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The Way Too Late NFT NYC Recap
Crypto’s "Who is John Galt" moment, the inherent politics of crypto, and tree nut allergies
“Did you make it to NFT NYC?”
“Of course not. You didn’t hear? Crypto is over”
“Oh really? Who shut it down?”
“Not sure, but I heard it ended up being one big scam”
“So was Pets.com, but I bought dog food yesterday on Chewy.com”
The mood behind the mood
There’s the mood, and there’s the mood behind the mood. My goal of attending NFT NYC this year was to decipher the mood behind the mood, as therein lies the “alpha” (crypto-speak for high potential money earning opportunities).
On the surface, it looked the same as NFT Week 2021. The glitzy parties still existed in the quintessential grandstanding-crypto-style. Many males mingled with a fewer number of females, discussing wins and losses (albeit more losses this time around).
Scratching the gray film off the lottery ticket revealed a very different picture from 2021’s NFT Week.
This year, conversations were much more down to business. With the turbulent state of the markets, attendees wanted to know what they should spend their time focusing on moving forwards. Before the crash, the difference between being involved in good projects and fugazi ones was negligible in terms of potential financial upside.
This shakeout meant not all crypto was ordained Holy Water, only suitable for blind evangelists to guzzle by the gallon.
This year, discussions in the dark corners of the parties were generally about what parts of crypto would last, and which would go the way of the dodo bird. The goal of the conversations would be to categorize the various parts of the industry: what is a grift, what is not useful, and what is useful?
Sorting aspects of crypto into these three categories encapsulates the spectrum of opinions and is more informative than just “useful and not useful” because not-useful applications of crypto shouldn’t be lumped together with scams. Some projects are not trying to steal, but their raison d'etre isn’t clear.
There’s never been a technology more suitable to grifters than crypto in its current state of regulation. The structure of most token sales has allowed founders and investors to sell coins to fund operations, sans operations. Founders and early “alpha-receivers” can own large percentages of the token supply at inception and sell when the USD value gets attractive enough before moving onto the next grift.
Retail investors are lured by VC-backed names and larger-than-life founders, granting these investors access to private company investment allocations, an opportunity normally reserved for accredited investors. Retail investors share in the financial upside and downside of premature companies (commonly after most of the upside has been had).
Most notably, a significant portion of yield farming and play-to-earn games to date fall into the grift category by creating obfuscation to ignore the true grift-mechanics (I could and probably will write an entire newsletter about this topic, but it’s not today’s agenda).
Conversations at NFT week often started with: Is web3 reinventing the wheel of web2?
I heard the phrase “reinventing the wheel” used in conversation at least 20 times in 5 days. I figured I must have missed a Chris Dixon tweet where this was mentioned, or a billboard in Times Square necessitating the use of the phrase to appear in-the-know. It was the phrase that guaranteed head-nodding from at least 72% of the group you were schmoozing. I digress… what did attendees mean by these words?
This was crypto’s “Who is John Galt” moment. People seemed to shout the phrase to fill the silence, giving no particular thought to the phrase they had just uttered.
It seemed that reinventing the wheel referred to the fact that crypto had transferred structures onto the blockchain that were unnecessary to be “on-chain”.
For example, when someone explained that hotel rooms were now NFTs, the next obvious question one should ask is:
Or, when someone explains that play-to-earn games are superior to the status quo, the next obvious question should be:
Or, when someone explains that tokens are a better way to reward participation in a system, we should ask, are we confusing token appreciation with product adoption?
Warning: Asking these questions to holy-water guzzlers may incite the guzzlers to perform a Fosbury Flop to clear the bar of rationality.
Thankfully, we are finally asking these questions. Not because we want to, but because we have no other choice if we want crypto to survive the cold winter.
Asking people at NFT week what parts of crypto were useful, they would explain:
Data is owned by people, not platforms (decentralization)
All transactions are visible (transparency)
Users are compensated for their contribution to platforms on a pro rata basis (improved incentive structures)
Interestingly enough, these were not applications or specific use cases, but general pillars that made crypto useful to them. Most specific use cases they mentioned would be one of these three pillars, magnified (e.g., wallet security, identification, portability). Without blockchain, these aren’t possible. With blockchain, these are generally certainties.
However, if you have conversations with most people who did not attend NFT NYC 2022 (aka “normies'' in crypto-speak), they likely won’t have thought of these pillars at all. For most, they care about:
Receiving the most engaging content, which is enhanced by their collected data (ex: TikTok’s algorithm)
Jeff Bezos not being able to hear them having sex through the Alexa (we are all victims of the spotlight effect)
Functionality (it has to work)
This brings me to my biggest takeaway of the week: Crypto is inherently political.
The inherent politics of crypto
The right to decentralization, transparency, and pro rata compensation for input to a protocol/platform is libertarian in nature. While there are different interpretations of libertarian belief, the lodestar of libertarians is rooted in trusting and awarding individuals above systems, as libertarians have a general mistrust of the systems that exist. As the new adage goes, bitcoin solves this.
It falls in line with the large debate going on as-to whether politics should be left at home or discussed in the workplace. Coinbase was one of the first major companies to take their stand on the issue, explaining that productivity is maximized when employees focus entirely on the task at hand rather than bringing political activism into the workplace.
While I agree with this sentiment, I find it ironic. Crypto is political in nature, and believing in the use cases of crypto is a de facto political stance.
Believing that crypto is political in nature is not a bearish outlook. In fact, because political beliefs are so important to people, the fact that crypto is a political technology strengthens its bull case, even if only a small minority of people care about the use cases outlined above.
Nassim Taleb explains why small yet intransigent minorities can “out-punch” their weight, attracting people outside the minority to become involved in their issue (source). Take food allergies as an example.
I happen to have an anaphylaxis-inducing tree nut allergy, so I have no choice but to care a lot if anything contains nuts. It goes without saying that most people don’t care if their food contains nuts. While most people don’t have tree nut allergies, those who do have them are extremely vocal about it. In turn, the awareness and cooperation level for allergies is high. Many restaurants have symbols next to items that contain nuts, even if it affects less than 1% of their customers.
The small minority of nut-allergy sufferers has been vocal enough to make changes that effect the majority. The result is that the “the majority” sees a menu and eats food that is allergen free, even though they don’t suffer food allergies.
In summation, the use cases that currently appear the strongest in crypto are inherently political in nature. These use cases are as real as they come for this small minority who cares, and as irrelevant as they come for everyone else. If the minority cares enough, the cryptos pillars of utility may extend the TAM to the majority. A new internet, indeed.
What should you do about it?
We at En Passant Digital know this minority intimately. In fact, we are squarely inside it.
Call us, as appealing to this minority is the key to a successful web3 strategy.
Warning: web3 will become increasingly more lucrative as the minority spreads its influence, expanding the crypto TAM in the process. Position your company now.
Or don’t, you missed everything anyway.
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About the author: Bryce Baker is the co-founder of En Passant Digital, which designs and leads Web3 strategy for businesses.
Our other co-founder, John Tabatabai, has led investments for Crypto VCs and consulted for projects across the NFT space. He orchestrated one of the largest grossing NFT projects, kickstarting the first NFT bull run in early ’21, creating over $200M of value. John is designing one of the most influential Metaverse Community projects ($243M valuation at time of writing) which launches shortly.