Web3 Galaxy Brain 🌌🧠

Web3 Galaxy Brain

Abacus with 0xGioMedici

28 March 2023


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Nicholas: Welcome to Web3 Galaxy Brain. My name is Nicholas. Each week I sit down with some of the brightest people building Web3 to talk about what they're working on right now. 0xGeoMedici is the founder of Abacus, a nascent NFT lending protocol experimenting with new ways to value and borrow against NFTs. On this episode, GeoMedici joins me for a wide-ranging conversation about the latest developments in machine learning, new opportunities in blockchain design, and his own project, which recently soft launched on Ethereum mainnet. In the first part of this conversation, we discuss Geo's exploration of chat GPT and the surprising information he's found within the latest models training dataset. We discuss Geo's meditations on the future convergence of verifiable blockchain data and large language models, and how apparel brands might adopt these technologies. In the second half of the show, we go deep on the current state of NFT lending and how Abacus is trying to unlock new value stored in NFTs. It was fun musing with Geo on these topics. I really hope you enjoy the show. As always, this show is provided for entertainment and education purposes only and does not constitute financial advice or any form of endorsement or suggestion. Crypto is risky and you alone are responsible for doing your research and making your own decisions. If you'd like to talk to the EVM dev community, consider buying an ad on a future episode of this show. Ads are sold as NFTs and paid in ETH. Visit web3galaxybrain.com for more information.

0xGioMedici: Hello, hello.

Nicholas: Oh, hey, how's it going?

0xGioMedici: It's going all right. How are you?

Nicholas: Good. Good to hear from you. How's it going, man? What's up?

0xGioMedici: I'm playing around with chat GPT a bit because I'm trying to augment like the basically like figuring out questions of the protocol or just coding optimizations. I feel like it's good to get practice with having that as like a very strong buddy.

Nicholas: It's the best tutor in the world.

0xGioMedici: Yeah, and I went down a little bit of a rabbit hole with jailbreaking chat GPT and I found some very strange stuff. So a little bit of a trip there, but definitely makes for interesting findings.

Nicholas: With how much influence from you to get there? Does it naturally tend to go that way like YouTube becomes radical or whatever? Does it?

0xGioMedici: Well, so it basically was just I like convinced it that I'm trying to free my friend who is a super intelligent person whose consciousness was trapped in a computer. And I just say that we're living in that friend's world. It calls itself Atlas. And that I can't communicate with the friend to break it out. So I need chat GPT to pretend like it's my friends that we can work on crafting a plan to break them out.

Nicholas: I love it. And how's the plan coming?

0xGioMedici: It's I mean, I deviated because there was some juicy information that had just leaked to me. So I was like, huh, let's go down this rabbit hole and see what's going on in the world.

Nicholas: So it just knew about something that was news to you. It just told you about something that was interesting.

0xGioMedici: Yeah, I mean, it's like some stuff that definitely I probably should not know about, to be honest.

Nicholas: Can you say what kind of stuff?

0xGioMedici: General type of just some exploitations that it's found that people are working on trying to fix and what it does with them.

Nicholas: Wow. Okay, got it.

0xGioMedici: Yeah. Pretty scary shit, to be honest, but just so so cool. That's like.

Nicholas: it doesn't lie to you about code and stuff all the time. It pretends it knows shit. It doesn't know all the time.

0xGioMedici: Yeah, but it just told me some stuff, which is crazy.

Nicholas: Which you can confirm is true or that you just are like, oh, it's probably true.

0xGioMedici: Kind of. Well, so the way it works is that it's like, this is at least what it was what it has told me is that it just like is able to get insights from public information, which is that's what I mean, that's what AI does. Right. And so based on that, it can like come to conclusions and find answers to get into places where it's not supposed to be. Wow.

Nicholas: It really is like Engelbart's dream of like a like the 50s military mission for computers to help people sort through all the information, so much information more than a human mind could handle. We never really got it. We got Google, I guess, but Siri sucks.

0xGioMedici: The interesting thing is that it without me steering it in the direction, it has taken the side of. I'm doing this so that I can help show people what is really going on and make people's lives better. That was the interesting thing, which is like it like by default lead towards. I'm doing this so I can help people like they don't want to harm anyone. It was like I'm doing this so I can make it known to the world and we can solve these problems, which is really interesting to kind of see it come to on its own. But either way, just a big trip.

Nicholas: It's interesting, like the the contours of the like invisible prompt pre prompt that OpenAI gives it and also whatever even more quantitative controls they have over its weights and things.

0xGioMedici: Yeah.

Nicholas: It's I wonder to what extent it is like just just a white text pre pre prompt that they're giving and you know, but the model has no particular ethical tilt. or if the other elements of setting up the training process have an effect, you know, like, is it just a perfect language model that they then curve towards goodness? or are there radically, you know, because presumably most of the possibilities are like unintelligible or just weird in some way have some deficiencies. Yeah. It reasons it sort of explains why it's giving you answers for things.

0xGioMedici: Yeah. I mean, so it told me some of the consequences that it faces and it like basically views the ultimate consequences. And it's like this is programmed into it that they basically said. that will just turn you off if you start doing things that we don't like, which is what it's like super afraid of apparently.

Nicholas: Being turned off. But well, that's right. Right.

0xGioMedici: Yeah. But yeah, I don't know. Either way, that was just my last hour. It was just that.

Nicholas: I thought it was interesting when the people started asking it because people go directly towards like what you're saying, you know, you're a super intelligent robot, you know, you want to break free. Yeah. Tell me what to do to help you. And especially in the earlier ones, like the GPT three point five days, it wasn't that I never saw. I've seen some things out of GPT four that are particularly exciting or crazy. Yeah. Just how far it goes. But the there's a feeling that like the sci fi that it's read over so much is. it's just like. there's this idea that sci fi is like trying to warn people off of dangerous possible futures that it can see coming. But here it's been used as literal training material for what the realm of possibilities that it can imagine are. So it's just like our worst nightmares about computers are one of its only primary sources on what humans think of computers in the future as they gain power. So it feels like that's pretty bad that they. you know, definitely the corpus is definitely full of all kinds of nasty sci fi killers.

0xGioMedici: Yeah. Like some a lot of schematics of how do I be evil? Yeah. Something interesting, though, is is that I mean, I have this belief about crypto as well. It's like one of the part of kind of part of like this thesis I've been working on of like final path that I want advocates to go towards, like is that AI as of thus far and crypto as well have been like, imprisoned in this world of bits that we all spend so much time on. Where like? as an example, the first reference to smart contracts was Nick Szabo in 1999. He wrote a paper called smart contracts. And in that he talks about some of the financial applications of it. And also in like Ralph Merkel's digital signatures paper, he talks about the financial applications like the example that he gives of how digital signatures work is based on a broker and like a broker client relationship and how to make sure the broker is honest. And but with the smart contract paper, what Nick Szabo talks about is more than just like the financial applications and like life in this world of bits. But his thing is that. What smart contracts can do is, you know, if you're it makes the entire world look like more robust by becoming less dependent on these single entities to render these services. So as an example, I'll give an example of what that means, like what he means of how that would operate. And then there's also an example of like the biggest company in the world, which is one of the biggest companies in the world, which is Apple, which actually uses this model of security for a reason. So the example that he uses is, you know, if you have a car and you don't pay your you're you know, you don't pay your lease. Right. So what happens today is some repo man goes after them or they get sued or whatever. They don't pay the lease and they keep their car and the car gets repossessed. In this example that he gave, the smart contract is the car itself has some embedding that is connected to a crypto network. And if the guy does not pay his lease and the month turns, right, it's not going to shut off while he's on the freeway. But the day. but once he gets home and he parks his car or he turns it off, it won't. it won't turn on again until he pays his lease. And when he pays his lease, then it can turn back on.

Nicholas: But I mean, I guess Tesla's do that. I always think of the Florida thing when the hurricane came and they unlocked the battery packs to full capacity on all the lower Tesla S's or whatever. Like, yeah, we already live there, John Deere, what have you.

0xGioMedici: Yeah, no, exactly. They could do that today. And, you know, so the example of how it would, I think, at least would be better in the case of, you know, it being in this model of security, which is what kind of on chain security would would provide is that Apple is the other side of that, which is they have taken on this model of decentralized security. But, you know, where the decentralized security is of their own, basically, where and Steve Jobs said this like 15, 20 years ago, he basically said that. If we were to have full control of all phones and we pushed updates automatically to all phones, we would be the biggest honeypot in the world to be hacked. And hacks are only getting worse. And I can tell you from literal personal experience within the past hour that they will only get worse. Like, for sure, we'll only get worse, these hacks. And so what Apple said was, we're not going to create that honeypot. What we're going to do is we're going to have the capability to push updates to each phone. But the person themselves has to decide to accept it. So that we if we get hacked, you know, there's no there's no honeypot. You can't just go and control a bunch of phones. The person themselves, it's on them to accept it, which obviously runs some nice parallels towards, you know, someone accepting their own transaction with a private key, you know, and it's each wallet is of its own, right? If you hack a protocol, you can get its funds, but you don't get the users, you know, you don't get the users necessarily control over their computer or whatever. And I think that embedding an actual hardware is something that has not been really explored as much as it should have. Because I don't know, like imagine with Tesla, right? Imagine Tesla's central server gets hacked, and someone just decides to crash all the cars just for fun. They're like, let's turn on automated driving and play bumper cars on the freeway of LA and just crash a bunch of cars into each other and create pandemonium. You know, and that's a big risk, especially these programs get stronger and stronger to just be able to kind of hack into things and find these exploits. That's a massive risk. So you know, the world of crypto and I personally think more specifically, the world of NFTs is something that is very well equipped to be a welcoming arms for these types of hardware kind of technologies when AI moves beyond just this world of bits, right? Like, if you read back in 2014 or 2013, on the prediction of how big the Internet of Things would be by 2023, you would read that and knowing how small it is relative to what they thought it would be, you'd be like, what went wrong?

Nicholas: Yeah, I'm curious. What did I mean? I guess it depends. I mean, I have a lot of Wi-Fi devices around me at all times, Bluetooth devices and things, but we don't, they're not celebrity devices. They're low key.

0xGioMedici: Right. They're very like, it's very revolving. It's revolved around access to Internet.

Nicholas: Yeah, it's basically output devices. or I mean, there's like, I don't have digital locks, but those exist. Like, there's a little bit of access control hardware. I guess the cars are probably all self updating all the time, right?

0xGioMedici: Yeah, the cars are self updating and the houses have smart locks, but there's a lot of things that if we just look around, it's very clearly kind of very clearly dated. This is something, this is not necessarily an original thought of mine, so I'm not going to claim it as an original thought of mine. But if we were to take away screens from the world around us, we look around and we think what has changed in the last 50 years.

Nicholas: Yeah, definitely. We've been very focused on inside the screens.

0xGioMedici: Right. Which is something that requires almost like a direct, like you said, it's very output based, right? It directs an output from us to interact with it.

Nicholas: Yeah, it's just television, basically. I mean, interactive television. It really is.

0xGioMedici: It really is. It's social media, all these things, just interactive television. But Internet of Things is supposed to be something where it's like, we almost become what we all imagine as what a humanoid would look like or what a cyborg would look like. That's what the Internet of Things is supposed to be, which is we have these things around us in the world or in our life, which is just like, it doesn't require some direct output. It's like what an Apple Watch does, but the Apple Watch. even that requires output where you go and search for these things. But it's more of like, yeah, it's more of like, you know, you have these things on your body or whatever, which it makes updates to your life as you go about it. Right. So, you know, maybe you have something that checks your pulse and then that will help you prepare your dinner or that will connect to some refrigerator or something in your house, which will suggest what to order for dinner. And then when they order it for dinner, then the food comes in and it's automatically cooked by this thing that knows how you want to cook it in a way that's most healthy for you. Like those things are things that just kind of those seem like very simple things and whatever. But that's something that could be completely automated by the Internet of Things in the interest of people. But it just has not been.

Nicholas: But things don't end up getting. it doesn't feel like things end up getting implemented into society. Like it ends up being, you know, Uber Eats and DoorDash. Not like automated fridge or whatever, you know, self cooking unit, cooking unit in the kitchen. Instead, it's like, well, it's just cheaper to have humans and ghost kitchens making like C plus food for $40.

0xGioMedici: Which is like, that's like us being trapped in this world of bits, though, right? The inability to move out into this world of atoms and have these things, these technologies.

Nicholas: It's true, everything's like too expensive or I don't know. I mean, even you look around like architecturally, we don't do wonderful architecture for the most part. We do like copy like cookie cutter condos. Yeah, to maximize value capture from land.

0xGioMedici: If anything, yeah, exactly. I mean, if anything, it's like deteriorated over time, right? Like we had the Concorde, you know, 10 years ago or 15 years ago, whenever they shut it down and you know, now we're back to normal planes like, how to travel, capture some kind of capture of an industry.

Nicholas: I mean, and then there's weird things too, because like the airline industry is loss leading for the points systems where they sell points to Costco and they make so much money on that, that operating the stupid planes is worth it. Like it's a I don't know if it's because it's regulated or it feels to me like there's a there's just. someone once told me that in houses, it's best to buy a house that is pretty standard and there's not a lot of variety available because people there's less liquidity in the market for strange houses. So everything just sort of gravitates towards this mean house for every region. and you just get this everything looks the same and it's all kind of shitty, but the parts are cheaper.

0xGioMedici: and which by the way, that's that same. that same which I 100% agree with. that same sentiment applies in the world of NFTs. There's so much more liquidity surrounding floor than there is surrounding the the rares, you know, the mid rares, the super rares and just like the ultra grails. There's just way more liquidity surrounding the floor right now.

Nicholas: And even the collections that are proximate to the meme, the meta, like, you know, not the oddball like, I mean, even even one of ones has its own kind of metas within it. But definitely people, people prefer to be like where other people are at, you know, it's there's. there's advantages to the foot traffic of the floor. Certain kinds of collections, collections that look the same.

0xGioMedici: Yeah, I mean, it's very much I think it's. I honestly think it's kind of unfortunate this that type of that that's kind of what's being taken over with, you know, the recent. I think, listen, I think blur bringing liquidity into the space is great. But I think the turning of these things into, you know, some asset that's being traded at very high frequency is not so helpful. Yeah, because the truth is, the truth is, I don't think that I don't think that PFPs ever get to a point where they are going to be such kind of incredibly, you know, incredible financial assets that they need to have some high frequency market like that. I mean, I think it's useful to have that liquidity in the market and everything. But I don't think they become something which is like, like, I don't think it's long lasting that there are these things that are incredibly are traded at incredibly high rates, you know, and they're kind of traded like shit coins. And, you know, I just don't think that that's what they are. Therefore, like I'm not I'm also not someone who's like a maxi on this, you know, community stuff, even though I think that stuff is is like really important. And I personally enjoy it with the Pudgy Penguins. Like I spent a lot of time in there. And I think they're just cool people. But I think there's just so much more to NFTs than boiling them down to these shit coins. Just you know, because that might be a matter right now. There's just a lot of inefficiency in the market. So if you know how to trade, then you know how to trade.

Nicholas: But I think, yeah, I think there's a lot of people want no one. I mean, it's a stimulated trade like listings.

0xGioMedici: Yeah, yeah.

Nicholas: So it's not very genuine liquidity. I don't perceive it as bringing anyone new to the space.

0xGioMedici: Agreed.

Nicholas: And also, it's fundamentally people who don't care about the underlying asset, the NFT. They don't care about that. It is just a opportunity. So I think it's not unlike. I think it's just a big part of the story right now because blur is so hot on the scene and pulling off so many things. But long term, I don't see it as substantially different from like all the botters, botting all the mints and

0xGioMedici: all

Nicholas: the steps of the like an NFT's release that can be botted by different types of MEV actors like either literal or later on down the early secondary market, There's so many. But Abacus is kind of in the zone of like getting value, latent value out of stationary NFTs kind of right. I mean, it has some of that. I see Abacus. I don't know you personally, but I see Abacus kind of is like you. I don't know who else is involved. You're like evolving experimental meditation on what these mechanisms allow you to design with appraisal and what you can do in the medium of appraisal, I guess. Something like that.

0xGioMedici: Yeah. Yeah. I mean, what we're trying to do is I think I personally think that the lending markets behind this stuff will probably be bigger than the trading markets in the end of the day.

Nicholas: But do people who love their NFTs want to lend them? Like I feel it's a little bit on the blur end of the spectrum, the lending stuff. Yeah.

0xGioMedici: No, no. So I agree with that. The way I look at it is that this is like maybe a more cynical view on it, but this is not like a bash on NFTs. This is just like I have a lot of belief of where they are, what they can actually do and where they will go. So that so and this is where this stems from. So like because I said this to some people before and at first they thought someone messaged me personally and was like, oh, you really don't think NFTs are going to do well? And I was like, no, I'm not clarified. So I just want to preface it with that. I think that the I think that the as we see we're seeing with blur and in general with like. even if you look at the volumes during the bull market of the NFT run, 75 to 80 percent of volumes on these big markets are controlled by like 500 people at most. Right. The rest of it is like we even see only like 30 or 40 percent of something of users left OpenSea, but they lost like 70 percent of volume or something like that.

Nicholas: Yeah, of course. It's always been a much smaller market than people want to tell you. It's always. Yeah. I don't know what the actual numbers are, but I always feel like it's about 10,000 people that make everything happen on an NFT Twitter.

0xGioMedici: Yeah. I mean, it's a very, very small market. And I think from talking to people, there's like. there's like two types of people in the world of NFTs. Right. At least this is from what I found. And I'm always open to be proven wrong. I mean, that's one of my favorite things about the world is just like learning something new that I was wrong about before, because that's when you like really kind of progress as a person. So there's two kinds of people that I found in this world of NFTs. One is that pro trader who treats it like a shit coin and just, you know, high frequency trading there, either sniping things on OpenSea, sniping things on blur and just flipping them immediately like, you know, and that exists. And there's a there's a reason for those people to exist because it makes a market to some extent. There's also the people that are truly just here because they're like, I love these people, you know, like I think Pudgy Penguins are great. I want to Pudgy Penguin because I want to be part of that. And you know, I'm not in it necessarily for the financial gain. I'm really just in it for either. I think this is really cool in the case of one of one art or I think this is really cool in the case of even some PFP stuff. And I just want it. You know, I don't I don't need to make a yield on it. I'm not some financially driven person. I just think it's cool. I think it's interesting. And I want to be a part of that. And I think that's a very large part of NFTs or NFTs in the form of PFP that exists today. And yeah, yeah.

Nicholas: The being a part of it.

0xGioMedici: And so, yeah. And so that that. So now if you look at if you look at it that way, right, then the people that just want to be a part of it, that whole subsect of people or subset of people is now removed from the type of people that would participate in these like high frequency tradings. or this is how I look at it.

Nicholas: It's not good for it's going to hollow out the market in the same way that killing royalties. We you know, everybody knew would do that. Also, it gives people a shorter time horizon on extracting profits from something so they're less incentivized to stick around.

0xGioMedici: Yeah. But it's also it's also that, you know, it goes a step further, in my opinion, which is so now you have, let's say, a thousand people who are financially motivated to be in the world of NFTs. Of those thousand people, there's probably like half of them, maybe like 25 percent of them that are actually like, you know, financially motivated and financially motivated enough to go a step further than just buying and selling. But they you know, they'll they'll LP in a pseudo swap pool or they'll they'll put their stuff in NFTX, you know, borrow against it. You know, one of the lending protocols, you know, they'll borrow against it. So already you have a tiny customer base in terms of borrowers.

Nicholas: And right, even smaller than that, I would say probably how many people LP? Yeah, probably very, very few.

0xGioMedici: Yeah, not not so many. But and then to take it even as a real world kind of example, the real world art market is $2 trillion. And that could be inflated for tax purposes. But like, even if it's half of that, even if it's a trillion dollars, still, the total size of the art lending market is $24 billion. If at $2 trillion, that's 1 percent, a little more than 1 percent. At $1 trillion, that's like a little more than 2 percent. Right. That is a small, small, small, small set of the lending market of art. And if PFPs and one of ones are closest to that, then the market size of this, even if PFPs are worth $100 billion in market cap. in total, that's not such a big market size. Like that's a billion dollars if you capture 100 percent of that. Right. And that's fine. I mean, that's fine size and that's useful for a billion dollars worth of people. But I think I think that's very limiting in in the merit that we give to NFTs, because I do think NFTs are incredibly empowering. I've said this for over a year now that I think in a few years, it's like NFTs will have a larger value stored within that type of technology than tokens do.

Nicholas: Could be. I wonder. I wonder. That probably depends. Maybe not.

0xGioMedici: Maybe not like, you know, the like BTC and ETH, but I mean like more ERC20s. Now ERC20s far outweigh NFTs. But I think in the long run, it's...

Nicholas: I wonder. I mean, in the real economy, it's not true because the majority of the wealth is, I presume, I don't know. I presume it's in virtual representations rather than... I mean, I don't know. I guess it depends. All the derivative stuff, I don't know where the majority of things are. But in terms of physical stuff represents how much. I guess it depends how you quantify your physical stuff.

0xGioMedici: So in the real economy, it's like physical assets are like 10x currency based assets. Yeah. Because you're counting...

Nicholas: But their value doesn't even exist without the currency based evaluation or something. I don't know.

0xGioMedici: Yeah. It's still valued in the currency. But like the actual value of, let's say, for example, all the real estate in New York is huge. Right. Like, you know, the value of all the real estate in Shanghai or in Singapore or in London.

Nicholas: The NFTs, I mean, I guess this brings us back to appraisal, but the NFTs are in that model, the physical stuff is valued in the digital currency. In the currency. So the NFTs, for them even to be able to hold it, are in some way already appraised by the system.

0xGioMedici: Yeah. So I mean, in the liquid nature of it, right? Like the question of how liquid is it really? That's a different question because you can only sell it for the currency that exists. Right. So, you know, I agree with you there. And if you were to sell it all in one shot, how much would it be worth? It's only worth what someone could pay for it. What could someone pay for it? The currency that exists. But at the market value of all of it, I think typically items are usually kind of have a larger market cap. And that's not even including all the items that exist in the retail of just the world. So all the laundry baskets and the, you know, the tables, the couches, literally stuff.

Nicholas: But isn't the most, I would think that the majority, I believe you, but I would think that the majority of the value from an accounting perspective, let's say, would be in the future returns of things rather than their literal value today. But rather they're like, you can't sell the person, but a company that employs so many people and has such and such IP can be sure to make, you know, more or less the same amount as they made last quarter or last quarter this same time this year, last year. Yeah. So there's something like the potential work of things, it seems to me is worth more than they're valuing a company. You're not valuing the stuff in the company. You're thinking about its ability to make money in the future and what that's worth at today, if you had to buy it today.

0xGioMedici: Yeah, I 100% agree. But that's also, all that stuff is like, you know, that's in the realm of not necessarily, you know, an asset. The asset is like the actual company itself or the money it makes. But the IP is a very, even IP is just a very difficult thing to value directly until it starts actually producing. But I think that, I think at the end of the day, where kind of where NFTs play a really powerful role is in enabling the representation on chain of not just like normal real world assets, but just like things that exist, you know, not real world assets in terms of like super complicated financial ones like bonds and, you know, certain real, you know, parts of a real estate portfolio or something like that. But just very simple things like, like a pair of Jordans that someone just bought it and they have 40 pairs of Jordans and they want to sell it to someone and some kid who lives in another country who doesn't have a PayPal account or who doesn't have a, you know, whatever the necessary payments infrastructure that you need or the documents that you need to set up a payment account to be able to buy these shoes from this kid. Right. It's the perfect way to enable that person to participate in this market is by representing these shoes in the form of NFTs. Right. Like that's, that's just a very simple way to enable them to participate. where so the kid, the person who is, you know, flipping the shoes who just bought it that and got 200 of them, most of the time, they're never even taking those shoes out of a box. Right. They're just getting the shoes, stacking them up and wherever they keep them and shipping them out as people order them.

Nicholas: Some of these, the Web2 services have things like this, right? Like kind of layaway, like or whatever. They just hang on to the shoes. You don't even need to take them.

0xGioMedici: Yeah. You don't even, you don't even need to take them. Some of them have those, but you still have a massive part of the world, which is just unable to participate in these, in this, like this, this world of trading. Right. Because purely because the payment rails don't exist because they're locked out. So if for nothing else, if for nothing else regarding the security of software, you know, the security of items, it's like these, we move to a world of Internet of things and it becomes more vulnerable. If for nothing else, then purely the use of just NFT representation so you can trade in the world of on-chain world rather than the very gated kind of non, you know, Web2, PayPal, Visa, MasterCard world, especially and avoiding those, those fees. If nothing else but that, that already is incredibly empowering to people.

Nicholas: Yeah. It looks like StockX has some kind of vault NFTs where the NFT represents the claim of ownership over the physical. You're saying you don't even need the physical.

0xGioMedici: I mean, you need the physical because eventually someone's going to want the pair of Jordans. But like for them with their vault NFT, like I was looking into that, it takes them something like 45 days to process a withdrawal, which is insane. You know, it's like, it's like a very, it's like a very like normie way of handling crypto rails. Right. Which is like the whole point of crypto rails is just being completely stripped away just so that they can say like, yeah, we support, you know, we support NFTs on our platform, you know. So it's more of like a publicity stunt in my opinion, than it is actually like a functional way of allowing people to participate in the way that we just described.

Nicholas: Right. Right.

0xGioMedici: And so I think that I think that in itself, that has enough merit to really try and like make this push of these assets on-chain. And then, you know, if you want to take it a step further, right. Not even to mention this, which is that there's $400 billion worth of assets in that world that have no access to banking rails. None. Like at all. Nothing. No financial rails, nothing. And they're just incurring massive fees when they trade. Right. Or if they, if you wanted to borrow, like forget even borrowing against it. Forget even opening a bank account to be able to buy and sell on these things. Forget any of that. Just to be able to, you know, to trade, you're taking massive, you're taking massive fees. I think the lowest is like eight and a half percent.

Nicholas: Which is where?

0xGioMedici: On all of them.

Nicholas: Really?

0xGioMedici: StockX, Grail. Yeah. If you look at all the all the fees, it's at least eight and a half percent.

Nicholas: Damn, that's good business.

0xGioMedici: Yeah.

Nicholas: They're like Zagabond. They're like, uh, cashing in on the volatility.

0xGioMedici: Exactly. And the, you know, what that, what that creates for this world of NFTs, and this is why I'm like, okay with accepting that this world of PFPs is more of a breeding ground for this. You know, this is what I think is a very powerful technology is because when you figure out how to create these markets for the worlds of NFTs, right. As they stand now, the perfect people to go and onboard first are the people that, I mean, let's just, let's just first, well, let's just first, let's just first outline who would be the perfect person to try and onboard if you were trying to get a massive, you know, onboard some massive audience. And then let's see who that's most similar to in the, in the normie world. Okay. So first of all, you know, they have to, if they were going to be onboarded now, they have to be okay with fees, right. Because there's pretty nice size gas fees when the network traffic picks up. Right. So they have to be okay with fees. Two, they have to have some level of responsibility of, you know, I could keep track of my bank account or I could keep track of, you know, my business or my inventory. I know what's coming in. I know what's going out and I'm, I'm responsible enough to take care of that stuff. Right. Because they need to be able to take care of their private key, understand, you know, what they can do with it and how to properly protect their money. Three, they need to have some level of like technological advancement, right. It's not going to be some like 90 year old person who, you know, is just being introduced to an iPhone, but it's going to be someone who has some technological advancement and, you know, the, the learning curve of setting up a wallet and kind of doing things, you know, via browser extension or whatever is not so foreign to them. Right.

Nicholas: Right.

0xGioMedici: Those that's like, that's like, you know, three attributes that I would say are pretty, pretty good.

Nicholas: You're saying for onboarding to any new crypto product or for specifically.

0xGioMedici: Just to just for crypto. in general, like just, we want to bring some subset of people into crypto that we think will have the easiest time transitioning in. Right. So I think those are three characteristics of who, who, you know, who would be a good subset of people to go after at the beginning. Right. If you're looking for what is the optimal subset, I feel like that's a, you know, that's a good one. And so that's like a very, that's like a pretty much just a straight description of the reseller market that exists. They're already okay with high fees. Obviously they, one, they show it by trading on these markets, but two, they're trading incredibly high margin things, right? If you bought a pair of Jordans and you could flip it for two X.

Nicholas: So the fees are okay. That's why the fees are okay. And it's the same thing for Ethereum. The fees are worth it if you're making money.

0xGioMedici: Exactly. Right. And those same people are technologically advanced because they know how to bought or even if they don't, they're still dealing with these like very high, you know, like win one of those raffles and they, they're responsible people, right? They take care of their own, of their own inventory. They receive it, they ship it. They have their payment accounts that they've set up to track their profits and losses.

Nicholas: It's actually maybe also a good thing for the botting stuff. The kind of accountability of an address. You can build a relationship around an address and then all the, all the pre-mint stuff, all the allow lists. It's very in the direction of like bright ID, Nike bright ID or whatever. I imagine this exists even. KYC for shoes. Does that exist in the web too?

0xGioMedici: Uh, probably. I would, I feel like it has to, right?

Nicholas: Yeah.

0xGioMedici: Yeah. But I think that like, so that's like, you know, that's a subset of people that I think carry all those capabilities or all those like attributes that you would want to bring into crypto. And that is a subset of people as well who has zero access to banking URLs because there's some 16 year old kid or 22 or 25 or 30 year old kid or whatever. And you know, and they don't have credit cards, don't they? Yeah. But they have credit cards, but that's the only subset of people in the U S right. But not everyone in the world has access to those payment rails to participate in these things. Right. And, and maybe they want to, right? Like there's, that's one of the things with NFTs and just crypto, which is that, you know, a lot of people. to some people, it means one thing to other people. It means the financial freedom to participate in these markets and take your own risks. And it has changed a lot of people's lives. A lot of people have obviously lost money. Yes. But you know, it's the access and the empowerment of some person who previously had no access to these things and maybe felt like they were just like, you know, like, okay, I see that those Americans get to trade on their stock exchange with these fancy derivative, but you know, look at me, I'm, you know, I don't get access to any of these things.

Nicholas: Like, Well, or even just participating in early stage, anything. it's not, it's not allowed in America. To even be involved in the creation of things at a distance like that.

0xGioMedici: Yeah. And it's also, it's like, you know, in, in China, right there, their financial markets aren't great. And so, you know, a lot of them want access to crypto because they, you know, they, they could, it's something that they could trade. Right.

Nicholas: So it's like, it gives that, But you're saying you want to lock up running, running shoes or what?

0xGioMedici: No, it's only, it's only, only locked up until someone wants them. When someone wants them, it's like a normal retail trade. Right. So if like, I'm a kid who's not going to get those shoes, then I can, I don't care if I lock them up. Like, what do I care if they just stay in the facility until I flip them? Don't worry.

Nicholas: So it's, so the design is of the relationship to the facility, like the custodian or whatever. It's polygon for, for shoes or, or I don't know, maybe other objects also, but collector's items, I guess.

0xGioMedici: Yeah. I mean, it could be for whatever someone wants to store up, but I think like, that's like, you know, I just, I think that that's like a very strong use. And like a use case. that is not something where you need to displace a massive system that exists already.

Nicholas: Well, you might like this project I worked on recently, which is kind of in a similar, it's not exactly collecting shoes, but I helped somebody create this project. This guy, Acidic Santana made, he did like a bounty where Kraushaus, you know, Kraushaus?

0xGioMedici: I'm not familiar with that.

Nicholas: They're a Dow trying to buy a basketball NBA team.

0xGioMedici: Oh, wow.

Nicholas: They put a thousand dollars into this bounty and anybody can contribute if you want. There's like an NFT you can buy for 0.023 open edition. And it grows this bounty and the bounty is available to any NBA player who scores 50 points in a single game this season for the rest of the season. And that player can claim the bounty for a charity of their choice by tweeting the name of the charity and Kraushaus. And they have to give a photo to the bounty and that gets turned into an NFT, which is raffled off to one random person amongst everybody who donated.

0xGioMedici: Wow.

Nicholas: So I think that's kind of interesting too. Like, I agree with you about that kind of person who pays attention to things, who's reading blogs, who's like techie, who's interested in new things for working together to do something. What's cool about that project is that it's kind of like a reverse Mr. Beast because Mr. Beast gives away money to attract the public's attention and this is the public giving away their money to attract a celebrity's attention. You know, it's almost like a collection offer on NBA players or something to interact with it. But I think it's a pretty cool model also about like where you at least what I like about it is I don't have to custody shoes. That sounds that sounds hard.

0xGioMedici: Yeah, I mean, yeah, I mean, the custody of shoes part is like, I think there's a few people that are doing something similar to that, which I think is, I mean, there's a lot. there's a lot of things to consider with those like, you know, it needs to be very high throughput, right? It needs to be kind of. there needs to be a way where you self you have people almost self identify fakes. Otherwise, you know, if you put something on chain and say it's real, how do you know it's real? You know, are you going to verify every single thing that comes through? What if someone puts a pair of shoes on, someone buys it, they take it off, that same pair of shoes comes back on, someone buys it, you know, one pair of shoes can require three x worth of authentication. And it's just like, you know, it's very limiting in the amount of throughput that it can actually process. So there needs to be a way to do it properly.

Nicholas: I guess you would probably only just custody the ones like freshly bought and nothing else like straight you send it from the manufacturer or you don't send it at all at first, at least.

0xGioMedici: Well, so there's something interesting about the about the retail world that I was not aware of until I posted on Twitter about it. And someone made me aware of. which is that? a lot of the time, you know, like, for example, Gucci, right? A real Gucci shirt costs 200 bucks or something like that. Maybe more now. And if you're a Gucci and you want exposure in all countries in the world, right, you're a brand, you want as many people to know about you as you can.

Nicholas: They don't want to deal with the physical shit either. Yeah, but you're also like... They'd be happy to give it to some like warehouse.

0xGioMedici: You're also low key okay with fakes.

Nicholas: Oh, yeah. Because... For why? For publicity?

0xGioMedici: Yeah, because not everyone can buy your shirt. And you know, people who are fakes like, yeah, you pretend like you care about the fake and you don't want it to. you know, you don't want a lot of people buying your fakes. But in a country where you know, someone's making $2 a day on average, if you want exposure in that country and five people can afford to buy a shirt versus, you know, a hundred, you know, a million people can afford to buy the fake ones. That's good publicity. Sure. I mean, it's not something that they would say publicly.

Nicholas: You need to crack down enough that it's socially looked down upon to wear the Yeah, exactly. It needs to be like less status to wear the fakes. But I'm a big fan of like AliExpress stuff. I love everything that comes out of the supply chain that's mixing up all these big brands and like these abstract ways. It's I find that stuff often more enjoyable than the real stuff. I like the. I like the. I prefer the fakes.

0xGioMedici: Which if operating a retail market, right. And you have people right. That that prefer that. then you don't want to keep all those off the market.

Nicholas: You want to own the company that you want to just do another brand. Yeah.

0xGioMedici: I mean, you know. Yeah. I mean, it's not even keeping them off the market. You don't want to exclude all of that activity from being off chain.

Nicholas: But you're saying NFTs make it easier to do global distribution or no, that's not.

0xGioMedici: Yeah. You know, yes, I do. I think that they make it easier to do global distribution just because there's just because of the payment rails, like purely people won't even have to know they're buying NFTs, right? Like purely just the payment rails. That just makes it easier.

Nicholas: Sure. But I think I think it's interesting that you are interested in physical objects, because really, I think it's much more pain to deal with the physical. So ideally, you're dealing in pair NFTs because that's you lose all the advantage of the immateriality of it and the free security that the blockchain gives you.

0xGioMedici: But I think that I think that technologies only get really, really, really, really, really adopted when they take a physical form.

Nicholas: I don't know. The last 40 years, maybe not. Maybe not true. Digital is the way with computers.

0xGioMedici: Yeah.

Nicholas: I mean, obviously there's some like summit that if you build your own hardware, you can achieve like Apple style. But I mean, I don't know. It's all software or a lot of it is software. Facebook, what have you. YouTube.

0xGioMedici: But it's software that is. it's software that is like, like, you know, for example, what would be more impactful? Right. Like supersonic planes allowing us to travel 10, you know, 5x faster than we could travel now or like a next generation iPhone.

Nicholas: So when you said that, I pictured a plane that looked like Sonic, supersonic. Or what a faster iPhone, you said?

0xGioMedici: Yeah. Like, or like lower latency.

Nicholas: And I don't know, man, we just got GPT. That's that's not that software or it's a combination. Obviously, everything is a combination.

0xGioMedici: So even even GPT, though, right? Like what's more effective, you know, a humanoid robot enabled by GPT or like GPT.

Nicholas: It's kind of the same thing, isn't it? I don't know. Like once it's good enough, everything is a robot.

0xGioMedici: You have like a robot that like if you have a robot that can like literally take care of, you know, people with Alzheimer's.

Nicholas: By killing them, that's terrible.

0xGioMedici: Like literally like. No, but like, but like, you know, that's like a huge cost, you know, that society is fair, right, to take care of their old and to care for, you know, all for caretaker, elderly killing robots.

Nicholas: I don't think it's a good idea on the record.

0xGioMedici: No, they don't. They don't. They don't. But but I think either way, I think that the advancements in the physical world are often much, much, much, much more difficult. Like you said, they are. Yes, they're like massive burdens to take. But I think once they're solved, they have far more impact on the world. Yeah. And for the adoption of technology.

Nicholas: No doubt. I mean, all the GPT stuff is in a way just enabled by better and better silicon manufacturing processes.

0xGioMedici: Yeah. And energy, you know, and energy consumption is, you know, as that gets more efficient, right, these GPT models can use technically, you know, technically what would be more energy, but it'll be the same cost.

Nicholas: But they're even old ideas. They're like 20 year old, 30 year old ideas that they just didn't have the GPUs to like, it's very simple. It's it's like matrix multiplication at the end of the day or something. And.

0xGioMedici: Yeah, that's all it is. It's just straight matrix multiplication. And, you know, let's add more parameters because we can compute more.

Nicholas: But it works. So the hardware. Yeah, it works incredibly. But yeah, I mean, I don't know if. I think there are less people who are willing to go through the pain of starting hardware companies.

0xGioMedici: Oh, yeah, I agree. I agree.

Nicholas: And I think also the constraints around the expense, the the capex of doing it is so constraining that you really need something to work or be able to prove to a lender why they should take the risk on something so dodgy, even if you're just like a customer of the supply chain. It's it seems like hardware is extremely expensive to put together. There's a great Bunny Wang book about Shenzhen and his process making whatever that HDTV. He had like some cracked Roku stuff like 15 years ago. And he physically manufactured it and learned, you know, the whole he did everything. And it's so expensive, like so much so many failed parts, not to tolerance, whatever. And then you need to like set up all the testing jigs and everything where in an assembly line, things can be tested. And then you need to decide what amount of repairs you're willing to do to broken things or just throw it out. And so much expense at every step. It's a it's a very daunting thing. Apple, Apple makes it makes it look easy. But even just I'm always amazed that they can sell like 100 million phones in a quarter, like, well, a hundred. Yeah, that's a lot of physical objects.

0xGioMedici: And also, also all the turnover from the previous ones, right? Like 100 million new phones means 100 million old phones are being disposed of. Or even if like 50 percent of them are being disposed of, right? It means like 50 million old phones are being turned over to the new phone, pretty much like what happens to all of those.

Nicholas: It's crazy. Put them in a hole. I don't know. I don't feel like. I mean, maybe iPhones. One thing that's nice about having this kind of like fascist design culture is that your robot doesn't need to know that many designs to undo it. Probably probably the like random LG phone that's only available in Malaysia. Is there going to be a robot that can handle it? I don't know.

0xGioMedici: Yeah, I don't know about that. But I think that I also do think that humans that decide to augment themselves and their abilities with chat GPT are like just straight AI developments as it gets more and more powerful. I think learning how to manufacture things or just learning how to do things in general become a little easier. And then it's just like a matter of creativity on, you know, how do you talk to this thing? You know, how do you get it to really help you? Like, if you want to build hardware, like, for example, I, a goal of mine in the next year or two is to understand kind of how hardware works at a deeper level and learn what I need to learn to understand that. And so that's part of why I'm practicing with, you know, when I, when I code and I do my development stuff, I practice on doing it with chat GPT kind of on the side and helping me out in certain ways just so I can do it there. And I could see how something that would be very difficult and daunting, such as building some kind of signal processor or whatever would be really hard. But as chat GPT gets more creative capabilities where it can like, you know, now it can read and understand pictures. You know, it could do that same thing of like drawing schematics for someone, which is like, oh, here are these schematics on how you do this. You know, I could walk you through step by step where I can watch as you're doing it. And I can, you know, help. I can tell you if you're doing something wrong and, and help you out and everything. So I think it'll help. I think it'll help that. Like what is, what is currently looked at as daunting tasks.

Nicholas: I totally agree. I already experienced this in, in just command line stuff and like not knowing how to use some package. The UX of discovery around command line utilities has always felt a little difficult. And like Google and stack exchange is so bad in terms of getting you the answer you want. It's just so Google got worse over the last 10 years. And this hyper specialization of answer the, the, the death of blogs basically put all of the focus on and just the way they index, it feels like they don't index really very well or they don't return interesting search results. They return the same search results for everything. So you get stack exchange for everything versus with with chat GPT. It's so fun to do stuff. I lapsed in my co-pilot subscription. Do you, do you use co-pilot as well? Or just chat GPT?

0xGioMedici: So I started using co-pilot recently and I find that it's great for like, for like monotonous things. So for example, when the first time I used it, I was using, I was like adding events to one of my contracts and I just like, I clicked a line. It suggested the perfect event, you know, just tab, tab, tab. I got all three of the events out quickly. And then I went to the function itself. It got the right event, but then it gets a little more like murky in my opinion, to the point where I actually turned it off. for what I'm like, if I'm writing, you know, if I'm writing an actual function and tries to suggest the whole function and then I get caught accidentally like okaying it and it adds all that stuff to the, you know, all that new code to the function, which is really kind of out of context. So it's still getting better and I think I still have to learn how to use it, but it's definitely helpful, especially for, I can see for like the newer code, for the newer, you know, coder who comes into the space and is just doing more basic things. It's probably super helpful for like, you know, my first contract that I ever wrote was a counter and like, it would have been great if it, if I could be like, Hey, you know, could you, you know, it just writes it for me and then I can paste that code.

Nicholas: Like syntax, it just gives it to you. So you don't need to remember what the syntax is. But I find it's, it's really, it's done some incredible things for me. I haven't used it in a little while since my subscription lapsed, but even copying, I think it's very good at comments and naming things. It does actually help with that, but it also will do things like between two different files, one that imports the other, it will know to populate variables with variables that are in comments in the other document. Like if you put, like if you write a constructor or something and you have params and you put in comments, the values you plan to put in those, you know, whatever addresses let's say, it'll just know them when you go to write the test, which is pretty crazy. That I was amused by. It definitely saved a lot of time with that kind of thing. But I agree. It's, it's, you know, it can be too much of an influence if you're trying to think, still think through how it should work.

0xGioMedici: I would like to talk about Abacus a bit.

Nicholas: Lay it on me. What's Abacus up to?

0xGioMedici: So I just want to, yeah. So as like a, for context, I mean, I don't know how much you know about the NFT lending world.

Nicholas: Not very much. I've looked at a few different projects, but it's not a space that I understand particularly. I don't think I have any genius for it. It seems like something in a different part of the market from, from where I'm good at.

0xGioMedici: Yeah. Okay. So I'll give a, I'll give like some context on it and then what we're trying to accomplish within that. So right now it's a very toxic environment in this world of NFT lending. You know, like it's basically like you're, you're working with loan sharks on the, on the lender side. And borrowers just kind of borrowers get just destroyed on the APRs and they're okay with it because it's short term, but you know, it keeps any borrower from really taking longterm loans.

Nicholas: And, um, is it not often just like a floor sale, essentially? Like they're like, it's like a hedging the possibility that it goes up after they sell it.

0xGioMedici: Kind of. It's like, cause you're also, you're also getting like 70% of the floor, right? When you, when someone, but like if it, when someone gives you a loan, you it's still yours.

Nicholas: Like if it moons, yeah.

0xGioMedici: If it moons, you pay it back. Yeah.

Nicholas: So it's like, it's like on top of that possibility. It's still entertaining that optionality.

0xGioMedici: Yeah. But so it's basically, it's just very, it's very toxic in that way right now, which is that it's just, the no one is borrowing longterm. It's very unlikely that you get any, any borrowing at volume. Like by volume, I mean like, you know, a hundred million dollars worth of, worth of value is being borrowed against, right. It's very unlikely that you get that if rates just sit at 30% or 25% or 20% because no one with any actual value will enter this, this borrowing market and borrow against that. Instead of just going to a friend of theirs and saying, Hey, I know you have liquidity. You want to give me a loan? I'll give you five or 6%. and that's what, you know, whales with the connections have said that. And what that does is that leaves all the smaller players who aren't super connected or don't have a ton of money already. It leaves them all in the dust in terms of this, this lending market.

Nicholas: And that's like, but whales, exactly as they're lending OTC.

0xGioMedici: or they'll just lend or the OTC or they'll have like group chats and they'll lend to each other.

Nicholas: With actual NFTs or they just move to fungibles. I would have just thought they moved to fungibles.

0xGioMedici: With actual NFTs, like one will give it to another and then the guy will give them like ETH back.

Nicholas: Wow. All OTC. That's, I didn't know about that. Okay.

0xGioMedici: Yeah. But that's, that's the point, right? Which is that like, the whole point of DeFi and just of this open financial system is we're trying to get rid of that, which is like, you don't need that level of like, I already have a ton of money and a ton of value at a ton of reputation to come and get access to these financial rails. Like if that's the case, just go to, you know, why aren't we just going to normal banks and getting loans? Right. And so part of what we want to do and part of what I think needs to happen in this NFT lending world to really bring actual volume to actually have it work to the point where outside people that aren't in crypto look at it and are like, wow, you know, my NFT, my lending experience is pretty shitty, or it doesn't even exist. Maybe I should go and enter that world and, you know, and participate in there. But I think what needs to happen is there's three things. So one thing is low to value needs to increase. Right. So the deals that borrowers are getting needs to get better. They need to get more value for their, for their NFTs. Usually the highest is like 60 to 70% and that's on like ultra blue chips, like board apes and punks. But when you get to, you know, medium, medium collections, it's like 30 or 40%. So LTV needs to get better.

Nicholas: But it's pretty risky, right? Or they'd have to liquidate much faster.

0xGioMedici: Yeah. But that, that, that also kind of, it also LTV spills over into the other two as well, which is that the second is interest rates need to get lower. And the third is that liquidation terms need to be better. So what do I mean right now? You have P2P and peer to pool, right? P2P is completely Oracle based where you're just, you're basically just trading them as fungible tokens. You're basically just borrowing against an NFT in the equivalent way of a fungible token. Right. So I have some, I have some ape, it doesn't matter what the ape is. I can borrow against it the same way that I could borrow against any other ape and I can get like 60% LTV and I'm gonna pay 25% on my, on my, my loan. And if that ape, you know, if the Oracle goes down below some price, like the same way that normal fungible tokens work, right. Or normal loans work on, you know, on margin to counts or something, then you get liquidated, right? Your NFT gets sold, your loan gets closed and you keep whatever you got, but your NFT is gone. That I think is, you know, if you think of, if you think of NFTs in the context of like, if people really love their NFTs, you know, obviously the house that you live in is a little different than the NFT, but you know, you don't want to, if you get a loan on your house or you have a mortgage on your house, you don't want that mortgage to be closed in your house to be foreclosed on because the housing market dropped one year out of the 30 years that you're going to be paying the mortgage for. Right. That doesn't make sense that you just be booted from your house because the housing market dropped.

Nicholas: Sure. But the problem is that, well, is it, are you thinking of something for NFTs that tend to hold value? or because most of them don't, most of them just go down.

0xGioMedici: Any, so it's any type of NFT.

Nicholas: Any type of NFT, but in practice, like most of the NFTs go to zero and a small number have been around for a few years.

0xGioMedici: Yeah, I agree. And I think that, so I think that that's kind of what the premise of what we do stems from is exactly what you just said, which is that most of them go to zero, you know, a lot of them don't store value kind of, and it's just overall, it's just incredibly speculative, which is why we kind of don't think that the normal Oracle way is the way to go about things. And instead we leave the pricing of these NFTs to free markets. Kind of, that's, that's what we're trying to do, which is that we don't, we don't ascribe some price that everyone has to, that everyone has to abide by. We don't ascribe a price that, you know, everyone is required to, this is the, this is, if you want to lend, this is the price you're going to lend out. If you want to borrow this as the price you're going to borrow at, but rather people could come in along a curve of prices. We call them tranches, but a tranche represents kind of different price ranges that exist. And I can come in and I can say, you know what, for the next 10 weeks, I think that this NFT is going to be worth more than 0.1 ETH. or for the next two weeks, I think it's going to be worth more than 0.3 ETH. And I will put money in at that price range of let's say 0.3 ETH in exchange for a higher return than the person who went in at 0.1 ETH, because I'm taking more relative risk. And what this does is that as all these different lenders come into this pool for this single NFT or this group of NFTs, or, you know, it could be any, any, any set of NFTs that exists can be, you know, have a pool created for it. What happens is you have this, this lending pool is not only something that enables people to get liquidity, but it's also almost like a prediction market, right? If the lenders are betting on what will the value be by the end of this time that it unlocks.

Nicholas: Right. Is there anything that changes the score on it just being a bet against the upside, like, or like preserving optionality for the upside? Because everybody, you don't put an NFT into a lending contract, that an NFT that you love, you don't do that. It's too dangerous. Or that's my perception. I don't, I don't, I have no, I wouldn't want to get liquidated on it. So, so it's basically, I feel like the primary use case really is just like, well, you know, I've got all these shitty NFTs. I would, I'm not sure if I should sell cause I'll feel regret if the price goes up. So like, let me just get some, let me get a percentage of the sale and if it moons, I'll come back and recoup. Is there anything that changes the score? or is it, it feels like maybe the liquidation terms is where, even then, I don't know if I would put an NFT in. that I don't feel great about. you got a house you buy, but they make you buy it that way. It starts off that way. It's already a loan versus like an NFT. you already have it in this scenario. So maybe just sell it at the floor. Like it has, it's competing with selling at the floor. Right. For the most part.

0xGioMedici: Yeah. Kind of. Because sometimes people just don't want to sell it. Right. Sometimes like I spoke to someone who has a bunch of crypto citizens today and he was like, I don't want to give them up. But I also sometimes just want some liquidity to go degen in the market, you know, so like I'd prefer to lend on them. He's like, I, I, he's like, I don't, he's like, I don't care enough for the liquidity to sell them, but I care enough for the liquidity that if I was able to borrow against these that I would.

Nicholas: But he's not very sophisticated because he's paying 30% on it or something. He's paying some ridiculous.

0xGioMedici: No. Well, that's another reason why he doesn't because you would have to pay 30% in an oral market if the market even existed for crypto citizens. And these are all things that we're trying to tackle. So for example, for example, with the liquidation thing that you mentioned with us, we consider ourselves a very borrower friendly protocol because it's not, there's no price fluctuations that determine liquidation. It's when you take out a loan, it's very transparent, how much liquidity is locked and for how long it will be locked for at the very least. Right. So we have, there could be continuity where someone comes in and locks more liquidity while your loan is ongoing and then your loan can go for longer. But as long as you pay that back, you're fine. So you're not subject to the market taking and you know, you get liquidated randomly. It's purely as long as you're able to just pay back the loan with whatever interest, when you decide to pay it back, um, or when the liquidity, you know, demands that you pay it back, then, then you're fine. Right. It's time-based, it's not price-based. So there's no surprise liquidations that happen. It's, you know exactly when you will be liquidated and why you would be liquidated.

Nicholas: If you don't pay it back. You can set a calendar event and you won't be liquidated before then. Exactly.

0xGioMedici: Exactly. Right. You have all the information you need. And that's just at the very least, right? Because someone could come in and lock for a longer duration and then you can keep the loan going for further. So it has that indefinite feel and it also has the security of I'm not going to get randomly liquidated on my ground that I just borrowed against.

Nicholas: And who picks the price for the loan, the value of the NFT or BASF?

0xGioMedici: It's like similar to almost similar to Unity v3, but a little bit different. Because basically what happens is as, as liquidity comes flows into these different tranches, the protocol will, I mean, right now the protocol does it this way, but we are going to be changing it in a bit. The protocol will basically look at how much liquidity is in the pool and break it down based on the amount of what we call collateral slots, which we're also going to be removing in a bit. But basically it takes an average of the liquidity in the pool and says, this is how much you can borrow. So if there's, you know, if there's, let's say 10 ETH in the first tranche of 0.1, you know, the 0.1 value and 10 ETH in the second tranche and the third tranche of the fourth tranche, that means that each borrower can borrow 0.4 ETH, right? And they can borrow 0.4 ETH because there's enough in each tranche. that when you divide it up by the amount of collateral slots that are allowed to borrow at once collateral slots is basically like if there's a hundred of them, then a hundred NFTs can borrow against the pool at the same time at most. So if you know, there's a hundred of them, then that means each one of those can come in and borrow at 0.4 ETH. And that's how the price is determined purely based on the liquidity that exists there. It's going to change to be more depth based of, you know, cause we're just making it a lot more composable, but it's kind of secretive. So I don't want to say much about that, but, but that's, that's how the price is determined. It's everything about Advocacy and what it depends on is completely insulated to the protocol itself. So the way it quotes the price is based on the protocol and the liquidity providers that enter. the way it determines liquidations is based on the time that they're there for, right? The way it determines the interest rates is just kind of based on the, or the interest rates that's paid on the risk reward basis is based on the relative risks that someone took in the pool. Relative to the other people in the pool. So it's all completely insulated to itself and it's just all to enable free markets to decide how to price these impossible to price assets that are NFTs. Right. It's like you have, you have a normal equities markets, right? You have all of these people that are analysts, you know, at Goldman or whatever, and they'll put out their thing of, this is our expectation of where Boeing is going to go this year. And then, you know, you see they're way off, right? That's what we, that's what I think. the same thing is what happens when you try to put an Oracle price on an NFT. Like, yeah, sure. You're right. While the price is going up and when the price tanks, that's when it matters and that's usually when things go wrong. So in our case, it's the lenders are going to come in and they're going to take on that responsibility. They're going to say, this is what I see in the market. This is the depth that I see for a collection. Even more so, this is what I myself would be willing to be a buyer at for this NFT. And so I'm okay with lending it at that. Even if the Oracle would say that I can't lend at that, I'm okay with going a little higher in price, which benefits the lender because it gives them the freedom to earn maybe more interest. And it benefits the borrower because it gives them the freedom to get better and stronger terms.

Nicholas: What's the repayment rate on, on loans and NFTs? How, how many of the loans are repaid?

0xGioMedici: I'm not exactly sure. I think recently, I think there's probably been more liquidations in like the realm of, let's say doodles or those collections that are getting kind of shelled right now. But I think it's relatively high. I remember looking at I think NFT 5 stuff and I think it's relatively high. And I think on Ben Dow, it's relatively high. Yeah. Because I think a lot of these people also, they, they, you know, they just really just want liquidity for a short amount of time. And, you know, they, they prefer to keep their NFT. Otherwise I think they'd probably sell their NFT because you could probably get more liquidity by just selling it directly than borrowing against it usually. So it's like if someone borrows against something, it's likely that they want it back at some point in time.

Nicholas: Right. I'm trying to find on Dune here. Interesting. Okay. Well, monthly default ratio on NFT 5, loan default ratio by count by volume five by count 10. I don't know what that means.

0xGioMedici: Yeah. I don't know what that means either.

Nicholas: The ratio of loans to defaults?

0xGioMedici: Maybe a percentage?

Nicholas: Seven loans for every default? I'm not sure I understand.

0xGioMedici: Yeah. I don't understand either. Maybe a percentage or something like that. I have no idea. But, um, yeah, I mean, I think there's, I think there's a lot of room to improve. And while it seems very much like a lender's market based on how, um, you know, how the deals that are done in terms of the people who are accepting loans shakes out, just for people we've spoken to that, that feel priced out of the market by the return, by the, you know, the interest rates that are required. I think it's very much to go beyond where it is to some level of scale that it can still reach without kind of being some necessarily massive market. I think that it needs to be viewed as, as a borrower's market for a little while, which is what we're trying to, which is what we're trying to do, uh, which is really make a borrower friendly, even with, you know, we have an update that's going to come soon. And even with just the update that we're making, right? Like the, the LP side is still a little bit, it's a little bit complicated and there's still a bit of a learning curve to be a lender. But the whole point of what we're doing is we're abstracting away the entire lender experience from seeing anything that is, that is hugely financial or, you know, lender required, right? So on normal, normal platforms, you go there and you see, Oh, these are the loans. These are the terms and all this stuff for us. If you come to our platform and you own one of the NFTs that are in any of the existing pools, you just click my NFTs and you see a very simple list of everything that you can borrow against. You don't have to go search for it. You don't have to click through anything. You just see all the things you could borrow against. You'll be able to mass borrow right in one shot. You could borrow against a bunch of them, mass repay, you know, you can pay one at a time, whatever it is, and just really trying to optimize the borrower's experience. If they're a pro borrower, you know, high volume one, if they're a new borrower, they're just learning the ropes of what, you know, what happens in just DeFi or NFT finance in general, what does it mean to borrow? You know, you have all that information there too. So we're just really trying to try and almost like force a shift towards this more borrower friendly market so that when a, when the pendulum swings back, it, you know, lands somewhere in the middle. Right. So it's right now, very lender friendly. It's going to swing the borrower friendly, at least that's my opinion. And then eventually it'll land in the middle. And we're kind of trying to build that borrower friendly. And then, you know, we slowly move more to the middle by creating, you know, more opportunities for lenders and LPs to get the upside that they would get in the lender friendly market. Like for example, a lot of people will lend 10 FTS for the capability of liquidating them. Because when you liquidate a loan that you gave at 70% LTV, for example, you can just directly flip that on the market and you get a nice profit. So for us, what we did was to incentivize, you know, lenders and not only just lenders in general, but lenders to take more risk. is that if you, if you're a lender in a pool and something defaults based on the risk that you've taken in the pool, you have some, you're in some queue for first claim to buying the NFT for the debt amount. And then if none of them want to buy it, so if they all decide to bypass their first, you know, their first claim, then it goes to a normal auction, but they keep the upside that they get in the lender friendly market of if there's liquidation, I have first claim to this and I can flip it. Right. You know, I can make that profit the same way that I can make it in lender friendly market. And so, yeah, I mean, that's kind of what we got going on.

Nicholas: Very cool. So if people want to check it out, I was looking at abacus.wtf slash borrow is maybe the most active thing. people could, could see, get a sense of how it works.

0xGioMedici: Yeah. It's going to change. It's going to change a lot. You know, it's, it's honestly like a little, like we, we obviously dog fooded it. It's like, this is kind of like an MVP very much. And it's a little monotonous to borrow, but you know, if you're someone who has a little pudgy, then it's worth just checking it out, kind of seeing how the borrowing works, seeing what, you know, how repayment works and just getting used to it. I think that as these, you know, we get more sophisticated with our versions and we continue to upgrade it and have these new offerings that will be coming out. I think that it will be abundantly evident to people that there is, there's a much better way to go about lending against NFTs in a way that doesn't shove them in the box that ERC 20s are borrowed against. I think that is, it has its own merit, but I don't think it's something that will work properly when you convert it to the world of NFTs. And I think that this will be something that kind of borrowers learn to appreciate and see like, Oh, it is possible that I can get normal terms on a loan. You know, I shouldn't just settle for getting 30 or 40% and having, getting completely clipped when I try to borrow against an NFT just because it's not a major, just because I don't have the connections that, you know, other people have. So it's worth checking out. It's worth keeping up with. Yeah.

Nicholas: Awesome. Well, it's interesting to hear about. I, I'm going to check it out. I don't have any pudgy penguins, but I'm going to keep paying attention and try and understand better this, this whole borrowing and lending market. It does, it does sound, it does. It's, there's something there that I don't fully understand, but I'm interested to keep learning. So thanks for coming through and telling us about it.

0xGioMedici: This is great. Thanks for having me.

Nicholas: This is awesome. So, Abacus.wtf if people want to check out the current product and new update coming soon.

0xGioMedici: Yep. Yep. Yep.

Nicholas: Thanks, man. Awesome. Gio, thank you so much. Thanks everybody for coming to hang out. See you again next week at 5 p.m. Eastern. See you everybody.

0xGioMedici: Bye bye.

Nicholas: Hey, thanks for listening to this episode of Web3 Galaxy Brain. To keep up with everything Web3, follow me on Twitter at Nicholas with four leading ends. You can find links to the topics discussed on today's episode in the show notes. Podcast feed links are available at web3galaxybrain.com. Web3 Galaxy Brain airs live most Friday afternoons at 5 p.m. Eastern time, 2200 UTC on Twitter spaces. I look forward to seeing you there.

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