Art Capital Markets | TCE - DevConnect Buenos Aires

Transcript

Um okay we'll start with a video to showcase like what we are doing or like what we have done and then I'll talk about what we actually Here you go.

And now with the slides. Thank you. So what we saw there was essentially like our launch video for the pivot that we did. But before going into this, I want to take like a step back and speak a little bit about the past sort of like how we started with FX Hash. So for those of you that might not know, FX Hash was initially founded in October or November of 2021. So four years ago by the nerative artist.

>> Ah, okay. What do I need to do? Ah. >> Ah, okay. [laughter] Sorry. Um, okay. So I'm Fix Hash like we FX hash. We were initially founded in 2021. Um, and we were a or we are still are a platform around generative art. Um, you might remember back in 2021, ETH was still proof of work. There were like huge gas fees. Um, and a lot of people simply were not able to collect, but also a lot of artists were not able to create. Um there were was essentially art blocks that that originated or that really like made generative art as the big thing that it was but uh a lot of artists were simply not able to upload

there. They were accused of like more than a year to upload their own art and we thought that this frankly is So our co-founder or Ciphford who is a gen generative artist himself he said that and he wanted to create a platform for himself to create art and that really resonated and we created that on Tzos which had like had and still has the huge like happenings within the art scene. There was hikon like a lot of artists were there and through that we found like an instant product market fit. We had a lot of collectors. I started my collecting journey on there. We had a lot of artists releasing and that ultimately led to like more than two and a half million artworks being sold. Um,

however, one of the issues that we seen over the years is that um, the market overall did not really work out for a lot of people. Um, and that ultimately resulted in us creating the FXH protocol uh, on base. Um throughout these four years in the past we origin we came from Tesos to Ethereum to B uh which is now where we are mainly up. So our app our platform still runs on still runs on the secondary on Tesos but the main things for artist creating now is happening on base. Um and what were what are we doing there? Um, we try to create a new economic system that makes it possible

for artists to tap into their value much more than you could simply by just like releasing art. Um, and we are doing that through something which we call art coins. Um, what are art coins and why do we do it? Um there's like another common example of this that was um showcased by Zora which is what they call creator coins. Um creator coins essentially allow any like creator to tokenize their postings. Uh which is really interesting because one of the things that a lot of like creators aren't able to do is monetize with it. You can only monetize if you have like more than 10,000 50,000 followers. you can only monetize if you

have ad spend going on and therefore this was like a huge innovation for that space. Um and we looked at that and we thought hey this is actually quite interesting because as we are in open platform we saw a lot of the artists that have initially released on FX hash or released in generally in the digital art space also struggle to make a wage or like to make like a living wage of the art that they have sold. Fundamentally to us the business model was broken a little bit because artists will always create. Artists should always create. Um but in a market when there's more and more art being released and less and less collectors being there

to collect it, that can result in a very like vicious cycle where an artist releases more work that they might not sell it as much. They might need to reduce their pricing. um and overall collectors are then less inclined to sell that art. It is a stupid cycle. I wish for this cycle to not be happening. But this is a cycle that we have seen again. We are an open platform. So we have a lot of artists that tried to for the first time to release genative art. We had a lot of artists that might not are household names yet, but they started their career with it and that still sort of like was an issue to them.

So we really thought okay what can we do to sort of like put a stop to this cycle. And one of the things that when we looked at the actual like art market uh what we have realized and that might sound a bit morbid but when you look at an market of a successful artist the market gets much better financially speaking for those artist if the artist is dead because then they can't create anymore. But obviously we do not want to kill our artist. this is not the option. So what do we do? Um and that really resulted in us thinking about sort of like art coins because what are art coins or like what do we want to do with them? An artcoin is an ERC20. Like it is an ERC20 like any other ERC20 token. We

just call it artcoin because we like the name. Um but the main thing is that now every artist that releases an artcoin has an asset that is supply kept like there. And if you as an artist are telling to the world, hey, this is my supply cap asset and I'm going to use that asset for all of my future artworks and you can use that to support me. You can use it as a patronage token, but most importantly, you can use that to mint my art, then over time there will be value driven towards that art coin.

Um this might sound well this might look a little bit sort of like tough because it's like a technical drawing but it's important to understand the overall concept of the innovation of what we're trying to do. So each art coin like there of each art coin of like dollar ciphered or like any gallery can also use it. They will always have 1 million tokens and those 1 million tokens we are using them to also mint art. So as an artist you get paid in ETH or USDC and as a collect. So it's the same thing as before. You get paid in like the currency of your choosing. The difference however is that as a collector you are paying in ETH and USDC

paying the artist. And then the other thing is that you're also paying a part of the artcoin. What are we doing with the artcoin? Essentially we are burning it. we are sending it to a ox that address and therefore over time the supply of that arcoin gets reduced. We don't have to kill the artist anymore but we're killing essentially over time the supply of that arcoin. So that now is like a little bit like economic and it's like a mix of like tokconomics and all of this. But what will happen or essentially what is known or showcased in normal economics is mostly that if supply decreases and demand stays the same or increases over time that market

will turn upwards meaning there will be valuedriven towards the artcoin and that is happening for all of the art coins that are out there. We launched this beta sort of like invite beta in July with like 20 artists. The artist released projects and over those 20 projects on average I think like 10 11 12% of the supply already was burned. So we see that this system is working. We do not see yet that there's like this huge value shift happening and there's value coming into the art coins. But this is something that is a medium to long-term thing. Just because you have a token doesn't mean that suddenly you're

all rich like but we think that this is a system that can enable artists to build an economy of their own. Um also where they can just be like much where it's much easier for them to invest in and how does that translate to FXH which is the mother token in that sense. All of the art coins are paired with FXH. Why do we do that? first of all to deliver value to the main token but then also but then also because this allows for easy trading like there's always liquidity the artist does not have to set up like find ETH or USDC or any other stable coin to pair to create a functional liquid market but we provide

that with FXH so if there's a collector that is coming in and they want to buy an art coin of an artist or an art coin of a collective or an altcoin of a gallery, they first need to buy the FXH token putting value into that ecosystem and then that FXH is used to put value into um the art coin itself. So even as an example, for example, I want to purchase an artwork for $500. I do not hold FXH yet. I purchase $500 of FXH. The FXH gets a value increase. And then I also purchase the $500 in Artcoin. the artcoin gets a value increase. And the funny thing about this is that with one

$500 transaction, you suddenly have created $1,000 in value because it is a looping system. Obviously, the other way around when people are selling, this also can can be negative. But I try to build like we try to build companies and ways where we try to strive for positive environments. Um, and that really is the overall idea uh behind this. And this is what we sort of like call art capital markets similar to what we are seeing right now also happening a little bit on base a little bit on Solana which is like internet capital market essentially trying to bring artist or companies on chain and make it possible for anyone to invest in. Um so that's roughly the

system and then also obviously the FXH also gets deflationary because the more outcoins they are they are out the more sort of like we put into the LP pool and that is not the FXH is not burned in that sense but the FXH is at least removed from supply. So we have now created a system where the FXH the main token is deflationary which is good in the medium to long term and also a system where the art coins are deflationary in the medium to long term. You might ask yourself okay why do we actually need to do this? Um I think I've alluded to to it a little bit in the in the in in the past minutes. But the other point of the story is that we

truly believe that every artist and every collective or every gallery is or should have its own economy. We we believe that social media sort of like gave every person a voice and every artist also has a voice. But for a lot of artists or also especially for a lot of collectors um they are at times priced out out of their favorite artist. they might not be able to mint it as the artist like has too much uh is just like priced too highly and therefore collectors at times cannot participate in the upwards trajectory of their artist and frankly I think this is a little bit stupid. I feel like if I like an artist I should be able to

participate in the upwards trajectory. Um so therefore again it makes a lot of sense in our opinion to have like an invest investable asset that is easier to get into and to get out of. Um and that is again why we created these like art coins. Um and I think it really helps align the capital. Um and we have seen that it worked so far or that it is working so far and we're really interested to sort of like continue to push this overall direction. Um because what we've seen and uh I think this is already sort of like the closing statement. What we've seen over the past five years or four years is that a lot

of platforms within the digital art space have closed down. Not because there wasn't good enough art. There's always good enough art. There will always be good enough art, but because for some reason the economics of all of it did not work out anymore. Um, and this is our sort of like answer to this. It might sound a bit radical and it might be that some people say, "Oh, you're financializing everything." But at the same time, I say to this that art always has been financialized. Ever since art has been around, people have been paying for art. Um, and ultimately, we are operating in a field that is hugely intertwined with crypto. And therefore

to me or to us it makes the most sense to just go this straight like the straightest way which is an EC20 token. Like if we all agree that art has a financial value then we should be able to invest in that art in the most liquid way possible and that ultimately is an ERC20 or how we call it an artcoin. Um and that's what we call art capital markets. Um, we've been doing this now for four and a half months, I think. And it's been really interesting to like see a lot of the receptions that we have been getting. Some negative, some positive, some being like I don't get it. Which is all good. Um but ultimately we're just trying to like further prove the point that art sim or art and artist

galleries curation collectives anything really um should be an investable asset because we believe that any asset in the medium to long-term run and or any financial asset will trade on chain. So at that point artist should as well and that's what we're building. Um I have a lot of time left but I'm happy to answer questions on this. Um, so yeah, there's someone in the back. >> My question is how is this different from Zora? I agree with you that there

is a vacuum since they pivoted. Um, Zora also started with just art coins and then they expanded to do creator coins. >> So, I'm listening to this and I'm just like, "Okay, so they're 10 steps behind Zora doing art coins. Maybe they'll do creator coins next." >> Maybe I missed it. What's the difference? >> Uh, you didn't miss it. I missed it. Uh, the difference is that on Zora or like the similarities between Zoro and FX Hash is that every creator, in our case, artist has one art coin, one creator coin. The difference is with them, each new post that an creator creates is also a coin. So, it's just like coins all around only coins. In our case, an

artist has one art coin and they still release their art as NFTts as ERC 721s. So, I create like I create my artcoin artist and then I create art and with that art I still get like the normal ESC 721 um collectors like it's not fractionalized or anything. If a collector buys my artwork, they get the full NFT and that really is the difference. And I don't know exactly how the Zora burn mechanic works in that sense. I think it also like pools like the creator coin into the post coins and all of it. But ultimately for us um this wasn't really a solution because I'm a collector myself and I don't like I

might like okay maybe if I am able to hold 5% of a Picasso or whatever I might consider it but like a I don't have the money b I don't have the chance for it and c I really don't like it as well like I want to own an artwork and call it my own and that always has been like a core concept behind us and u I think that's really the difference so there's like this top level asset which is the artcoin and then the artist still releases the NFTs, they still get the same money that they got before, like they're selling art for ETH or USDC or TS or whatever in that sense. The only difference is we add this artcoin component to it um and try to therefore derive value or like create a new asset that then hopefully also creates new

revenue streams to him because the artist they do get um trading fees. they are able to sell some of their artcoin which is then obviously it's not equity but it's not equity yet like why shouldn't it be in the future why shouldn't we create like an a possibility to invest in artists and why shouldn't they be able to raise money of that why shouldn't they be able to sell someone on the open market to finance like their their lifestyle or to finance just like their day-to-day life um and I think that's the main difference um that we really focus on the art >> copy so there's one ERC20 per artist and then when I upload a new artwork that's a 720 21.

>> Exactly. >> How do the Do I get to pick my own price? How much fees do artists or how much how much fees does FX Hash >> take when I'm selling my 721s? >> Um, right now we take 25%. >> Which I get to pick my own price. >> Yeah, you you you pick whatever you want. You can sell it for $1,000 one $1. Um, the reason why and like initially and that was like initially FX Hash started with 0% fees in our beater because like in we we just wanted to get it out there. Then we increased it to two and a half% fees. Um, and looking back it was really good because like the artist got a lot of money but ultimately what sadly happened is that we as a platform did not make enough money to actually sustain ourselves to sustain

like a development team in the times or like in the frenzy times like late 21 early 22 it worked out. We were able to like generate we were able to essentially be break even and we were bootstrapped. All of it was good. But as soon as the market tanked and volumes were not $10 million a month anymore, but volumes were $1 million a month. Two and a half% just like simply wasn't enough. Um, and therefore we tried to really like hiked up our fees. When we came to ETH, we hiked it up to 10 10%. Now it's 25. Might be a lot, but it's still half of what a gallery does. Um, >> thank you. Very helpful.

>> Yeah, always. So um if I'm as a collector I'm buying an artwork from an artist, right? So the the smart contracts or your platform will route it through the artist's coin. >> Yes. Um, but you also said that the artist will receive I guess the the full sales price.

>> So like where does the value that I'm the $500 that I'm spending as a collector it it doesn't go to the coin though right? >> So that depends. So how we are showcasing it on the front end is one unified price. So as a collector, you see $500 or maybe $100 because it's easier to actually like calculate in the head. So then we say to the artist that they can choose any amount of split between USDC payment and Artcoin payment. They can choose to do just like 0.1% in Artcoin because they just want to sort of like get the full amount of money in USDC or they they can what we rather recommend is like a 75 25% split.

So 75% of the amount of money is like USDC. 25% of the money we use it to if it's a USDC payment USDC to ETH to FXH to Artcoin, buy it, burn it. Um and that's how value gets acred. Um and then the other angle which is obviously you can also simply buy the artcoin because you want to support the artist because you believe that over time the artcoin will increase in value because the artist is doing great art maybe because of the tokconomic system but maybe also because you cannot afford to mint an artwork. Like obviously if an artist sells for $25, $5, $1, like everybody like everybody might be able to afford

it. But if there's an artist selling for $10,000, a lot of people are priced out. But that is then sort of like the idea. Okay, I still believe in the artist. I still like the artist and I want to participate in that artist trajectory. And then sort of like we uh there's obviously trading fees attached to it. Um and then that is also like how the artist can create like additional revenue streams through it. >> Okay. the the percentage that goes into the art coin that essentially will be burnt.

>> Yes. >> Okay. Thank you. >> Hi. Uh I would like to know more about the primary market. I understand that there is this kind of if you collect on primary market and you have this NFT that maybe go viral and people go for that NFD >> and you iterate on that NFD. The primary market collector can get some kind of economy around that.

>> Are you aware of what we're building with like open form and sort of Yeah. Okay. I'm talking about the Okay. Yeah, you get it. You get it. >> Yeah. Yeah. Okay. So, um when we start I don't like for So, he asked a question about a way or like a specific type of generative art that we introduced when we launched the platform in July. Um generative art obviously is hashbased. So, um every like iteration like every mint creates a new iteration. Um and what we we built a system that allows artists to essentially interlink artworks so that you can evolve artworks similar to cryptokittens in that sense in the past. So an artist could say, "Okay, my do I have something like that?

I don't have an example, but you might see this. This is from like the artist E boy uh for the artist group E boy. And they built like a tower system. Um the tower system worked in that way that you could add additional sort of like towers or like subsections on top of it with each additional section like being evolved from the past. And what we built is that if I am as a collector mint something nice curate a seed essentially when others are minting on top of my seed the collector also gets paid. So it is sort of like a way for the collector to curate and then also trying to create like an economic system around it. I

omitted that part from the overall um presentation because it is a bit hard to get into but it can yield to really interesting concepts and really interesting like artistic concepts as well. uh by artists. Um and I think so far there's like some people that I think made up to like 0.5 ETH just from like curating seeds and collect and or like other people then collecting based off those seeds. And that might not be much if you look at like the overall crypto market. But I think it's pretty cool that you can mint art and get paid for it without having to sell it.

I hope that answered your question. Okay perfect. Uh hello I'm an I'm an artist. I I follow FX hash since 21. I always found it amazing. I collected some project. I like it. And my question is I always see saw FX hash related with generative art >> and with the new changes you're talking I can create anything any art point without thinking of create a big project generative.

>> Mhm. Yes. So one of the issues that we have faced is that like I love generative art like I I started my collecting journey in generative art like Ciphford is a generative artist I believe one of the best of our generation but the issue is that the genative art market in its current state simply is too small to run a business at the scale that we're in. like the solutions that we had as a company were either the following we close it down and just let our like current solution continue like that would have worked but that is not something that I or like we would have liked. So the idea was okay what can we do and I think what we have

has what we have seen as generative art on FX hash essentially always was like live browser rendered generative art and there is much more to it than just that you could even make the argument that a lot of like AI AI work also like is generative in itself so why should we exclude that why shouldn't we allow artists to create something especially when those artists also came to and be like hey I want to do this I want to release on FX hash but I am not working in the really like small conscribed niche what you are calling genative art so what is the answer is it okay then we are allowing this other type of genative art or this other type of genative art

this does not really work out like ultimately the answer must be okay then we are a platform for digital art and this is also much easier to actually explain to people outside of the space because it's like it's It's like art created like digitally. It's art created on a computer. Um, and it just allows us to like increase the artist that we are speaking to, but also allows us to increase the amount of like collectors that we can speak to. And ultimately, this whole system is a bet on the digital art economy. And the the the bigger we can make that and the more artists we can get and the more artists we can get to launch art coins, the more artists we can get to create good art, the better the overall economic system will be for everyone. That's the thing.

It's it's it's really interesting because if there's a really successful artist having a really successful successful art coin, there will be buy pressure on the FXH. And what does that actually mean? That means that the FXH if FXH increases by 10%. That means that the FXH in all of the liquidity pools of all of the art coins launched also increased by 10%. That means that also like all other artins are suddenly worth more. And that is really interesting. And therefore we really had to create a system that can be as big as possible and that is then sadly not restrained to genive art but to everything.

Nice. We have two more minutes. Maybe one question otherwise we can also call it. Then we're calling it. [laughter] Thank you so much. Okay. Sorry. Sorry. I'm not going anywhere. >> Yeah.