Category Archives: NFT

What “wallet” it say about you?

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Just as your e-mail domain name can say a lot about how/when you first got online, I have a theory that our choice of digital wallet will also reflect our blockchain, crypto and web3 profile. (Remember those early ISPs and e-mail services such as AOL, Lycos, Compuserve and Pacific Internet?)

Part of the challenge with early digital wallets was the UX/UI – before the advent of software, browser-based and hardware wallets, users relied on “paper wallets” to manage their private keys. The first software wallets needed to be set up very carefully, so that your seed phrase or private key was not stranded on an abandoned hard drive, and thus lost forever. I think the first BTC wallet I used was CoPay, which was an early multi-sig wallet, but which has largely been discontinued. The arrival of browser extensions such as MetaMask have made a difference when it comes to bridging between chains, and managing a wider range of assets.

Even though there is more interoperability between digital wallets (cross-chain, multi-asset), dedicated applications are still needed for BTC and other chains. Also, some use cases (iGaming, web3/DeFi) may demand more specific wallets to support particular functionality. But like many crypto users, I still maintain about 6 different applications, including exchange-based wallets.

I suppose the eventual user experience will be a seamless transition between crypto, web3, DeFi, TradFi, NFTs and RWAs. But until then, stay safe and make sure you know where your private keys are at all times!

Next week: Signing off for 2024….

 

 

Pudgy Penguins come to Melbourne

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Last week, I got to chill out with some of the Pudgy Penguins crew, as they launched the Oceania chapter of their NFT community. In case you weren’t aware, Pudgy Penguins are one of the top NFT collections, and have built a loyal fan base for these digital characters.

I went to a major Pudgy Penguin “Pengu Fest” in Hong Kong last year, and got to see first hand how engaged their members are. I also gained some insights as to how this ecosystem enables their NFT holders to license the IP associated with their individual characters into royalty-based income. In short, a subset of the NFT characters are chosen to be turned into merchandise. (For example, Pudgy Penguin soft toys are available in major stores such as Walmart in the USA, and Big W in Australia.) Owners of the selected NFTs earn a percentage of the sales revenue (less tax and production costs etc.).

The most recent collection of Pudgy collectibles are the Igloo figurines, which include early online access to Pudgy World. As a proud owner of one of these plastic figures, I’m still not sure what I have let myself in for…

As well as local meetups, other ways in which the community can interact include a trading card game called Vibes, also launched via the Overpass IP licensing platform.

Igloo Inc, the parent company to Pudgy Penguins and Overpass, has also announced it is launching a Layer 2 blockchain on Ethereum, to be called Abstract, and is being positioned as a “the blockchain for consumer crypto”.

Whatever your views on crypto, NFTs, on-line worlds and collectibles, there is no doubt that Pudgy Penguins have set themselves up with the admirable goals of building a healthy and inclusive community, underpinned by the twin pillars of individual creativity and positive culture.

To crypto sceptics (and the merely crypto curious), the “community” and the enthusiasm of its members could resemble something of a cult. Someone did say during last week’s panel discussion that “I am my penguin, and my penguin is me”. But there are worse things for people to get involved with – and for younger people (I don’t regard myself as part of the Pudgy core demographic), I can see the appeal. For example, your Pudgy Penguin PFP can act as a protective avatar as you engage and explore online – allowing you to share only the personal information that you want to, while you build up trust with other community participants, and before you choose to meet IRL.

There was also a discussion about the difference between meme coins and NFTs – the short answer is that the former represent pure speculation, while the latter aim to create value for their holders. In fact, someone suggested that meme coin trading is not that different to punting on betting apps. But since most NFT collections are well down on their market highs of a couple of years ago, maybe NFT holders and communities like Pudgy Penguins are trying to convince themselves that they are still backing a winner?

Overall, however, I remain positive to the opportunities that NFTs represent – especially in the creative fields, and as a new model for IP licensing. Even if cute flightless birds from the southern hemisphere are not your thing, I don’t think you can dismiss or ignore the social, cultural and economic impact that NFTs will have.

Next week: “When I’m Sixty-Four”

 

 

Ticket scalpers? Blockchain could fix that!

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Music fans of a certain age and demographic have been complaining loudly about the use of “dynamic pricing” when trying to buy tickets for their favourite band’s highly anticipated reunion tour. (There must be a pun in there about “Don’t book online in anger”?)

Part of the rationale given for using a demand-based pricing system is to disincentivise scalpers. The higher the cost of the ticket in the primary market (not the same as the ticket’s face value), the smaller the potential mark-up in the secondary market. Except that some tickets with a face value of $150 were priced at $450 at the box office, only to be re-advertised in the secondary market for several thousand dollars. In other words, the touts have simply increased their margins, in response to the so-called dynamic pricing mechanism.

Without offering any sort of apology or mea culpa, the said band have now announced additional tour dates, tickets for which will be allocated and sold in a form of ballot. Stop me if you think I’m being cynical, but by quickly adding dates to an existing tour itinerary, it shows that the band knew there would be excess demand, because it’s not that easy to reserve major (and highly profitable) venues, even 12 months in advance. And if they can run a ballot system now, why couldn’t they have done that in the first place?

All of which simply shows how out of touch bands like this are with technology and market dynamics. In short, ticket sales and allocations could have been achieved far more equitably if the band and their promoters had chosen to use blockchain, crypto and web3.0 solutions.

Here’s a simple list of options that could have been used:

1. Issue all tickets as NFTs (non-fungible tokens)

2. Limit the number of tickets per digital wallet and/or the number of wallets per ticket buyer

3. Ensure the use of soul-bound tokens to link wallet ownership and ID to specific individuals (to limit the number of tickets per wallet, and to limit the resale of tickets)

4. Run social media campaigns, quests and airdrops to allocate and distribute tokens that entitle holders to a place in the ticket queue – e.g., the more active a wallet holder is in the band’s fan community, the higher their chance of securing a priority place in the ticket queue

5. Pre-publish the expected ticket price ranges, and enable wallet holders to vote on the minimum/maximum price they would be willing to pay (using something like Snapshot)

6. Cap the amount an NFT-based ticket can be sold for in the secondary market or write the token smart contract to allocate a percentage of the resale value as a commission to the ticket issuer

Of course, the UK competition regulators are taking a close look at this ticketing fiasco, to see if so-called dynamic pricing breached fair trading or other consumer protection laws. If punters were not aware that they may have to pay far more than the advertised or face value of a ticket, this would appear to be unfair and unconscionable conduct. It’s potentially a form of under-quoting – advertise the ticket at a artificially low price, then force buyers to pay well over the face value at the actual point of sale (under the guise of “market demand”), knowing full well that the fans had little or no choice in the matter.

One final thought – knowing the volatile history of this band, the chances are that the concerts (or at least some of them) may be cancelled. Hopefully, the ticket agent and box office operators won’t be counting the advance ticket sales as recognised revenue, rather they are required to hold the funds in a verified escrow account until the performances are delivered and the ticket revenue actually earned….. (again, something that could be easily factored into a smart contract – no release of funds until the loud-mouth sings?).

Next week: Cooking the books?

 

 

 

Notes from Hong Kong

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My personal relationship with Hong Kong stretches back 30 years – to the time I moved there from London in 1994. I arrived on a 1-2 year contract, and ended up living in the city for 6 years. Since then, I have continued to visit at least once a year, and my latest trip earlier this month was the fifth since hotel quarantine was lifted in October 2022, following the global pandemic.

Despite the significant political, demographic, social and economic upheavals of recent years, in many ways Hong Kong remains the same. It still acts as a fulcrum between East and West, and an important trading entrepôt for mainland China and the rest of the world. There are still the evident paradoxes represented by Hong Kong’s ancient traditions and modern values, combining spiritual beliefs with materialistic tastes, and vertiginous high-rises set against mountainous backdrops and waterfront vistas.

From an economic standpoint, Hong Kong remains in something of a lull. People I spoke to commented that the SAR government needs to find new sources of income, especially as the property market (a cornerstone of the local stock exchange) remains patchy, and visitor numbers are only about 50% of pre-pandemic levels.

As I have mentioned in a previous blog, Hong Kong is usually resilient and adept at reinventing its financial fortunes.

For these reasons, the Hong Kong administration is pursuing a fairly aggressive policy of promoting itself as an attractive global venue for the digital asset industry in part to reinvigorate the local capital markets, in part to outpace its regional neighbour and rival, Singapore. (Plus, the SAR acts as something of a test bed for the rest of the PRC.) According to people I spoke with, there is some difference of opinion as to how many digital asset exchanges are actively pursuing a Virtual Asset Service Provider (VASP) license, given that only two licenses have been granted so far, while a number of applications have been withdrawn, refused or rejected for being incomplete.

During my visit, I was granted a 1:1 interview for Brave New Coin with Yat Siu, co-founder and Chairman of Animoca Brands, a leading player in web3.0, NFTs, the metaverse and, potentially, stablecoin issuance. A major advocate of digital property rights, Siu is a very influential figure within the fintech scene, and I expect to see many more announcements from his company leading up to, and during, major events such as Token2049 and Hong Kong Fintech Week. I also met with clients and contacts across crypto exchanges, hedge funds, VCs, brokers and tech providers. All remain suitably bullish on the digital asset sector, although some considered that there needs to be some industry consolidation, to soak up excess infrastructure and to stabilise the entry of institutional fund managers.

Finaly, I found time for some contemporary art exhibitions, confirming that Hong Kong continues to establish its profile in the arena of global culture. There was Bruce Nauman at the JC Contemporary in Tai Kwun, I.M.Pei and Henry Steiner at M+, and even Banksy and Damien Hirst at Sotheby’s Maison at Chater House. Of course, this being Hong Kong, the displays in Sotheby’s showrooms are not too dissimilar to the luxury goods on sale in the surrounding malls.

Next week: Postcript on Tarantino vs Ritchie