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!
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.
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?).
If there’s one consistent lesson to be learned from Blockchain and crypto is that the enabling technology often outpaces our understanding of the viable use case, commercial application or sustainable business model. For example, smart contracts have only recently proven their value with the rise of decentralized finance (DeFi). Even then, they are not perfect and if not well-coded can result in hacks, losses or other damage. Plus, until scaling (transaction throughput) and gas fees (transaction costs) are properly resolved, mass adoption is still some way off.
The latest crypto phenomenon is the market for NFTs (non-fungible tokens). Artworks in the form of digital files are being created, auctioned and traded for serious (or very silly?) amounts of money – just Google EtherRock, Beeple, CryptoPunk or Rare Pepe for recent examples.
NFTs are not just confined to digital art – animation, video, music and text are all being created in the form of NFTs. In addition, NFTs are being minted to represent ownership or other IP rights for physical artworks, real estate assets, collectibles and luxury goods.
Why would anyone pay the best part of US$12m for the original digital file of CryptoPunk #7523, a copy of which I have displayed above?
Perhaps we need to consider the following:
First, the image above is simply a low-res web image, easily reproduced via copy and paste – it’s not the “real” image as represented by the code or digital file embedded in the NFT. The original file is owned by the NFT buyer, and if it is an edition of one, then that is the only authentic version. Scarcity (as well as kudos) is a key market driver in NFTs – but only if someone else attaches financial value to the work (just as in any art market).
Second, owning the NFT does not necessarily mean you own the copyright or other rights associated with the art work. (I may own a Picasso painting, but I don’t own the image contained in the work.) So, apart from holding an NFT in your digital wallet or displaying it in a virtual art gallery, the only right you have is to re-sell the work. This means you can’t commercialise the image for t-shirts, on-line redistribution or reproduction (unless the owner has agreed to grant such rights within the NFT). (My use of the image here would be covered by the “fair use” principle, for the purposes of illustration and/or critical analysis.)
Third, unless you are able to export the NFT from the marketplace or platform that sold it, the NFT may “vanish” if the platform goes offline for any reason. (Doubtless, platforms need to enable token transfers to other market places and to users’ own digital wallets, otherwise there could be a lot of stranded and/or worthless NFTs in years to come.)
Fourth, the creator of the original work may be entitled to a % of the resale value of the NFT. This is obviously an important consideration for artists and other content creators, and I see this as a positive development. By extension, musicians, authors, film-makers and designers can more easily track and control the downstream revenue generated by the use and licensing of their works by third-party marketplaces, streaming platforms or 3D printing and fabrication services.
Fifth, NFTs support improved authentication, provenance and chain of ownership, as well as bringing more transparency to the world of art auctions – valuations, bidding and prices could all be hashed on the Blockchains that track the NFTs.
Finally, if NFTs are seen as a form of bearer bond (linking ownership to whomever controls the token), they could also be used to package up a portfolio of different crypto or digital assets, and auctioned as a single lot. The buyer could then unlock the disparate assets, and combine them into subsequent bundles – bringing a new dimension to block trades and the transfer of large bundles of stocks.
Content in Context 