintain your community, it will be really powerful. But this technology is definitely here to stay.”

Aarthi: “Kayvon, as the Founder of Foundation, can you tell us your thoughts?”

Kayvon: “Creators are driving this revolution. The money is attracting a lot of attention. The large institutions have a lot of hesitancy and are moving slow. This is a democratizing revolution. Of course there will be established players who will enter the space. However, a 20-yr old with a digital wallet can create a career without ever having to go through a gallery or a record label. Thats why I get up everyday.

Justin (3LAU): “I got 10x more texts over the past 4 days than I did for my birthday in January, and a lot of these people are executives and creators. Theres so many people focused on the numbers and not creating value. The legacy world is scrambling on how to capture this.” 

Sriram: “Mike? You’ve worked with old-school, well known brands - what are your thoughts?”

Mike: “To be completely honest, I’m quite new to traditional art world. Being a digital artist is a lot of client work and freelance work. Nobody was making a living off this before NFTs. But I am seeing fear and extreme interest in this from the traditional world. You’ll see a lot of traditional artist making their art more digital and digital artist making their art more physical. I think this is going to be equivalent of a single use case for the internet. This is so broad, there’s gonna be so many different NFTs. Established players will come in and if it’s a bullshit cash grab it won’t last. People will get wise about the difference between the two of those.”

Chris: “How do we want the next 12-24-36 months to play out. How can people contribute to a positive outcome. What are potential the negative outcomes?

Justin (3LAU): “My biggest fear is ICO 2.0 - I want to encourage people to buy stuff that actually makes them feel good and not what they think will make them a lot of money. We don’t need people buying stuff cause they think they can flip it. This is what happened with the ICOs in 2017. I feel a responsibility to the universe to say buy stuff you like, I’m never selling my BEEPLE cause I love it. It’s such a moment of history. Yes there’s gonna be speculation. But please, buyer beware. This is a new age, and it’s not about making money, its about expression.”

Mike: “It’s very speculative right now, but to compare this to the early days of bubble. It wiped out a lot of the crap but it didn’t wipe out the internet. There will be a ton of crap and some people will lose money on that. But it won’t wipe out NFTs. The tech is agnostic and powerful enough that it will last.”

Justin (3LAU): “People are using NFTs for self-expression. People’s taste will become a part of their public profile. NFTs creates this opportunity for people to own digital assets that are interoperable across the internet and it represents peoples taste.”

Aarthi: “If you’re new to this space, how do you get started?”

Kayvon: “I imagine most listeners are watching creators they’ve followed for years experimenting. You have an opportunity to watch what they’re doing. This is a new form of patronage. Don’t go into it to make profit. For a lot of people: There are pieces they’ve wanted to own for so long and this is finally an opportunity to do it. I’ve spoken to many people who love the idea that they can own a piece that the creator is selling.”

Scott: “Ethereum is the peace/love/rock-n-roll branch of bitcoin. A lot of people wanted to build things. I think being part of this digital renaissance is very much in the blood of the Ethereum community and there was the CryptoKitties thing that drove a lot of people to learn more about it. Now that it’s roaring back, everyone who was part of that mini movement is now leading this movement. Theres a lot of people who want to build the tech behind these projects. If there’s people out there who want to get involved, there’s a lot of open projects being built so instead of just being a consumer you can be part of creating the infrastructure.”

Sriram: “How far are we from a world with millions of transactions?”

Roham: “We still have traditional scaling problems. When talking about 100s of millions of people and millions of applications - I don’t think we’re that far. However, we’re single digits away from being able to handle a considerable amount of volume. Look at NBA TopShots for example. I think the rate limiting factor is ideas that get consumers excited rather than the infrastructure.”

Aarthi: “What do you all predict for this space in the next few years?”

Mike: “I think this will be the next chapter of art history: allowing true collection of digital art. People will look back and realize that there was no way to collect it in the past. We’ll see major players and trends, and we’ll see a lot of movement. Exposing digital art to the broader market is going to be interesting for everyone.” 

Justin (3LAU): “Half of the top artists on Spotify are inquiring about this? In a few months we’ll see a lot more artists building and releasing NFTs. The biggest people are about to enter and this will create a lot of opportunities.”

Baron: “The future is in collaborations. There will be a need for trust. Our future is super bright.” 

Kevin: “If this becomes a dominant form of art, we should see trillions of NFTs.” 

Dylan: “Like I said earlier, NFTs will be the cornerstone for artists and their communities.”

Here are a few of the most widely used marketplaces for NFTs: