Arbitraging Culture in Size | Meltem Demirors

Transcript

this episode is brought to you by Circle the issuer of usdc which hopefully as you all know is the preferred stable coin of digital Natives and crypto natives with over 1.5 million holders globally you'll hear more about usdc later in the show [Music] so one of the really interesting things is We Believe culture is kind of the submergent property but it's not culture is created culture is created by people who create the content it's created by people who monetize the content is created by people who own the algorithms that enable you to discover content like this idea that culture is somehow an emergent property is [ __ ] in in many ways there are emergent cultural movements

from time to time but the the process of creating culture is across the very well studied it's very influenced by psychology [Music] all right everyone welcome back to another episode of Empire uh when Kane came on the show uh he called himself the benevolent dictator Melton today seems to be calling himself d-gen princess Melton is that what we're uh calling you today I I use this on Riverside um a while ago and I guess it's just it stayed it sticks it sticks it's a good uh it's a djan princess that's a good bear Market name um markets we're versatile yeah no we're versatile here yes a lot of utility a lot of utilities Max utility exactly

there are two big things I want to talk about today and then I have a feeling knowing you that this conversation will go in a bunch of different directions um you uh there's one idea which is like that you have um that I've heard you talk about which is like all we're doing this is this this whole thing all this has been in crypto is just a big story about Market structure and all this all like all we're doing here is just building probably what maybe you would call like more efficient market structure uh new forms of Market structure Market structure around things that I've never had a market structure around them so I want to talk about that idea and then you also have this um idea around arbitraging culture and uh you more than maybe other people uh that I know have been probably ahead ahead of

the curve uh when it comes to Arbitrage and culture so those are the two big things I want to talk about you have this great piece on nft microstructure that we'll put in the show notes that I would recommend people um read but maybe Melton if you could start out just like what what do you mean by this is this has always been a story about Market structure what do you mean by that yeah so um I think when people first get into to the crypto space crypto has its own syntax its own language and we love inventing new words and phrases and terms um but at its core what I think has always been so fascinating about taking assets and putting them on a global permissionless incredibly neutral settlement medium is

um basically the way that markets normally are are constructed right is you have people who want to buy and you have people who want to sell these people need to find one another figure out the price at which the trade will clear the size in which the trade will clear the trade happens and then there's this whole workflow that happens once you match that allows the trade to actually get executed the trade to get cleared meaning both parties agree on settlement then the trade actually settles which means assets swap hands and then there's post-trade reconciliation after the trade you account for it you do all your a little paperwork everyone's happy trade is done what's really interesting and that's the world I operated in for my seven years

my career before crypto and then when I came over into crypto what was really cool and at that time it was only Bitcoin what's really cool about Bitcoin is you didn't have to construct any of those layers um once you matched with someone right you could do everything on chain and so one of the really cool things if you think about Market structure is for the first time we have all of these really interesting interesting pardon protocols with different features different attributes that allow us to effectively create really efficient automated markets um using this underlying substrate and so the crypto story in my view is and

has always been a market structure story I think the challenges is a lot of people who are in crypto don't come from a Market's background so the way they understand it the way they articulate it it's like Engineers discovering like markets and finance for the first time she's not a criticism but it's just if you're like in electrical engineering compsi you're typically not you know trading markets and if you're trading markets you're typically not doing comp PSI there's a rare crossover of people who do do that and those people believe it or not are the people who got into the coin in 2012 2013 and have been incredibly successful because they understood that market story but I think the one of the things I'm really

passionate about is teaching people helping people understand what Market structure is and helping them understand what the implications of more efficient more Global uniform Market structure looks like um because the opportunity is absolutely massive and everything everything has a market the other cool thing is we can give things that have implicit value explicit value now which is where the culture Capital component comes in but we're constantly pricing things all I'll die right like your audience is deciding whether or not they want to listen to this podcast there's an implicit utility function calculation they're doing right like everything has value to us the activities that we've seen and spend time on our attention the things we care

about things we spend money on they all have value we now have this really cool capability to try to articulate that value in new ways and then apply this Market structure to it so again it all goes back to Market structure which I realize people are going to get very tired of hearing me say the words Market structure I apologize in advance but it is really it's a market story yeah it's an interesting point you bring up Malcolm I'm curious to get your thoughts on the common criticism we hear is this is all speculation and you know why should nfts be worth X and why should tokens be worthwhy um I'm curious like especially now in the bear Market where things have come down a lot this we keep hearing this criticism over and over what would you

say to those folks that are very skeptical of just calling crypto just a pure speculative asset class has no value has no worth and tying that in with Market structure it's into a part of how markets work a lot of people when I talk to them about crypto or what I do or what I'm excited about they'll say melt them that's great but I live in the in the real world I work with real assets and real companies so there is um I think Santi to your point this interesting perception or this interesting bias like a lot of people who got into investing read Benjamin grams the value investor right I grew up in the world of

corporate finance so the way you evaluate a company is on the basis of balance sheet cash flow and income statement right those are kind of your Three Holy Grail documents and in corporate finance and so there is I think this really interesting again question about utility particularly for people who operate in the world of Commodities or equities or bonds or or fixed income they operate in this world where things have a very concrete defined function they understand the utility um and I think the challenge for them is again if we think about the field of corporate finance we think about the field of just economics and and investing more broadly that is a science

that is a discipline that has matured over the last 150 200 years arguably even before that right we think about Costa's theory of the firm we think about all of these Innovations and these fundamental truths that we now take for granted when it comes to the world of stock companies and understanding companies that generate cash flow crypto is in bitcoin's 13 years old the almost 14 13 years old ethereum is about five years old six years old um and these new Protocols are a couple of years old so there is this New Concept that is emerging and I think with cultural capital it's even harder right like how do you value an audience how do you value

a tick tock how do you value a piece of nft art how do you value a pfp how do you value a meme and so this idea of real versus unreal is very much in the eye of the beholder because again we have very subjective utility functions what could be real very useful to me is something I'm willing to spend money on is something that another person might look at and say absolutely not this is worth zero so there is kind of this interesting belief that people outside crypto have that what they do is somehow more real but I think again this is like a very subjective cognitive bias and one of the most important things that we need to do as an industry is help dispel some of these Notions that somehow markets are more or less relevant or more or less credible just because the

assets they trade in or the assets they deal with are well understood or not well understood again if we look at the stock market right people talk about like oh well I do real things I'm like well look in the last two three years we've had a number of companies who've gone to Market who produce nothing of value who are trading at 1500x forward p e price to earning multiples and you're gonna sit here and tell me that bitcoin's not real I have news for you my friend I have news for you my friend like the legitimacy and credibility of of something is not bounded by Your Capacity to understand it and again a market gets created Santi when there are people want to buy and people who want to sell and so there are people want to buy and

people who want to sell it could be something as dumb as I don't know what's the what's the latest meme coin well uh didn't someone launch a horse coin I mean probably yeah so so again um you know are those markets real well they're very much real in the sense that they're buyers and they're selling their selling price at which those trades are clearing and there's there's real money moving around so again I think we have to move away from this very dated idea that markets are defined by traditional assets that we can value using formulas and standard formats um there are aspects of this that are

going to take time to develop but at the end of the day like real and unreal is highly subjective at the end of the day back to markets if there's a market for it it's an asset it might not be an asset you understand it might not be an asset you value but if there is a market for it if people are buying and selling it if there is volume if trades are clearing that is a market and people who are early to Emerging Markets or new markets or new asset classes can extract a lot of value from those markets and so I think a lot of people who dismiss crypto who dismiss nfts who dismiss meme coins are missing the broader narrative now does it create value for society also highly subjective right um but these are again very difficult

questions because they deal with people's individual utility functions as opposed to a societal utility function right which even that is difficult to Define if we look at the state of the world today and how different countries are prioritizing how they allocate or have historically allocated resources and the impact that it's had on on the global economy and on inflation can we actually talk about that for the speculative impact on society because I so I think when equities investors kind of uh [ __ ] on bitcoin or or eth or something like that it's quite comical because when you look at a lot of I mean stocks used to be a function of the ability to vote and influence the company and uh cash flow right like in the sense that you would get dividends from the company if you buy if you buy

Facebook stock that is a purely speculative speculative play you have basically no voting rights and you have no uh you get no dividends um but Facebook stock Yano doesn't trade purely on fundamentals right there is no sub formula that says Okay Facebook is going to trade at a 15x um no I agree with you it's purely speculative in my mind it's you don't we call it like animal spirits right that's the the classical articulation of it like animal spirits but it is all markets are speculative by their very nature I I completely agree I completely agree so there used to be these baked out markets uh markets are on Commodities and companies with equities right um and I guess you would argue fix uh fixed income as well then you got these

things with like with derivatives um where you have these uh which created a massive Market on top of on top of those we haven't been able to bet on culture though in the way that people have been able to bet on equities and commodities and fixed income and things like that what does like why is that exciting to you to be able to Arbitrage because the market is just making money in the market is just some sort of Arbitrage usually so uh or betting on something going up or betting on something going down so like why why is that exciting to you and like what does that unlock yeah so I do think we have ways that we historically have arbitraged culture right or invested in culture so to use the perfect example Facebook when Facebook acquired um

Instagram right Instagram became part of that platform and Instagram started to grow as the primary platform for influencers right who I liken to modern day shamans um those influencers a good way to bet on their reach was potentially to buy meta stock right another way um there's actually an influencer in Italy the blonde salad Sheriff Ronnie who took herself public she created a company she took a public she's one of the first influencers who has publicly traded staff you do this also when you buy Collectibles right a lot of billionaires one of the assets they love to own is the sports franchise why because there's a limited number of sports franchises in

the world and they've gone up consistently in value year after year after year so these markets for culture have existed for a very long time and if you own pieces of culture culture does create cash flows which is one of the things people don't understand it could be direct cash flows which is what we're seeing through like the selling of merchandise or tickets or events there are a lot of different like in a way block works right like you sell crypto culture your channel is Media but you're effectively selling access to cryptoculture and knowledge which is a form of culture in my view um and then you have more indirect ways of monetizing culture which is through clout and the crypto Community is huge on clout because they're all on Twitter

we're we love dopamine and we're addicted to it it's why we fly around the world to conferences it's why we spend a lot of time arguing about monkey pictures on the internet um we we love clout and so clout is like an indirect way that you monetize culture and your proximity to culture and so what's been really interesting to observe is we've gone through these sort of evolutions of the different ways that people monetize and capitalize culture and it started with collecting art right then there were brands that started to build up IP um they also capitalize on culture then with the Advent of the internet there were different companies that were facilitating cultural exchange of different types and so those companies

captured values people saw those platforms as a way to sort of benefit from the monetization of Internet culture whether it's Unique Niche subcultures or more broader like broad mainstream cultures why people invest in media companies we see it with the growth of investing in franchises and and Brands themselves and now I think what we're seeing with this idea of web3 or this new articulation of culture where people can issue tokens or pfp nfts that allow people to belong to culture in a very public way that is the next step in the monetization of culture and each successive wave I think of Technology Innovation gives us new ways to monetize and make this cultural capital more tangible um because at the

end of the day again everything converges to to markets and so what we're doing effectively is we're finding more efficient ways to monetize this cultural capital we're at iteration like six or seven of this there will be many more iterations of this over time and this is why I love reading sci-fi you can watch Black Mirror you could read sci-fi books there are a lot of books that sort of talk about this you know having Futures markets for your reputation having markets for clout like these are these social scores right these are not new Concepts they've existed for a long time it's just now we're at a point a society where we spend enough time online we have the tools we have the capabilities and most importantly I think we have the mindset and the understanding to actually

articulate what this might look like and how this this might work from a functional perspective scary but also exciting it depends on where you sit like totally I guess what you're saying is like there's like a lot of companies going back to your example of like look I mean intangible show up in the balance sheet in a very meaningful way for a lot of companies like apple has like billions of dollars have been tangibles when you acquire a company use Nike sponsors a bunch of athletes they show up as intangibles now and then they trickle through the income statement because you know they're sponsoring LeBron James and or Air Jordans have created this billions of dollars so I guess what you're saying is you're now able to crystallize and perhaps have better price discovery on that

intangible because all of a sudden you're connecting culture to these like untethered Capital markets that we call crypto where anyone can bid on if you melt them were to decide to do the Degen princess you know 10 000 pfp drops not suggesting that you do but if you were to do it then you can have perhaps is what you're saying is you can have a price on your brand today and in real time and people can then speculate on that on what you're doing now and in the future and 100 yeah and it's it's sort of like isas our income sharing agreements which we talked about a lot in crypto maybe two or three years ago and there are companies like fairmint and others that are attempting to bring the ISA model into startups for Founders and early employees

um but I I do think again if you're able to spot cultural movements early and if there's a way for you to invest in them and own a piece of that cultural movement which you can do now with crypto right I would argue meme coins are just cultural capital but in the most sort of degenerate format um again what it opens up is the ability to create new markets for this cultural capital and at the end of the day like this is all a very large markets story because all of a sudden you're dramatically lowering transaction costs you're enabling more efficient price Discovery and you're enabling the formation of a very efficient Capital Market without the need to go out get your contracts listed at different

brokerages get traded on a bunch of different venues there's one venue there's one market there's a massive pool of liquidity and it's really easy to access all you need is a wallet an internet connection and the ability to open up a DEX and you have a market that's that's incredibly powerful you've never been able to spin up markets so efficiently but before right historically it's been you have to create a physical Market or you have to work with existing Market venues or you have to create an entirely New Market if we look for example at Collectibles right you have to go to stockx or you know one of these these marketplaces to trade in these assets but what if

instead of going to stockx and actually physically trading in like the new Nike Nike donks I could buy a speculative Market on the Nike Dunks that's what I used to do on poly market right you could uh you could bet on prices for hot new sneaker drops so I think it was like the Nike Air Force mochas that came out like maybe two years ago I bet on what the second secondary market price would be and so I was able to trade a derivative of a culture Market completely in crypto and without any sort of tethering to the physical underlying and so again this is really um Market structure and market efficiency story

and it sounds so boring and so unsexy like it's really really exciting I get really hyped up about markets and if people ever want to get really excited about markets um there's a great uh book I think it's called Confessions of a ticker tape operator that goes through like the early formation of the stock market and what it was like when people were still trading like physically on a floor which when I started trading I was trading over the phone we were still doing voice brokering it was super [ __ ] exciting you'd sit there I had two handsets sorry talking in a one I had my Blackberry you know I was like it was exciting it was electric he felt a lot if you had to do deals on face to face over the phone you'd be screaming at people it was really fun um say I

highly recommend that book I promise it will get you really excited about markets or like if you're a nerd and you like like watching Wall Street and sort of these old school 1980s 1990s Finance movies like it's cool it's really cool it's really fun yeah I want to get your take on on utility because it's something that is either it's the projects that emphasize or need that they need or they feel that they should always promise a lot of utility do we need to have utility uh because clearly when you're betting I mean betting has been around for centuries people like to do it it's fun people go to casinos they do derivatives whatever um but I'm curious to get your thoughts on that because it's a common criticism of of nfts of crypto it's like what's

actually and you mentioned this earlier what's what's the value that's being created here yeah um no I think utility is one of these words utility and Community are two of my least favorite words because they get thrown around haphazardly and they mean objectively nothing because utility is highly subjective right so if we look at an nft this is why also by the way the only nft communities I've been really active in are etherocs zero utility no road map just culture and crypto dick Bots no utility no roadmap just pure culture that's it I think the issue with utility is what is the utility of owning

a pfp JPEG what is the utility of owning an art blocks piece of art the utility is me flexing the utility is me belonging to a community your utility is me making a statement about who I am it's like why do people buy Rolexes why do people buy Mercedes why do people buy birken bags my birken bag doesn't have a utility it's a handbag right I could buy one for five bucks I could buy one for 50 000 bucks it doesn't change the objective function of that item but what it changes is my cultural capital and how I believe I'm perceived and how I present myself to the world so I think a

lot of these projects that are getting caught up in utility like building metaverses are allowing you to own your IP like there's a great debate the other day say I own aboard a and I have the IP rights to my ape and I get my a printed on a hoodie what value does that hoodie have to anyone other than me zero dollars right I'm not gonna be able to auction off a hoodie with a picture of an ape on it for hundreds or hundreds of thousands of dollars so I think we have gotten into this trap of like oh we need utility what's the utility and it's like no that's the wrong question the real question you should be asking is what if the what is the persistent cultural value of this meme or of this art or of

this idea that I'm a part of right for me crypto dick bets are very simple it's a dick it's a bot they're cute they're funny dicks and butts will always be funny we're all five-year-olds at heart and so like it will always trying so hard to hold back the laugh and the smile right now he's fine now listen listen I you know I collect very little very few nfts other than punks I do have I do have a bag of crypto dick butts wow One D equals one beast on D there we go I didn't I didn't realize you knew math yeah Universal math yeah yeah and and so this is this to me is what's so

interesting because all of this utility I think the only thing it does is it creates expectations that actually lower the value of these projects right and punks are another great example Santi like the only value of a punk is is pure flax like you are a tasteful [ __ ] oh why thank you no I mean I I do agree with you it's sort of like collecting Pokemon cards and I mean humans always want to differentiate and now you can do it in a digital context with an immutable Trace in a sediment layer that you have certainty of it go try buying a watch in the secondary Market how do you know it's authentic it's a pain in the ass yeah but this is also I think one of the things that will start to matter is the provenance of your nft so right like in

five years from now when you are the next Warren Buffett and everyone's like oh my God it's so empty um people will want to own your punk your punk will have more value because it was owned by you similarly one of the things I'm really excited about with crypto dick Bots is creating canonical like globalized law around crypto dick butts which I've been doing as our quote-unquote high priestess which has been really fun um but then also creating individualized lore around your dick buds so there's a really cool company called hype that allows you to create lore nfts that you can attach to your nft and so if people start to write stories about like the personality of their story of their about their traits then there are dick birds that have really cool stories that could potentially have much more value than other dick butts simply because of

this cultural cachet and so these markets yes they're a bit strange they don't immediately make sense but I think if you live in the world of the internet and you understand how internet culture works like I grew up on Fortune and then something awful this makes total sense to me welcome to nfts expand do nfts expand Beyond like I think for anyone who's in crypto in 2017 they remember the like nfts for uh you know like all uh tickets event tickets are going to be tokenized and then nfts got big and everyone's like oh see this is the solution it's going to be you know all these all these event tickets are going to turn into nfts and like when you hear those kind of ideas do you kind of laugh and it like reminisce on

the 2017 markets do you are you like oh yeah that is the future or do like our nfts just uh uh deeply efficient markets or hopefully soon to be deeply efficient markets around culture um okay so that's a complicated question I think nfts so one one of the things so just talking briefly about the technical distinction between a fungible token like an erc20 and a non-fungible token like an ERC 721 I think one of the challenges with nfts and a lot of um illiquid asset classes that are non-uniform right like Collectibles like art like wine like real estate is the money-ness function so an erc20 token because these assets are fungible interchangeable for one another they

take on this property of moneyness meaning they can be used to store a value although arguably no cryptocurrency has achieved star value quite yet um but primarily they can be used means of Exchange the challenge with erc721s is because they're non-uniform they don't have the same property of moneyness they can't be used as medium of change or unit of account because nfts have a wide price range real estate has a wide price range so that's really the fundamental distinction is this property of of moneyness um so the the challenge comes in for me I think when you you look at the nature of how you like value this this money-ness or just do price Discovery generally

um something like concert tickets or even like a unit swap LP position that's an nft you're utilizing this property of uniqueness um to basically put assets that are different on chain now people are dealing with peer-to-peer loans which I think is pretty cool like each loan becomes its own unique asset that then could trade in the secondary Market great but these things are not imbued with cultural capital these things are just different ways to represent existing Financial assets so I think there's a fundamental distinction between utilizing an ERC 721 to bring efficiency to a item right that already has sort of a defined value like a concert ticket has an X3 right it's kind of like

elongated call option where it increases in price as you get closer to maturity date and as of the maturity date it expires worthless because the concert tickets exercise I don't think people are going to trade like concert tickets stubs although who knows I've been surprised by weirder training in the market so who knows but I think one of the the fundamental distinctions you have to make is like what what are we trying to accomplish and so leveraging the ERC 721 format to enable something to trade more efficiently is very different from actually creating a new type of asset and capturing esoteric value in a tangible way if that makes sense and that's like a very granular and very subjective distinction I probably did

not articulate that well but to me it's very different there's like a very big difference between owning a concert ticket or owning um box tickets to a Mets game and owning a crypto dick butt very different things all right everyone time for a quick word from Circle and uscc as a crypto user you know the power of stable coins dollar digital currencies that transcend borders banking hours and Legacy Financial rails while circles usdc has quickly become one of the most trusted and widely used stable coins it's simple people use usdc because of its composability its stability and its Reserve transparency and uscc isn't just adopted by a few of us defy degens and

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you want to learn more about usdc I would recommend you check out the recently published transparency Hub on circle.com it's a great update to circles content on usdc it outlines everything from links to their weekly Reserve reports monthly attestations blog posts that are written by their exact team that highlight how and why usdc was built the way it is really recommend it just go to circle.com backslash transparency to access it now let's get back to the show Where do you um other than perhaps I mean I guess like specific to culture what are you most excited about these days other than perhaps just pure nft drops or maybe a project you're there that you're

not excited about nfts to be honest I think most nft communities have zero substance um because precisely for this reason like people expect utility and I think one of the challenges for nft communities and nft projects that raise a lot of money it's like okay you did your initial sale you made a bunch of money you sell a derivative you make more money you sell merch you make more money you sell tickets to an event you make more money but you're constantly monetizing the same Community right and I think one of the really important things about grade IP is like when Disney bought Marvel right they bought a universe of 5 000 characters and I would argue that Stan Lee who created sort of the Stanley created

Marvel right uh yeah I think so yeah yeah he created the Marvel Universe like he's the original Mastermind behind that I only like DC is the Lesser metaverse in my view like this is a metaverse alternate universe um brilliant right all of these characters all this lore all these stories when Disney about that IP they were able to monetize it in a variety of different ways far beyond the core audience of people who would buy Marvel comic books right so they created movies the movies had spin-offs they created merchandise like now they're selling out movie theaters the most popular genre of movies over the last few years has been um superhero movies sorry I'm losing my airpods superhero movies right they sell costumes they

sell swag they have merch lines they go to theme park and you can have a whole Marvel section of the theme park so a brand like Marvel is incredibly valuable because you can take that intellectual property and it's broadly extensible and you can sell it in a variety of different ways a monetize it in a variety of different ways the challenge to me with nfts and particularly a lot of these like 10 000 animal derivative collection pfps is how do you build these concentric growing Circles of monetization at different price points around these nfts number one the nft is largely inaccessible right and nft that costs five thousand dollars or one eth even right which right now is like

thirteen hundred dollars that people in crypto seems okay but like the average person doesn't have thirteen dollars lying around to buy access to to culture right they have maybe like 13 lying around although in the New Economic climate maybe that's like closer to five dollars so the ability for these products so you have this community of ten thousand holders who are the Insiders how do you spread that culture and how do you monetize the spread of that culture outside of that initial core group and that's what I'm not seeing yet and people are like oh we're gonna make a show oh we're gonna do this we're gonna make a restaurant we're gonna make a theme park and I'm like great I don't want to go to an ape theme theme park I don't want to go to Doodles theme theme

park because the culture is not relevant to me it's a very Niche subculture for a very specific group of people and it's simply too small right so what we're really counting on is the ability for these communities and these projects to grow their cultural cache and their cultural relevance but the way that they're doing it is completely inaccessible to broader audience and so to me I'm just very skeptical of like how you take something that says Nisha esoteric as a pfp collection and turn it into a rich Universe to me it kind of starts with the inverse which is why I've really focused on lore and storytelling with crypto dick butts is you typically start with a great story

and great characters and you work in the other direction you you don't start with characters and then say okay we're going to try to build culture and a story around these characters it's generally not not done that way so yeah I don't know how it's going to shake out but I would say like these early iterations a lot of these projects will pivot into trying to provide infrastructure for other IP plays right but at the end of the day as an IP asset as an intellectual property asset or as a subculture that can be monetized through these ever-growing concentric circles at lower price points that reach more and more people in larger and larger audiences I don't think I've seen any projects in the space that have had the ability to translate Beyond these very small niche subgroups there's a lot there that I

want to unpack and I guess the common umbrella there is IP um and I'm curious to get your thoughts on on how you on we've seen various iterations like creative comments and then others that are more guarded and then others that have transitioned like yoga labs and punks I'm curious what you think of Ip if that really matters uh when it comes to culture and and encapsulating that I guess in this world I'm just curious to get your general thoughts on on IP yeah I'm not a lawyer I still preface anything I say I was like I'm not the expert on this I think Galaxy wrote a great research piece on the different licensing models for intellectual property related to nfts I find IP loss so incredibly boring but it's one of the things that makes

America like the preferred place to operate a business is we have really strong rights property rights we have really strong intellectual property right so we have a court system that is demonstrated um it's willingness to to defend and uphold those property rights and intellectual property rights that being said I when I say the word word that the term IP is probably a little bit of a misnomer um the IP in this instance is like what is the unique asset what is the unique thing these communities have right and to me it's in order for something to become culturally relevant memes are really important for the transmission of

cultural ideas and I think one of the challenges with IP rights we saw this with Kevin Rose and moon Birds right when people started creating Moon bird derivatives and he was like I'm going to sue the [ __ ] out of you and he got a bunch of the Moon bird derivatives delisted I actually think that made Moon Birds less valuable because memes and imitation right is what makes the original more valuable why do people Flex Rolex is so hard it's because everyone wants one but very few people can get them right so the imitators are actually making your item more valuable right right it's like you have Gucci and you have YouTube or Gucci so um I think there is sort of this question of okay how do you how do

you actually make this culturally relevant and culturally valuable and I think it's really difficult to do that if people can't replicate it and create memes around it and extend the meme and today the most popular method for transmitting memes on crypto Twitter right is viral meme tweets so if I can't viral meme tweet if it's not easy to make funny memes out of what you're doing like how do you make that scale right how do I transport my nft into popular culture like memetic transmission I need to create memetic desire in people whether that's through humor serious cult identity you know I think Moon painted brilliant job giving a bunch of

celebrities board Apes because I made them more desirable and then other people started buying them because they wanted to be relevant but it's like okay now that you've given you can give every celebrity in the world aboard ape what do you do next mm-hmm yeah how do you scale that to a million people 10 million people a billion people yeah exactly and that that's where I was going more with IP not so much like the different type of licenses but more like striking that balance between having the community really bought in and feeling like they're a part of it versus being really guarded and monetizing it um like I came around this company that's trying to like create like it's called Story down they're trying to like kind of transform the entertainment

industry by allowing like amateur content creators to to like Bottoms Up create like really good films um and I don't know I I don't know if like I'm not an entertainment person like I'm not an expert on it but I'm like I was cautious about like this idea of like allowing people to like kind of like okay the community but like create can the community create really good content like that is going to be on Amazon or Netflix or you're going to want to like stream it's something that I'm like not really sold on yet like I'm curious um I ultimately think you need to have like really good experts and it's fairly centralized like how you go about that process yeah what like communities require leadership

and the leadership has to have Vision but also for culture to spread people need to be able to take aspects of that culture and replicate it in a relevant way within their unique sub community that they're a part of for the idea to grow right like the way we transmit ideas the pneumatic transmission of ideas is very much in a digital format it's internet driven there are aspects of virality that we understand and there are aspects of reality that we don't understand but at the end of the day it's really about like how do you make something as relevant as possible to as many different niches and sub communities and demographic segments as possible and that's where I feel like crypto really falls on its face because what we're doing is not accessible is

not relevant to a lot of people I think nfts definitely took that like from tokens to nfts nfts opened up a much wider aperture particularly like sports um entertainment media I think are very fruitful Avenues but I think they're still inaccessible um I'm curious to see what's going to happen with Solana nfts I think if we look at volumes on Solana nfts and if we look at you know magic Eden volumes now competing with open C volumes um that's interesting because Solana nfts are at a much lower price point transaction fees are much lower I think generally they're not as Elite as ethereum nfts which I think can make it really attractive

um and again what okay what it goes back I have an idea on so I I actually I think I think there's a world I was talking to a 19 year old like big um Tick Tock influencer yeah and he goes he goes he goes nfts are Boomer nfts he goes Solana he's like why would anyone he's like we don't want those those eat like those eath Boomer nfts we want Solana nfts and if you actually look at the it's really hard to get like um aged like almost like web 2 data on on crypto stuff right like age and like where people live and stuff but if you look at a lot of the people trading Solana nfts they're the it's the Gen Z The Tick Tock crowd it's not the maybe 30 and over like Instagram crowd yes because people don't have thirteen

thousand dollars thirty thousand dollars 130 000 flying around to like buy these nfts that's what I think people in crypto don't get it's like that's a that's a lot of [ __ ] money that's a lot of money I have precisely like thirty dollars left in my wallet after I pay rent and whatever other expenses I have so I think again going back to Market microstructure just turn it out for a moment right Market migrant structure has really big implications for how things Price Right supply and demand have really big implications for how things price this idea of an nft collection being exclusive is a concept that was sort of pioneered with um these these early

drops but like why can't you have an nft collection that has a million pieces that doesn't mint out immediately and they're three dollars each they're five dollars each yeah are there any like different pricing models I think like Tyler Hobbs the guy he's really famous because he did like fidences and a few others like like art block he was experimenting with like like pay now mint later um I think we've seen like very basic forms of like just purchasing nfts and like 10 000 seems to be like the number the holy number but to your point it's not very accessible for mainstream adoption like we should be having a mindset of abundance not scarcity that

is historically been like the center of crypto which is scarcity drives value I get it but like if we're talking about like culture while culture spans billions or do you agree with that or would you say well no like crypto's just taught us that you could be very successful in monetize and create a lot of value from these micro culture communities or whatever microculture cosms and that's fine we don't need to go to billions of people like not everyone affords a Birkin bag either right that's right that's what makes a broken bag a Birkin bag right but then Target creates like a knockoff Kelly bag so for 30 bucks you can feel like you own that bag or you can feel like you have access to that style right so so

again what I think um I do think one of the things that crypto enables it enables very Niche sub communities to congregate and create and capitalize on cultural value right and a great example of that is um what are the Milady makers right these are like very Niche they are specific to very Niche internet subculture whether good or bad that's that's a different argument but they're an offshoot of a very specific internet subculture and they've been able to monetize that where they go from here like I don't know but yes you can monetize that initial very small subculture and yes it could be profitable but where the money actually is in all of

this is in the market owning the market infrastructure owning The Interchange owning The Lending owning the financialization in my view is where the opportunity lies that's what I'm investing in that's what I want to monetize I buy nfts for for fun for me it's like a helpful way to understand and contextualize what's happening and in crypto you learn by doing so like I do these things I try to create Cults around nfts because that's how I learn about culture and communities and the different ways that you make something a meme um but really where the the value is is in the underlying Market infrastructure and so that's why I wrote this blog post

on market microstructure for nfts because I'm like yo everyone's so obsessed with doing these nft drops everyone's so obsessed with finding the next big IP play I'm not an IP investor I don't know [ __ ] about intellectual property I know very little what I understand is markets the most profitable businesses in the world operate in interchange they run markets marketplaces and underlying Market infrastructure so what I want to own is not the nfts although like those are for fun those you know according to what I find valuable and I find interesting are definitely fun and have a lot of personal value for me but as an investor what I want exposure to is the market

microstructure that isn't just for pfp nfts or our nfts that is for utility nfts game nfts whatever we want to represent as an nft I want to own the underlying Market structure I want to own the price Discovery mechanisms I want to own the venues where these things trade I want to own the order books I want to own the margining I want to own the clearing I want to own the financing side and I want to own the settlement infrastructure I want to own the post trade reconciliation systems that people are using to integrate the accounting into their books that is a business that I will invest in a hundred times a day all day that is what consistently makes money bulb air doesn't matter the

asset doesn't matter it doesn't have to [ __ ] matter what you trade the marketplace makes money on interchange when orders match and orders clear we are making money and so I think again when you frame it from the lens of the Venture investor I just get very confused by Venture investors who are buying specific game IP or specific nft IP and maybe I'm dumb it's very possible or maybe I just don't get it which is happens all the time there are a lot of things I don't understand and probably will never understand but what I understand and what I think always makes money you look at human history the marketplace and so that's why I think like more entrepreneurs need to focus on market microstructure and

building Market structure and I do think a lot of these nft projects that raise tens hundreds of millions of dollars will very quickly figure out like the infrastructure we're building to support our quote unquote community and provide them with quote-unquote utility that's actually where the opportunity is to create persistent cash flow I was going to say where do you see the most amount of opportunities obviously you have things like openc it seems to me like those fees are trending towards zero as you've seen in binance and other exchanges where do you where one what are the things of the stack that need to be built particularly about nfts and you're an investor number and I sort of share your same view it's easier to bet on infrastructure than it is on a specific pfp but one of the things that have been built that you think are not

working that well and things that you're investing in or actively looking to invest in in this kind of piece of the market stack if you will yeah I think one of the really cool things we're seeing is on the front end on the exchange side a lot of um nft projects are building their own marketplaces I think board apes are going to build their own front-end Marketplace punks already have their own marketplace right um ether rocks had their own Marketplace interface they can only try it on the original website but I think there is this trend of instead of having these sort of horizontal marketplaces that aggregate a bunch of stuff having more verticalized infrastructure Stacks that are specific to specific nfts because again if these things are just protocols

there's nothing that prevents me from just creating a front end to access a protocol and then branding it with my IP right I'm making it the sort of place where people can come to consume this entire Market stack so I do think there's an increasing trend of people shifting away from marketplaces to embedding marketplaces directly into their IP into their Community into their own ecosystem so this is sort of this interesting trust this interesting challenge of horizontal plays versus vertical plays I do think one of the really cool things about blockchains it's much easier to sort of vertically integrate the stack because you have these composable building blocks right so I think there's a lot of opportunity around protocols that aggregate on the front end so price Discovery and

execution across sort of all these Global nft projects I think I was personally really excited about Solana Wormhole the idea that we could use Solana as potentially the execution layer for all this nft trading and then use ethereum as the settlement layer or wherever the nfts issued as the settlement layer right because you can do execution theoretically and anywhere but I do think price Discovery is a huge opportunity trade execution is a huge opportunity so how do you enable people to basically just build a front end onto Global liquidity protocol for nfts that's super exciting nobody's tapped into that yet and theoretically if all of these are sort of compatible assets you should be able to integrate them into sort of one

interest phase um you know swap acquiring did they acquire gem or Genie I always get this mixed up Genie I think they acquired Genie yes an open C required the history of that was so I'm an investor in blur so it's sort of a competing thing but yeah yeah but like I think it's really interesting that the leading Ducks acquired an aggregator and the leading nft Marketplace acquired an aggregator why because they're realizing like this note they have doesn't exist long term because Market microstructure is highly mutable in crypto and highly mutable Texas have proven that like I have zero loyalty to unislav

or one inch or any sort of Dex aggregator it's where can I get the best price execution best price or is the most liquidity right it's like if the best liquidity is on one inch I'm gonna go to one inch the best liquidity is on uniswap I'm gonna go uniswap nfts same thing right you see already these price dislocations between looks for our x2y2 and open C so I'm gonna go to the market that has the best pricing so I think there's a lot of opportunities on the aggregation side and on the liquidity side I think on the margin side we're still in the very early Innings of lending Primitives and margin is applied to nfts I also think um this idea that nfts are not fungible starting to get challenged like if it's not a girl it's a floor right and so I do think a lot of

nfts um will start to see more systematic uh trading strategies applied to them there's already a couple of people I've been talking to who are working on building Arbitrage driven nft investing models so effectively these are like statistical Arbitrage models um which by the way that is how Commodities become a huge Market that's how equities became huge markets it's through these active strategies that rely on these systemic price dislocations right and so that can bring a lot of liquidity into nfts but in order for that to be possible you need better Capital efficiency sorry I'm using a lot of like nerd Finance their terms but um you need to be able to get leverage on your your Capital right if I can only use the

collateral I have my return on Equity my return on Capital in my book is very low if I can borrow against it and use 10x the collateral I have but trade it like quickly in real time like what we saw with flash loans last summer in D5 then that all of a sudden allows me to increase my Capital efficiency by multiple orders of magnitude but it also allows me to trade a much higher volume this is how traditional markets function you can get like eight to nine X leverage traditionally crypto not so so easy yet although three arrows somehow mastered it by lying and double pledging collateral but you know potato potato um and then on the settlement side I think

um the settlement sites pretty well figured out but I think there are a lot of issues around post-trade reconciliation which like how do we make it easier for people to figure out how to integrate nfts into like all the accounting and bookkeeping that needs to happen not sexy super important especially for people who want to trade nfts at scale and in size like that step often is the most painful and it will preclude people from participating in these markets because your internal accounting teams can be like yo [ __ ] you we're not doing this this is too painful word yo [ __ ] you no literally even like investing Adventure right coin shares public lists a company trying to capture Venture Investments and on the balance sheet of public

listed company is really painful imagine trying to capture nfts if you have to do Mark to market pricing every quarter it has to go through audit right and then you have to do like a Black Shoals options pricing model to try to figure out an objective market value that takes into account a whole bunch of different factors you can't just like type in the nft go to Leica I don't know what's the leading nft pricing tool oh if you have like upshot you have uh a few others that are trying to do this I've met like six or seven different teams right it's been it's algorithm where you incorporate a

bunch of different data points is because it took our quad team through weeks to build it you can tweet at our back I think it's called at coin shares nftai you can tweet at it it'll give you a price for your nft what I'm hearing from you is you need like basically the okay so if you go back to 20 for the erc20s it's like the last five years is like you know everyone's trying to build derivatives options markets uh used to just be able to buy Bitcoin on coinbase then you could buy it and sell Bitcoin and coinbase then you can buy and sell Bitcoin and Ethan coinbase then 2017 you get all the exchanges then you start getting like uh the Lend and borrow uh like London borrow platforms you start getting like the Genesis of

the world the block fives of the world uh you get the Dara bits uh then you get start getting derivatives folks today all you have is like to trade nfts is open c um so it feels like like you have a couple of you basically have what are the equivalent to spot exchanges from 2017 yeah that's maybe a better way to say it but what it sounds like what you're saying is D SP the nft trading Market is going to get institutionalized as we get better price Discovery RFQ at scale trade execution uh like pseudo swap was working on this which was really cool like margin and clearing uh yeah pseudo swap has like some some structural issues because on the pricing side like

the way prices up to you on pseudo swap is problematic for like the way that prices tend to move in nft markets but yeah again like this entire Market infrastructure that we've created and I think the examples we use by the way are around centralized Financial infrastructure right like fully custodial centralized trading platforms I think even on the D5 side like we don't even have a peer-to-peer lending order book yet yeah lending in in Defy is done through lending pools which in five years I think will be a relic of the past because it's completely nonsensical let me ask the real middle of the bell curve question then which is okay first 45 minutes of this conversation all about culture nfts are betting on culture and okay we're building these like I'd call them like nft Pro markets

or like institutional nft markets funds will finally be able to come in in size you're not just like sweeping a floor on Genie anymore yeah because we're building we're building vertically integrated nft markets that enable professional traders to participate okay so professional Traders come into this market for the first time does that kill the culture side of things and again I'm sure that's the real middle of the bell curve question there no okay here okay here's uh this is the crazy part okay this is either like this is very left of the bell curve I think or maybe right of the bell curve or maybe but it ain't but it ain't in the middle no we try to not do mid right nothing is ever in the not that was ever in the middle when it comes with DJing princes no we don't do metal I only do extremely

extremely left of the bell curve or very far hopefully we try not to do middling middling find yourself in the middle you always go left that's always yeah turn left sharp turn left uh I try not to middle I have found middling greatly reduces my giant life and it's also not profitable um okay here's what's really cool so one of the really interesting things is We Believe culture is kind of this emergent property but it's not culture is created culture is created by people who uh create the content it's created by people who monetize the content is created by people who own the algorithms

that enable you to discover content like this idea that culture is somehow an emergent property is [ __ ] in in many ways there are emergent cultural movements from time to time but that the process of creating culture is across the very well studied it's very influenced by psychology there's a great book called uh the Alchemy it's called Alchemy I think and it's about like how to market products basically in a culture driven way like culture creation is a science also by the way Financial firms do this like what makes the stock hot versus not hot where this there's this whole cottage industry that's now become a very professionalized industry a professional stock picker is financial

media fin twit influencers now there's these these communities that have done that at scale like Wall Street bats was sort of one cultural articulation of that but there is a whole industry in every sort of vertical you look at right whether it's equities whether it's art whether it's nfts whether it's tokens there is a whole industry that exists around culture creation right and creation of Trends and the manufacturing of that so what's really cool here is we can actually start to use markets and financial Capital to influence cultural capital and vice versa right the two are like intrinsically linked and related it's

just when making that linkage much more explicit now but that has always been the case it's just that we don't talk about it but that's how culture gets created that's how influence is created the reason you want to own a Rolex is because you're bombarded by both direct and indirect messaging and advertising that you should own one if you are a person of of culture right the reason you want to own a crypto dick bot and the reason both of you own a crypto dick fuss is because you have been uh led to believe both through the financial Capital created by crypto dick Buzz as well as the really incredible culture created by crypto dick buds that 1D

equals 1B is a universal mathematical truth and you know not owning a dick butt would basically make you middle of the bell curve do you know Stephen Hawkings would definitely have a dick butt based on this 100 100 principles 100 last last question for me because we are it seems like in a bear Market well we definitely are in a bear Market in crypto um you talk about like in your last comment around dick buds there is a phenomenon where if you make money on it then you become more vested and then you know it's great you know it does add to this culture element I think um and when things collapse and you know it's not fun to see the acid now you have like a real-time price Ticker on

culture and I'm not sure that's a good thing I'm sort of like ambivalent I'm just neutral on this point but when we talk about like should artists like we we had Coop talking about music nfts and the question to him and I'll ask you is can this backfire on artists because if you all of a sudden are selling music nfts and that music nft that someone spends all of a sudden collapses in value in this market environment are you going to lose all your fans and should we be putting a price on culture a real-time price of degens on culture whereas sometimes sometimes it's better to think that like you're Picasso that you didn't think of anything all of a sudden recruit a lot of value but you didn't realize that until 100 years later and that was fine okay but I

think what the concern you are to articulating Santi is one that's sort of a moot point by what I said earlier all of the things that you are culture were created by people with capital and influence so what you're consuming that you believe is organic culture in most instances is manufactured whether explicitly or in a more organic way like all culture is manufactured all memes are manufactured like if you go back to the 1930s you read Bernays as propaganda you pick up on a lot of these elements the things that become Trends things that are cool the things that are taste tasteful like there's someone somewhere profiting off of that who's directly working to influence that culture the issue is today this happens behind closed doors and as a Creator

it's something that you have very little access to unless you have the right relationships unless you have the right people the right access um and so what this does and I think this is one of the things Coop and I have discussed a lot because I still don't understand music nfts but I love talking to him because he's so patient and trying to explain to my very small brain and how this all works what I think is really cool about is for the first time we're making this linkage between culture Financial capital and influence influence very explicit and we're enabling people of all types to utilize these tools to create an influence culture so what we're doing is instead of having you know 10 culture creators the internet you know enabled us to go

from having five culture creators you know Disney Pixar or whatever name your favorite cultural brand creators to having now hundreds if not thousands if not tens and hundreds of thousands of influencers who can create and influence culture right and so you have a much broader set of opportunities and you'll have much more ability for creators to directly influence culture because they now have this channel speak directly to Their audience the next step is we are going to give the creation tools and distribution mechanisms and the market tools by the way directly to culture creators and so each successive step opens up the aperture to allow more people to participate more directly and

more explicitly in the creation distribution monetization and financialization of culture I mean there's still that but Santi the issue is like the yes there is always going to be ways that you can exploit that but the question is is better to have a thousand musicians who have a lot of money and then Millions who have nothing versus a million artists who all make a living wage and can create their art um but maybe fewer super Superstars yeah I guess what I'm hearing you say which I think is an interesting point I haven't thought about it that way is that the the key linchpin here is that you have perhaps capital is perhaps more accessible in this world because you have on Tether Capital markets and that

empowers these micro creators to have a bigger say on culture and what gets pushed perhaps in a more organic way whereas before it was Kellogg's telling you that you had to have breakfast and also I mean organic and organic I think again is that's in the eye of the beholder it's a very subjective yeah exactly so that's why it's difficult to make absolute statements on that and I think a lot of times the people that object the most to the commodification of cultural capital right which is like inherently a trend of financialization is like these things get commodified is this a good thing is this a bad thing well for The Gatekeepers that's a bad thing right because they become less and less relevant because you no longer need their expertise that's why I think nfts make people so angry

yeah like nfts make people viscerally angry it's just like crypto makes Finance people that's really angry because imagine you've spent your whole life working to get to this point where you get to gatekeep culture and all of a sudden there are all of these cultural movements that are getting created they're all of these moments in fashion and art in sports that are getting created outside of your sphere of influence yeah that's infuriating like people hate loss of control change is very threatening and so um again you know I think that's part of the exciting thing here is like okay we're gonna have new local points of control but we can also enable all these

like really Niche subculture things that I haven't scaled well before to actually scale and find bigger audiences potentially or at least be able to create more value or sponsor more creative Capital to to exist so is it a good thing is it a bad thing it's difficult to say I think it depends on where you sit if I'm a legacy brand or if I'm involved in the business of gatekeeping then it's a bad thing if I'm a consumer right unsure um and if I'm a Creator I think it's a good thing I think it just really depends on where you sit again that's why I go back to markets I'm just a girl who wants to trade cultural capital in size so yeah if I if I could if I can trade it I'm

into it so again there and that's by the way that's what people in the world of Finance do right like I don't care if it's apple or if it's Tesla or whatever I'm not trading I'm not emotional about trading my book and again as cultural capital grows you're going to see the presence of more and more arbitragers who are not emotional about the cultural capital trade they trade they just trade based on trends anyways hopefully that makes sense it's I always feel like such a loser talking about these things because I think they're really exciting people are like this is not exciting at all but I think it's super cool I think it's great welcome giddy up as you said in your post I think it's a good deal yeah I mean but like look this is again read sci-fi I have a website

meltonjoiners.com sci-fi reading list on it really good [ __ ] on there um sci-fi is like such a a great I don't read nonfiction anymore because honestly most non-fiction books are just like blog posts with 300 Pages added to sell books like just making a blog post um but science fiction is great because I think sci-fi writing has always been a way for us to like articulate our hopes and and fears as a society so a lot of sci-fi books are sort of forward look at what might happen if we extrapolate technological Trends societal Trends cultural Trends forward 10 20 50 100 a thousand years or set them in different universes with different rules different

cultures so I think it's actually a really interesting way to lens through which to view what we're doing and a lot of what we're doing now right has been written about by various sci-fi authors over the last five or six decades any any favorite sci-fi books well I guess you have that list but any any one book that folks should read maybe outside of the like obvious like the snow crash or like the yeah oh yeah yeah I don't even think snow crash is that like great of a book um Hyperion cantos by Dan Simmons incredible Incredible Book all right yeah it's like a derivative of pizzas Canterbury Tales but it's a really cool book about um basically sentient AI That's modeled after Keats the the poet um and this

it's in this universe that's like controlled by this AI but nobody recognizes it and there's this robot that comes from the future called the shrike that like kind of super cool book read it it's really weird the other one that's amazing is um the quantum Thief by Hani Rin Swami I think that's how I say it um yeah very very good book as well um you know the question is what if time was an asset that you could trade hmm that's interesting that's a very cool concept of physics through that one but anything is possible if we dream it you are a nerd in the finest sense of the word uh and I love that you're betting on culture and thank you for uh teaching

song to me how to do it this has been an awesome chat yeah thanks for having me and if anyone has any questions DMS are open um I'm always happy to talk [ __ ] and obviously tell me what I am getting wrong because there are a lot of things I don't understand I'm just a simple woman who wants to trade cultures at heart and and the best one out there guys so go out go and follow the high priest is pure entertainment and high quality content thanks for coming on we're gonna have to have you on soon yeah yeah YouTube men of culture all three of us own crypto dick butts trying to do what we can people people of culture

amazing thank you on the other side foreign