Nicholas: Welcome to Web3 Galaxy Brain. My name is Nicholas. At the end of each week, I sit down for a casual Friday afternoon conversation with some of the brightest people building Web3. In this episode, I'm joined by four exceptional guests. Jiren Z is a blockchain sleuth and NFT MEV brain. Andrew Thurman is a journalist who's worked at Coindesk, Cointelegraph, and now Nansen AI. Nodar Janashia is the creator of DeFi Zaps and co-founder of Crypto Dash Board Zapper. He and Igor Yuzo, the host of the Web3 Frontier podcast, are co-founders of Defrag Finance, a new NFT loan protocol. In this episode, Jiren, Andrew, Nodar, Igor, and I jam on ETH Denver, NFT burnout, and Defrag Finance's approach to NFT lending. A small note, this episode was recorded in March 2022. I'm working through a backlog of episodes, so please keep in mind that any comments made about the state of the market might be a little bit unaware of what happened since then. Thanks for tuning in, and I hope you enjoy the show. So welcome Jiren, Nodar, Igor, and Blockanalias joining us in a minute. It's great to have you here today.

Igor Yuzo: Thanks for having us.

Nicholas: Yeah.

Nodar Janashia: Yeah, thanks for having us.

Nicholas: Yeah, so tell me about Smallbrains. What's... you got a small pill me.

Nodar Janashia: Yeah, Smallbrains is a project that's built on top of the Treasureverse right now. Have you looked into magic and treasure?

Nicholas: I totally missed the loot claimable magic.

Nodar Janashia: Yeah, that was the time to do it for sure.

Nicholas: I know, I totally missed it. There were so many derivatives and I just wasn't paying proper attention. I missed a bunch of things, honestly. Oh, yeah. Yeah, it's a shame.

Nodar Janashia: Yeah, that's what happens in the bull markets, right? You gotta filter out more of the noise to get to the good ones.

Nicholas: I'll be honest, I minted a few things that are worthless. A few claimables of toads and loot.

Nodar Janashia: I minted more than a few things that are worthless.

Nicholas: Totally. So, okay. So it started off with a loot claimable magic and then they created Treasure Marketplace on Arbitrum after that.

Nodar Janashia: Right. So they created this, what they call it, kind of like the Nintendo of the metaverse, right? And the Smallverse is essentially a project that's built on top of that, right? So they're utilizing their marketplace. So there's a ton of activity around small brains on the Treasure Marketplace. As a matter of fact, it was the first NFT that started having any kind of buying and selling activity on the Treasure Marketplace at all. And a little bit after launch, they introduced the staking where you could stake your small brain to earn the higher IQ. So it's a small brain, but your brain actually gets bigger and bigger. The higher your IQ gets. But the biggest is five sizes of your brain. So you could actually pick... Even if you have a higher IQ, you can still pick a smaller brain size to show off on your PFP.

Nicholas: Okay. Okay. So you can actually pick your brain size and your brain... Sorry, your brain size changes in the actual imagery of the NFT?

Nodar Janashia: Yeah. Yeah, exactly. So on their UI, you could actually go in. And when you're staking your small brain there, depending on your IQ, you can select from the five categories that they have. Five sizes. And I think as soon as you have... I think it's over 300 IQ, you basically have the biggest size, like the fifth size.

Nicholas: Damn. Okay.

Nodar Janashia: I think you earn 10 IQ per day when you start staking. But chances are, when you buy a small brain right now, if you do on their marketplace, most of them I see have already at least 200 IQ starting.

Nicholas: Okay, so you can get a quick start by buying one of the already leveled up small brains.

Nodar Janashia: Yeah. And originally, this was a free drop, I think, because I was originally staking with Trezor. I got two free ones when it launched. So it was a free drop, essentially, originally, but now the floor price is quite high.

Nicholas: Damn. Okay. I mean, it's pretty popular. I've definitely seen the meme around for the past, what, I guess, a couple months? Something like that?

Nodar Janashia: Oh, yeah. It's been taking over crypto Twitter.

Nicholas: So Trezor actually surprised me because it's a sort of permissioned marketplace too, right? It's not just any NFT. It's only the ones that are using magic, or you have to pay magic in order to purchase NFTs on that marketplace.

Nodar Janashia: Oh, yeah, exactly. So you're right. There's permission right now, but they're launching this new thing called Trove right now, which anyone's going to be able to list any NFTs. Yeah, Igor, sorry, I kind of cut you off there.

Igor Yuzo: No, I just wanted to add that the current Trezor marketplace is denominated in magic to closely tie in their native token to all the activity. And then the next one, as Noda mentioned, is Trove by Trezordow, which is going to be denominated in ETH. And they've done it specifically, their design decision was done specifically for that reason, to be more inclusive of other communities that are not necessarily as close to or own as much magic and don't necessarily care about that and rather just want a great experience on a decentralized marketplace.

Nicholas: Who are the giga brains here behind this project, behind Trezor and all this?

Igor Yuzo: Yeah, we just did a Twitter space with them yesterday. It's John, Garp and Peter. They've kind of started collaborating since, I think, September or maybe even a little bit earlier and adding a lot of members to their core team. I believe Peter's focused on the tokenomics and economics and is the product lead. Garp and John are the co-founders.

Nicholas: Got it. That's cool. What was your Twitter space about yesterday?

Igor Yuzo: It was about the origins of Trezordow, how it got started, how it grew to what it is today, what the concept behind it is, what the big picture was, and some design decisions along the way. And then the launching of BridgeWorld, which is kind of the evolution of a gamified metaverse where people can stake their various different NFTs for different boosts and discover different treasures. And they've created this universe where in the near future, they're going to have guilds that are competing to maximize token emissions. In different, what they call them, harvesters. So that's going to increase the different amount of combinations of gameplay. So people are going to have to strategize together to maximize the emission.

Nicholas: And so ultimately, these are like ERC20 competitions, basically. It reminds me a little bit of the Lords stuff.

Igor Yuzo: So it's a combination of both. So you have, you stake your magic, which is the ERC20, and then you have other NFTs that you could stake such as Genesis Legions to boost essentially your emissions.

Nicholas: What do you think that the staking... What does it incentivize? Like sustained participation in the community? Is it sort of like farming?

Nodar Janashia: Yeah, I think it's actually like, yeah, that's where they kind of did something that's better than just general farming. First of all, the way they initiated their emissions, right? It wasn't just first come, first serve. Emissions only start out when staking reaches 30% of the supply. So only after that does emission start actually happening to the stakers. And it doesn't reach 100% emissions until like, I think. I believe it's like 60% of the supply that needs to be staked. And so first of all, that obviously encourages fair initial distribution. There's no guesswork to get in first and experience crazy high APY for a couple of hours and then essentially be incentivized to dump on the market when everyone else starts farming. And then the second thing they did really well is always incentivizing people to not only stake magic, but also use it within their ecosystem. So what I mean by that is they have requirements such as 300 magic to mint a legion with your legion. So holding an NFT, right? You can summon another NFT. You just have to stake your NFT for seven days and pay this magic fee, right? And then they have these other areas where you obviously constantly are encouraged to spend magic. Well, one of the other big ones would be obviously purchasing NFTs from the marketplace, which boost your mining power. So the higher your mining power, the more essentially rewards you'll be getting every day. So yeah, it's a really interesting dynamic they've created. And yesterday they said basically they created like a flywheel effect on liquidity formation around the Treasurer. So it's pretty exciting to see and experience as they're pushing the boundaries on layer twos, right? They were the first project to successfully migrate their NFTs from layer one to specifically Arbitrum. And they've always done unique things. So it's interesting to see.

Nicholas: Yeah, super cool. Actually, looking at Treasurer, I didn't understand all that detail. But just looking at it initially, my thought was, it's funny that OpenSea doesn't have a token that they push as giving you a discount on their fees or something. They didn't start that way. They never tried to, or maybe they did at some point long in the past and it's been forgotten. I never heard about it. But it's interesting to see one spinning itself up. I mean, Lux did something a little bit similar. But it seems like Magic has both the content creation side and the marketplace tech side, as you say, in like a flywheel.

Igor Yuzo: Yeah, that's true. And one thing that's also underrated is just, there's clearly an amazing narrative. They've created this universe where people can align themselves with the story and the characters. And OpenSea nor Lux doesn't have that.

Nicholas: Yeah, right. Hey, Andrew, thanks for joining us. How's it going?

Andrew Thurman: Doing good. What's going on tonight, gentlemen?

Nicholas: Not much.

Igor Yuzo: What's going on? How are you?

Nodar Janashia: You know, I don't know, guys.

Andrew Thurman: We're just Googling, like, how will nuclear war?

Jiran Z: Yeah, some dark times. That's why you got to get the small brains and get on the rocket. Get the fuck out of here.

Andrew Thurman: Right. If you aren't yield generating, you are not prepared for the future.

Jiran Z: I just sold a bunch of my alt coins just now with that war news. I was like, cool, I don't think I'm going to hold all this random coins I have anymore.

Nicholas: Smart.

Jiran Z: That's where I'm at.

Andrew Thurman: Yeah, it's liquid.

Jiran Z: You think I'm just going to chill and cash and eat now? Now is the time.

Igor Yuzo: Yeah, Jiron, you've been talking about going on vacation for some time now.

Jiran Z: Dude, I know. I mean, part of the space we're talking about, like, NFT burnout is real right now. So I don't know. It's like that effect on top of market nuking. And I don't know if you guys have ever gotten to this point, but I hit burnout to the point, it's like, I could make six X here, but I just don't want to. And I'm going to go do something else. And that's when it's dangerous, where it's like, I could make money, but I just don't have the energy to whip out my wallet and stare at a Discord to wait for a mint to go live and check the contract to make sure it's actually live to that mint. And then it fails, and then they delay. It's just like, fuck this.

Nicholas: Yikes. I'm just catching up on this world war news while listening to Jiron fud the whole market.

Igor Yuzo: We're just waking up.

Nicholas: Yeah, just waking up. I was working earlier. I have so many words blocked on Twitter. I'm, it's very nice. I don't hear about anything.

Igor Yuzo: I'm guessing Putin is one of them.

Nicholas: You know, I don't even know. He probably is in there. Most of the sort of generic terms about US politics are in there, like very generic terms so that I really don't see anything. And it's funny because people, I just, I'm not, I'm not up to speed. So catching up. This is, this is good to hear. Thanks guys. Thanks for this.

Jiran Z: Nick is like pulling up all his exchanges right now, like quickly.

Nicholas: Carry the conversation for a second. I just gotta do something real quick.

Igor Yuzo: Nicholas, just to be clear. I don't know if you, maybe eventually you'll get to this video, but Putin was giving a talk and he said that I understand that NATO is super powerful, but don't forget Russia also has nuclear weapons.

Nicholas: Oh, great. That's good.

Andrew Thurman: Like, mentioning nuclear weapons wasn't even the scariest thing he said.

Nicholas: What was the scariest thing?

Andrew Thurman: This will, nobody will end this.

Igor Yuzo: Yeah, exactly. Yeah. That's a good point, Andrew. There are no winners in this, at the end of this.

Nicholas: Oh, geez.

Andrew Thurman: The guy was like.

Jiran Z: I think, I think NFTs win because like they say, NFTs land on the blockchain forever. So there's your bullet to the tea case.

Nodar Janashia: Also, Putin, we also say he's 69. So we're thinking around 420, he should attack.

Jiran Z: Solid thesis.

Nicholas: What were you going to say, Andrew?

Andrew Thurman: No, I just, I love that. Putin's doing it for the memes, man.

Nicholas: But so, but now they accept crypto, right? So we're supposed to like them or like the, you know, that's our side, I presume.

Andrew Thurman: Yeah, but even before the fucking end of the world was bearing down on us, like I'm feeling Jiren, stuff was getting fucking nihilistic out there. Like, it was just all this stupid shit with celebrities getting these. And like, it just got a sense that like even the most sophisticated market participants who could make those easy multiples is like, what are we even fucking doing here?

Jiran Z: Well, I think like Debussy made this great thing. He's like, why the fuck don't I just liquidate everything and take like 50 million and retire? And I'm like, yeah, what are you doing on Twitter if you're worth eight, nine? Like, just like, get out of here, dude. Like, I don't think you need the golden monkey for that long. Like, I don't know. I think people are starting to be like, I kind of miss my like real life world. So on top of like, just pure, like the whitelist grinds, and then like, people are just like arguing on Twitter over everything. Like, it does feel like it's just burnout, you know, burnout city.

Nicholas: Interesting. So my understanding was that the Bored Apes thing, maybe somebody here knows better than me, but it was like a partnership between Moonpay and the celebrities and I guess Bored Apes as well. Yuga, I don't know. Did anyone keep up with that story?

Jiran Z: I didn't. All I know is I think Moonpay bought a bunch and then gave them to like, celebrities and then that like, kind of frustrated people.

Nicholas: Ah, I see.

Jiran Z: But I mean, like, this was kind of, well, on top of that, it's just like a lot of retail came in, right? Which brought in a lot of the crazies from retail. And now it's like, oh, wait, guys, I don't think we actually wanted retail like we thought we did last year, right? Because the space has gotten so much bigger, it's probably just kind of lost a little bit of it. Because I read the article, Geeks, Mops, and Sociopaths. It's kind of like that effect.

Andrew Thurman: That's a classic. And we are deeply mired in the sociopath phase right now.

Jiran Z: Right. For sure.

Andrew Thurman: That's the crazy thing, too. I felt like we talked about this a few times, actually, over the summer in like 2021. You know, it was frothy. It was unsustainable. Everybody knew it was unsustainable. And the tech fucking sucked. It was all just EFP projects. Nobody was doing interesting, like, things with the contracts or was trying to do anything new. But at least everybody was optimistic. There were these new people coming in. There was a fucking 12-year-old who raised a half million dollars with pixel art. And like, everybody was excited about it. And, you know, Nate Alex tried to call him out because it didn't think he was a kid. And then he actually was a kid. That was hilarious. It warmed everybody's cockles. And like, it was fun at least. And now it's frothy and unsustainable and the tech sucks. And like, fucking Paris Hilton's shilling things on there with Jimmy Fallon. It's not even fun anymore. It's just like really deeply weird and very dark. And like, I just don't know how to market. Like, when it finally collapses, all this infighting we're starting to see. Like, we just came off a huge, like, healthy bounce in NFT markets. And everybody's out with their knives on Twitter. Like, what's going to happen when it really collapses? It's going to get dark out there.

Nicholas: Wow, guys, this is really uplifting. I don't know what to say. But I do agree with you. I was thinking this week that a lot of the, you know, maybe without getting too much into it, we've seen a culture clash on CT the past week or two. As I think some of the subcultural mores that were considered standard and fine in CT prior, now sort of the mainstream has arrived. Or maybe mainstream isn't even the right descriptor. But people from a different culture or different expectations have arrived and are no longer going to put up with things. And it feels like very much the resolution to people demanding that the mainstream show up eventually in order to buy their bags. is that people show up who have a different sense of, you know, even just what kind of images you're allowed to post on Twitter. There are definitely meaningful and legitimate grievances. And there are also strictly cultural ones. So it's been, it's funny that the feeling is so down while sort of the prophecy is also simultaneously being fulfilled.

Nodar Janashia: Yeah, I really don't like this whole narrative of, "Oh, yeah, bringing it, oh, we're going to bring in the mainstream and kind of like trying to tackle this, you know, supposedly huge user base that hasn't touched crypto before.". And that's kind of like the same narrative people were talking about when, you know, DeFi was getting built up. And the reality was, is that like the majority of users and, you know, easier to get users will come from already, you know, they're already in the space. So you already have like a pretty big target market for you to go after. And instead of kind of forking and, you know, kind of launching a new PFP every day, right? Maybe it comes down to exploring further possibilities of what's possible with NFTs. And this already existing user base will be easier to target and easier to kind of get them to do an action to try to, you know, try out this new experiment that you're building, right? So it's really going to come down to further exploring the use cases of NFTs beyond obviously PFPs and simple player earnings.

Nicholas: But I feel there's also, I mean, I feel a little bit of fatigue, even when genuinely complicated projects come out. It's like, "Oh God, now I got to learn how this whole economy works in the next 10 minutes to decide if I should mentor now.". Actually, I saw one just now that I wanted to bring up. Oh, I'm going to forget the name now, but it's a t-shirt project that just came out. There's 999 of them, on-chain SVG t-shirts. I don't know if anyone saw this yet. I'll find the name. But the mint price ranges from 0.123 to 1 ETH per t-shirt. And it's like a very simple project. And it's, here it is. It's Benji Taylor t-shirt exchange, t-shirt.exchange. And I, it looks, the sort of image on Twitter shared with the link looked cute. So I clicked in, customizer thing kind of shields a little bit feeling. Not, not obviously the level of polish of shield, but I just, I, that mint price. I'm like, "Are you kidding me?". 0.123 starting.

Jiran Z: That's like cheap though.

Nicholas: For a hype project. Yeah, maybe, maybe.

Jiran Z: Yeah. Like, okay. Yeah. For a hype project. Maybe not for like a project no one's heard of. But like, I don't know. The Carrefours were like 0.5, I think. Um, and people were paying 5.4 E per transaction just to mint them. It was nuts.

Nicholas: I didn't follow that. Was there a crazy secondary subsequent to that?

Jiran Z: Uh, I think it finally like picked up at the end. Uh, and right now the floor is like five E's. Um, but like unrevealed, there were 3.7 E, right? So like, this is, this comes back to this, like, this, the, the market is weird now. Like the Asanas, the Asana waifus were like, what? Three E's pre-reveal.

Nicholas: Because you needed two other NFTs to make that happen.

Jiran Z: Yeah. And so like, the, like the demand is insane for certain projects. And I think like notarize is a pretty good point. It's like bringing on retail is like, I don't know how I feel about it either. I'm kind of just going to be honest. I'm using them as exit liquidity. And like, I don't know how long I want to play this game. Like, it's fun, but I don't know. There has to be a point where it's just like, all right, this is like exhausting.

Igor Yuzo: You know, I think it comes to like the theory in economics called asymmetric information, you know, information asymmetry. It's like, at what point has enough people in mainstream come into the market? You know? So like who else is left to like buy your bags? So the other point in notarize, which I'll emphasize, is you do want to have more creative mechanics that basically are some function of staking and vesting while you're building up your product and narrative. And I think that's, you know, what we've seen, you know, Treasure Dow do successfully. And I envision that more and more projects will come up with creative ways to invest capital and incentivize it over a longer period of time.

Andrew Thurman: Well, I'm not even like, as Nick pointed out, complex mechanics don't necessarily do it, but different mechanics might. Like everybody right now is coming into the market and they're finding one particular thing, right? There are these really highly branded forms of NFTs that we're supposed to use as our profile pictures and we're supposed to socially signal. And then there's, you know, certain very particular types of collectibles usually related to game. And I think that makes sense because gamers are idiots and, you know, they've been spending money on frivolous trinkets, you know, well before NFTs existed. I think that, you know, people in general have been spending stupid sums of money on frivolous trinkets for a very long time. And so figuring out what other forms of collectibles and what, you know, types of objects of desirable ownership that, you know, people want to go out and get. Eventually we have to do that because right now everybody's, you know, nobody's thinking about why humans collect things, why they do non-economically rational behavior, why they engage in these weird rituals around buying things that sometimes they know they're never going to be able to resell. You know, and right now everybody's treating NFTs as the asset, you know, we're having the best gallery integrations are occasionally coming through wallet apps. And I don't think that's the future. Like once we tap into like humans are these stupid creatures who are really bad with money overall and like start thinking about that more and why NFTs are good as ownable digital objects, you know, then we're going to start seeing new stuff. But like again, right now it's all. it really is just all a casino and there's not enough good thought being done about like what things do people want to own digitally and why. And like the amount like PFPs aren't going to go away. I think that trend is real, but the current state of the market doesn't justify the volumes and the amount of money we're seeing. And it didn't since the start of fucking 2021. Like where are we now? Where are we then? It's just been messed up.

Jiran Z: But it's a lot like the early internet days too. Like if you look at how much a website costed to make in the 90s, it was like three to three hundred thousand five hundred thousand dollars. There was some piece of shit 90s HTML flashing screen fire everywhere like design. Right. And then now you look on Squarespace and you can make a decent like website for 12 bucks a month. So like I kind of see NFTs at this like same trend where it's like the tech we don't know what to do with. We're going to make a bunch of shit that sounds really good on paper, but no one's going to want. We're going to spend absurd amounts of money. I've talked to plenty of venture guys. Those guys are just signing checks left and right. They're like the joke I heard was like as long as they don't puke on the desk during the pitch, we'll probably write them a check. Right. So like it's just like a mass thing of like just people wanting to get it like get in on like this like hysteria. So I don't know. Like I don't know how long it lasts, but.

Nicholas: I feel it depends a little bit. I'm going to be the cheery one today, I guess. You know, it depends what you're looking at. Like there's there is a lot going on that is quite innovative. The move to L2s, these new NFT collections exploring how to make the transition from L1 to L2 and create some kind of economy. They can do sort of resource management games mixed with farming techniques on or mechanisms on L2 more affordably. I don't I don't pay a huge amount of attention to it, but there is this FX hash sort of art blocks on Tezos thing that some people who are more into Tezos tell me about. I feel there are a lot of. I still haven't minted my Genesis adventures. I'm trying to think what else is going on. Then there's simultaneously like a more traditional maybe approach. Like Dom just got just got funded by Paradigm yesterday for 12 million or something. So there it does. I feel like there is still a lot going on. Sometimes people in the past few months have been saying things like, oh, it's gotten too big for anybody for me to keep up with what's going on. It's like, no, it's been much too big to keep up with everything that's going on for a very long time. Um, so I do kind of feel it depends what what corner of the the market you're in.

Andrew Thurman: That's a great point, but I want to pause for a second. How the fuck does Dom need money?

Nicholas: Yeah, I don't understand the fundraising.

Nodar Janashia: Yeah, I was about to ask.

Jiran Z: Okay, we're all confused. I'm just like, I don't get this at all. Like, the dude can just raise this by doing another drop tomorrow.

Nicholas: I don't have any evidence for this, and I don't spend much time in the Blitmap discord really at all. So I don't. I don't I'm not up to speed. But I get the feeling maybe it wants to be like Nintendo or something like more than just an NFT project by Dom, but a company that ships game software built natively for Ethereum. I don't have any insight on it, but I get the sense maybe that's why to do fundraising for hiring reasons and stuff like this, too. It's it's. but also Dom comes from that world. I don't know. I've always been a little bit surprised that Dom doesn't. He's very one of the most creative developers in NFTs who like with corruptions and things is sort of changing the way that the creator relates to the to the the work, you know, there to the to the audience. But at the same time, he seems to have some affinity for Web2 corporate structures, which having spent a little bit of time in DAOs, I can see I can see the appeal of in terms of clarity about how things are put together.

Igor Yuzo: Well, coming up from Vine, I guess he still might have had that network where people were quickly and readily were able to write him a big check, whereas some people who haven't built up the reputation in Web2 are using these new and creative funding mechanisms via NFTs or ERC20s.

Nicholas: It is weird. Did y'all see Squiggles yesterday or this week, whatever? I think they raised, what, 2,400 ETH off some, I didn't look into it, crummy project. Oh, the fake Squiggles? Yeah, it's called @Squiggles.

Jiran Z: I love that they called themselves Squiggles. It's like, really, dude? It's brilliant. Yeah, that was like... You know what cracked me up about that was like, they were like, "Oh my God, guys, team members are minting their own project and making it look like it's selling out.". I'm like, "Yeah.". Do you know how many projects do that?

Nicholas: It's not like.

Jiran Z: he was the first one that's ever done that.

Igor Yuzo: Wasn't like Melania just caught, like, watch-baiting her NFT? Yeah. It was like one transaction where she bought her own NFT.

Nicholas: Bold. She believed in it. You know, you got to just own it if you get caught.

Igor Yuzo: Yeah, right.

Andrew Thurman: Well, that's the other one, too. Comparing this market to over the summer, there was this great Nonsen report. I think it came out in August, but it looked at the summer months. And of the 600 or so drops that happened in June, July, a huge amount of that money sort of stuck around in the ecosystem. Only 50% of it stayed in ETH, the amount of money that developers made from drops. 20% of it was being spent on new NFTs. They'd make money, developers, and then they'd go buy other stuff, predominantly crypto funds. And not a lot of it was just, you know, launch an NFT project and then run to an exchange as quickly as possible to cash out. And I just feel like there was these cartels that are fucking pumping out these projects every goddamn week, these on-chain shenanigans to fucking generate hype. There was still some of that. But now that just feels like the goddamn norm. Like, again, it's just there's this nihilism permeating the whole-- Like, look at fucking Paragon's down, man. Like, a bunch of friends got in and said, "We're going to be the seed route. We're going to be the ones who get in early.". And now they're just dumping on each other. It is just fucking dark out there.

Jiran Z: Dude, DeFiGod, like, you know, he was one of those big guys for Parallel. I saw him on the chain the other day. The dude dumped 80 ETH worth of Parallel stuff. And it was like, "Are you serious?". Like, you were just the other week like, "Oh, Parallel's forever.". Literally, like, not even a few days later, you just dumped on everyone. And like, it's absolutely fascinating. And I do believe on the group thing. It's like, if you go on TikTok, you'll see these NFT projects, like, grouped together being, like, pushed out. Hype Bears, Hap Beast things, Imaginary Ones. They all have, like, the same, like, 3D motion. Just, like, a different, like, look to them. And then they all do the same, like, sleazy, like, "Discords are hidden," "Whitelist only invites.". Like, it truly is so different from last year. Just, like, simple gas wars of, like, "I really do think that's the most fair way.". And yeah, it sucks. There's going to be some bots. There's going to be some people who can code and can do it better than you. But, like, at the end of the day, that feels more fair than all these, like, crazy "Whitelists" and "Discord Olympics" that are, like, clearly doing, like, far shadier things. And I think that's where a lot of this burnout is coming from.

Nicholas: I'm not in that scene. I think the closest one that comes to mind for me is, like, Invisible Friends, which is overhyped but not maybe exactly the same as those things.

Jiran Z: No, I think those were just some kids that started something and then it got out of hand, like, very quickly.

Nicholas: But I don't see these, sort of, really scummy NFTs. I don't know how I somehow missed them. But often when people ask me about if they should mint a collection, it's usually something I've never heard of that they're asking about. But then some kind of, you know, collections of quality. Yeah, like, I'm seeing this tweet here. Ricefarmer.eth says, "I'm old enough to remember cryptodes at 12eth, loot at 10eth.". I forget how you pronounce it. O-N-1? How do you say that collection's name?

Jiran Z: Oney, probably.

Nicholas: Oney, yeah. Oney at 10eth. It's like some of these, kind of, superstar collections that people had a lot of faith in have really fallen off. And I don't know, is it maybe part of the problem is that even the quality collections, there's still not great best practices around how to keep your community excited six months after the drop. Except for the very rare collection, like Bored Apes or whatnot.

Nodar Janashia: In DeFi, we call them... Sorry.

Jiran Z: No, no, please go.

Nodar Janashia: Yeah, I was just gonna say, in DeFi, we call them, like, APY cockroaches. There's always gonna be a part of population that's gonna, you know, always go to where the highest yield is at the moment and always, kind of, switching capital around. So I think that's definitely a big part of it.

Jiran Z: That's actually... So I did a tweet on this about Arbitra. And I was like, "The reason Arbitra is actually winning these L2 wars is because they don't have a token.". So people aren't here bridging back and forth, trying to get airdrops, chasing the yields. On top of that, it sits on top of ETH. It feels a little bit more natural. Because there's no coin, it's like everything's, kind of, priced in ETH besides magic. So there's less of this, like, zero-sum game being played. And it's the same thing with a lot of these NFTs is... Let's be real, most of these people are just looking to mint and immediately flip it up. I mean, I've done it a hundred times and I have no shame. You can go look at my wallet. Like, I got Karafuru whitelist randomly. I minted at 0.2. 10 minutes later, I sold it for 3.78. I was like, "Sold. Done. See you later.". You know what I mean? Like, less to Discord. So how do you sustain past that? I don't know. As Nicholas knows, I'm, like, huge on Izuki. For some reason, I feel like they might have some interesting ideas with, like, the Bobu Farmer and some of the other stuff. But I don't know. A lot of it does just feel, like, kind of like zero-sum games of, like, you're just looking to get the whitelist just so you can mint on the hype and sell immediately into that hype and then leave to the next thing.

Igor Yuzo: Yeah. I mean, that's a good point. But, like, if you do look at NFTs as, like, a new model of ownership or, like, funding that exists in these digital economies, you want to be able to pass through future revenue of the project through these funding mechanism, which is the NFT, to the owners. And if that's not being done and it's just you're just launching a collection and then, like, the only thing that you could do is either, you know, showcase it for signaling and then just have people flip it, that's not going to be enough to sustain the past, you know, like, with the one-year mark, three-year mark, the five-year mark, the ten-year mark. There has to be more to the fundraise and the future, like, prospects of revenue.

Nodar Janashia: Yeah, exactly. And that's why I see a lot of the projects right now start utilizing the DeFi concepts of staking and kind of earning something else on top of just holding the NFT. So kind of encouraging it out of the circulation, out of the possibility of being sold, right? So, but I think, you know, in the future, we're going to see new and new kind of schematics and ways for people to kind of incentivize that, right? So in the short term, like, at least for now, those projects would be winning over, like Igor said, just those to have just two use cases of, like, flipping or just signaling. Yeah.

Igor Yuzo: Yeah, it's like this delicate waltz, right, between, like, product traction and product market fit and tokenomics. It is a dangerous, like, game to play because you could incentivize the wrong things and get a lot of false positives. But at the same time, it's an incredibly powerful tool if used correctly. And as we're evolving, we're seeing more and more use cases and more of these experiments come to fruition. And future entrepreneurs and people and the participants in space are learning from these. And they're building out their next new project with these things in mind. And the system evolves and gets better.

Andrew Thurman: I put that like 30%. I do think, though, that the only thing you're focused on is innovative, new, smart, contractual ways to generate revenue and give that revenue to your holders. Again, you're just missing some of the point. Like, look at something like, fucking Forgotten Runes Wizard, right? They're going ballistic. Fucking, the only thing they did for the first couple months of them being around were these goddamn, like, poetry contests. Like, this lore-building exercise from a couple of holders who really liked the art. And now, when I look at my on-chain history and think about how much I could have sold some of those fucking wizards for, like, that's one of my... I've whiffed a whole lot of shit that's selling early on them because, like, they weren't doing anything interesting from, like, the revenue-sharing standpoint. All the stuff they were doing was just, like, these stupid map contests. And that's what did it. You know, I mean, he collects shit from a minor league baseball team from, like, 1930. The Scranton Wild Roses or some shit. It's some middle Pennsylvania team. I'm pretty sure it's the Wild Roses. Why the fuck does he do that? I don't think they do. It's not because the Wild Roses are revenue-sharing. There's something about the Wild Roses he deeply connects with. And, again, I think that, you know, the contracts can help. But, you know, when you're talking about NFTs, you're talking about a fundamentally absurd... Like, whatever animates the collection of NFTs is a very strange part of the human psyche. And, like, figuring that shit out can often be just as important as, you know, how do we fundamentally reshape the economics of revenue-sharing with our community?

Igor Yuzo: Like, you do both of those. - Yeah, I think... I mean, I don't disagree that there's going to be a graveyard of NFT projects. I mean, of course there is. I mean, there's a graveyard of Web2 companies from the dot-com era. But, you know, Naval said this famously, is that, you know, like, NFTs and tokenomics, it looks, you know, like, it's just not your generation's Ponzi scheme, right? So, like, if you look at how the financial infrastructure was built over the years, like, there are so many different mechanics that incentivize capital to stay in certain locations, you know, whether it's, like, through dividend payments or whatnot. Yes, it is far more aggressive now because, you know, money has become programmable and you have this global talent that is just rushing in to make a quick buck and there's an explosion of different projects. But that comes with the territory of, you know, discovery.

Nicholas: - Yeah, I'm not as worried about... But I'm curious, maybe... I'm curious about Nodar and Igor, your history in blockchain and stuff as well. But maybe you could answer my question, which is, you know, I think one of the great advantages of NFTs is that they're quite a simple issue in terms of regulation. They're non-controversial, at least right now. And I don't anticipate that they will be unless they have more complex tokenomics. But things like RevShare, like what Lux does, if you start integrating that into the NFTs, then it suddenly becomes more complicated. As, like, DeFi OGs, do you think about that at all? Or do you just figure YOLO?

Nodar Janashia: - Yeah, honestly, it's kind of YOLO for now because, you know, like worrying about regulations, where regulations at this point are not clear. As long as you're not blatantly scamming people, I think you're, you know, you're clear. But yeah, this is not like financial advice. - Of course, of course. - I'm afraid.

Nicholas: - We're in doubt. - Yeah, we're in doubt. Igor, what do you think?

Igor Yuzo: - It's, of course, important to, like, think about regulations and keeping up with them. But to prevent yourself from trying something new for, like, all the entrepreneurs that are out there that are looking to latch on to something new and build something great, you know, nobody's even looking at you. Like, so, like, nobody's paying attention to you until you get to a certain size. And by the time you get to that size, if you achieve the success, then, you know, You're probably going to be in a position to, you know, defend yourself. And as Nodar said, as long as you're doing right by your customer or investor or stakeholder and doing everything in your ability to make sure that the people are getting the best handshake, then, you know, I think it's fair game.

Jiran Z: - It's the Uber way, right? Just get so big until they, like, when they finally try and regulate you, you're like, "Well, now we have the money.". Just, like, massively.

Igor Yuzo: - I mean, every industry has gone through this, right? It's not like. crypto is the first industry that didn't have regulations. Every single industry before it came into existence didn't have regulations. So, like, you know, people are... Right now, I think it's just... One thing about crypto is that it's come in the age of, like, Twitter and social media, and it's just so prevalent and so in the limelight. It's just, like, the information spreads so fast. Um, so, you know, you kind of... Everything's amplified.

Jiran Z: - For sure. I also... Oh, I'm sorry, Nicholas.

Nicholas: - No, go for it, please.

Jiran Z: - I just... I kind of wanted to, like, get into Defrag a little bit around this conversation, just on, like, liquidity and, like, what you guys are working on, because I feel like a lot of people here probably don't know about you guys, so I kind of wanted you guys to talk a little bit more.

Nicholas: - Educate us NFT idiots, please.

Igor Yuzo: - Uh, yeah. Um, so... Basically, what we're solving for is the liquidity problem that I think, for the most part, most people acknowledge in NFTs. I mean, to simply put it, you know, if you're listing your collection's last, like, you know, last bid price, and that's the way that you calculate the floor price, it's pretty bad, and, like, it's not a good representation of liquidity. So, like, just to give everyone an example, I was analyzing the Bored Ape collection and the turnover from, you know, wallet to wallet is roughly around 2.5. So the amount of activity is so, you know, so minimal.

Nicholas: - Wait, when you say 2.5, 2.5 what? 2.5 transfers per Ape?

Igor Yuzo: - Uh, yeah, exactly, for the collection. So, like, and a lot of the times, the collection, a lot of people don't even list their NFT for sale. So it's... Right now, the liquidity is a huge issue with NFTs.

Nicholas: - I've seen that called "true believers," people who don't list their NFTs at all.

Igor Yuzo: - Right, the true believer score. But, yeah, Noda, if you want to just start us off on Defrag.

Nodar Janashia: - Yeah, like, basically, I myself come from a really, I guess you'd say a DeFi maximalist background. I've been, like, building up Zapper and really haven't been paying attention to NFTs even as, kind of, the hype went on up until, like, this last summer. But then, like, I eventually, obviously, I just started minting anything that would kind of pop up on the Etherscan. People playing Gas Wars. So I would just, kind of, mint some here and there. And eventually ended up, kind of, having a, you know, pretty substantial, you'd say, like, NFT portfolio. And the first thing I thought about is, well, you know, back in, I guess, when ETH was, like, a low price, nobody was selling it, or everybody was collateralizing ETH and taking out loans against it. So that's what people are looking to do now with their NFTs, right? Especially the ones you really are, like, truly are going to hold, as people say, forever. So what we're coming up with on Defrag is a system that helps you do just that. Collateralize your NFT in the vault and instantly take out a loan against it. So current solutions in the market, kind of, are around, focused around, like, peer-to-peer markets. Whereas you have to wait for a counterparty to accept your terms before you initiate a loan. What we're coming up with is a peer-to-pool model where you get instant liquidity. And the way we do that is, every time you withdraw a loan, your collateral, your NFT, the floor price is essentially backed by a put option, which you're forced to purchase in order to take out a loan. So think of it as a cost of taking out a loan would be the premium fee that you're paying for your put option. Now, I know a put option might seem like a complicated term, especially for people that come from a non-financial background, but all it means is one party is guaranteeing to buy your NFT at a certain price. So there's going to be a separate, you know, a pool, right, liquidity pool, which will be underwriting all of these put options, which is like, you know, a separate kind of party, which is depositing their liquidity in order to earn interest on it. So that's like the general gist of it.

Jiran Z: Is it a guarantee though? Because put options in TradFi are not technically obligations. They're just the right to, right?

Nodar Janashia: Right, but the underwriters guarantee liquidity. So like in our case, like in the real world, all the options would be under collateralized, but we're like over collateralized, right? So we have the collateral is locked up in the smart contract together with the NFT when you're essentially taking out the loan.

Nicholas: So walk me through it. I come to the protocol, I come to Defrag with the Cryptode and I want to get, so I want to take a loan that would be more or less equal to the current floor price?

Nodar Janashia: So yeah, that's a good point. So in the beginning, what we're doing is we're valuing, it doesn't matter what kind of NFT you come in with from that NFT collection, everything will be valued based on the average floor price at first. And then as pricing kind of improves throughout the ecosystem, we'll be valuing each individual NFT according to their actual price point. closer to that. But in the beginning, say, yeah, you could even come in with a couple of NFTs from that same project and that would just get multiplied by the average floor price, which we ourselves would be calculating. It would be like a custom calculation. We wouldn't just be looking straight up at the price floor on, like, say, OpenSea.

Nicholas: So some kind of average of recent sales or something?

Nodar Janashia: Exactly, exactly. And then plus we'll take into account like volatility and like kind of existing liquidity, feel out how deep the liquidity is around the current floor price, right? Kind of see what people are offering and listing it for. And then from there, you essentially are able to borrow. you probably want to keep things safe, but we'll have a threshold where after that point, you would get essentially liquidated, right? And that's when the put option would actually get exercised.

Nicholas: Okay, so I come with two cryptodes. Floor is around three ETH. Maybe it's a little higher or lower on OpenSea, but you guys, let's say, evaluated it to be three ETH. So what do I do with my two NFTs? What do I have to pay to take the loan? And how much loan can I take more or less?

Nodar Janashia: Yeah, so say you come in with two that are worth three ETH. It's like a six ETH would be your value of your vault. So say you take out something like three ETH against it, something that's worth three ETH of a loan. So that will put you around like 50% of your utilization of your value lot. Got it. And the cost of the loan would actually depend on a couple of things, right? It would depend on how much of the pool that's available for underwriting you're taking out as a loan. So if you were to tap into like a bigger portion of the pool, the premium fee would curve up. But the calculation for like the standard premium fee that you pay for the put option will come from also our own custom Black-Scholes model that we're doing based on like the NFT volatility and the liquidation price that you would be hitting based on the loan that you're taking out against that value. Does that make sense?

Igor Yuzo: Yeah, just to clarify, it's going to be a variation of price over a certain period of time, which in the Black-Scholes model is dictated by something called sigma. It's a variable that affects the implied volatility. And given that the nature of NFT floors is so volatile, that's the reason why we have to put options in the first place to price the APR, the cost to borrow. We felt it was the most appropriate financial instrument to accurately price. So in some cases, a person might be just priced out of taking the loan because it's just, we won't allow them to take the loan because the volatility factor is too high.

Nicholas: So if I try to take out a 70% loan, if I try and take out five ETH of the six, but there's too much volatility to guarantee that the whole thing is even worth five.

Igor Yuzo: Yeah, your premium is going to go, let's say it's going to go above, you know, 50% or 60%. It's not going to make sense for you to pay that amount. So you probably just won't take the loan.

Nodar Janashia: Yeah, and actually to a point where, you know, we're actually trying to focus to use each NFT project, right? We'll have its own underwriting pool, its own put option underwriting pool with its own unique pricing mechanism. And at first we are actually trying to focus more on like play to earn NFTs. So not like CryptoPunks you would say, right? It's kind of like what everyone's going after right now. So something that has possible revenue stream attached to it, right? So there's a couple of interesting things you could do there. First of all, obviously you could use the revenue stream to constantly automatically repay the loan that you took out, right? Kind of rebalance into that. And then in things like specifically, like in the Treasurers, you can keep your NFTs staked in-game earning you fees, right? Like you're staking boosts. Meanwhile, borrowing against it to try to get additional boosts in-game with the borrowed amount that will outweigh the premium fees that you're paying for borrowing, right? So there's going to be interesting strategies that people could come up with specifically around the mechanism that allows you to keep your NFT staked in-game and use them for actual collateralization and take out a loan against them.

Nicholas: I want to come back to the general principle and an example, but how is it possible that you can take a loan against a staked NFT? Is it not possible for the wallet that staked it to unstake it and remove it from your system?

Nodar Janashia: Well, essentially the NFTs that would go through, specifically again, speaking around like the Treasurer example, they will go through essentially like an upgrade for those that are willing to do this, which essentially they'll give the permission to the smart contract that's in charge of liquidations, right? To take an action in case the liquidation does need to occur. So the staked NFTs, they're not time-locked within the game or anything, right? They're able to be unstaked at any time. So that's the permission that the protocol smart contract that's in charge of liquidations will have on them.

Nicholas: Okay, so you essentially wrap the NFT or somehow transfer ownership to a contract that then does the staking on your behalf?

Nodar Janashia: Exactly, exactly.

Nicholas: Got it. So, okay, so back to an example. So when you said treasure, you mean like the magic treasure small brain stuff that we were talking about earlier or a different play to earn game? Treasurers?

Nodar Janashia: Yeah, so they have like these legions that are, you know, like small brains, the project built on top of treasure, but legions are their own NFTs that they use within their own game, right? So, you know, we obviously want to start with one specific use case, focus on one niche community, which right now, you know, treasure is very active. And so, yeah, like we will take it from there. And over time, you could imagine, right? Like I said, NFT project will have its own unique underwriting pool. And over time, you could imagine there's going to be these general categories, right? Of underwriting pools that new projects can easily tap into and use an existing blueprint to quickly launch their own underwriting liquidity pool. So this will like enable new projects to essentially spin up new liquidity for their community, right?

Nicholas: Okay, so pool specific to the collections. And then, so let's say I have, let's just do an example. Let's say I have 10 legends or legions, whatever you said, and they're worth 10 ETH. And I want to take a 5 ETH loan against it. I also have to pay a premium in order to take the loan. or how does that part work?

Nodar Janashia: Yeah, of course. Yeah, so each time you take out a loan, and by the way, the loan that you take out is not ETH. It's going to be like a stable coin, right? So you take out kind of like, you take out a loan and die on maker. Similarly, you would take out a loan in stable coin. So yeah, like depending on how much, again, how much of a loan you want to take out. Each time you do that, the put option, the put options that you're purchasing in order to generate stable coins from the system, right? So you're paying the put option fees up front, right? Got it. In order to take out a loan, you could say.

Nicholas: And then the, do I have a time limit to return the loan or how does it work?

Nodar Janashia: No, there's no time limit. So this would be like perpetual put options. Essentially every X amount of time, the put options would be rebought, right? Because put options have an expiration in addition to strike price. So essentially every 30 days, you can say if you don't do anything, if nothing changes in the market, right? All the prices stay the same. Your liquidation price will go up just a little bit, right? Based on the fact that now you've put, you've paid more of a put option fee, which got paid by increasing your loan amount. Does that make sense?

Nicholas: Yeah, it does make sense. Do you foresee this being something that more like DeFi operators are using to extract maximum value from these collections or something that sort of a regular NFT collector might?

Nodar Janashia: Actually, yeah, like a regular NFT collector because we want to make like, you know, we want to take out all the complexity away from like, I guess you'd say like the end users, right? And they will have like quick actions where, you know, you'll borrow and do something right away with the borrowed amount. And they will not be seeing like anything around like strike prices or expirations, right? It'd be like familiar terms, like liquidation price and like fees that you're paying in order to take out a loan. So we definitely want to extract as much complexity away from the end user. And specific to the treasure case, it would be something where you already have something staked and would be quick actions to how much of a boost you could potentially generate by taking out a loan, right? Like, so it would be like quick actions to kind of reduce as much as possible the friction for the end users. That's kind of what made DeFi really kind of, I guess, really hate to say this, but go more or less mainstream, at least within the crypto sphere.

Nicholas: Igor, do you want to jump in there?

Igor Yuzo: Yeah, I just wanted to add that we're trying to focus on the why to the borrow. So as you asked, like why would someone take out a loan in the first place? And the reality is that it's always a function of some form of arbitrage, which is like the lending cost versus some ROI on a certain time frame. And what we're seeing evolve through BridgeWorld, which is a game within TreasureDAO, is you have these game mechanics and different pathways that players can take that are generating variable ROIs on different time frames. So like on one month, on three months, on six months, they go on these quests and they're staking their NFTs for boosts. Depending on which way you go in gameplay, there's always an opportunity cost because you haven't taken path one versus path two. And what we believe will be a huge value add is the ability to maximize these ROI pathways via these lending boosts that allow players to have more options for gameplay and engagement.

Nicholas: And so, okay, you're focusing on this one, I guess Axie's other kind of play to earn games might be next?

Igor Yuzo: Yeah. So Axie is huge. And they're currently working with three different liquidity pools, whether it's AXS and WEF and SLP and now the RON token. So we definitely see the need for these pools of liquidity to interoperate with the NFTs in-game that have these boosts attached to them to increase some kind of revenue within the game. And we believe that more and more structures like this will be built. Kind of like the interaction between ERC20 and ERC721.

Nicholas: And how does this compare to something like NFTX?

Igor Yuzo: So like the lending platforms that are currently available?

Nicholas: Yeah, I guess like the ones I know are like NFTX, NFT5, Niftex.

Igor Yuzo: Yeah, so there you have to go and you basically make an announcement. It's like, "Hey, I have this NFT that I would be willing to lend out.". And somebody on the other side has to come in and say, "Hey, I am looking to borrow.". And they have these different inputs from both sides that have to match up. Right, so that's kind of like what we're talking about in peer-to-peer. Whereas we want to have more of a focused peer-to-pool model where you're taking a loan not against another individual looking to borrow, but you're taking the loan against the underwriting pool. And the risk and reward is obviously shared and managed by that pool.

Nicholas: Okay, so that's more... Okay, right. So we're talking more lending rather than, I guess, an FTX is not quite the same because you really are selling in exchange for this token and can't necessarily get the same one back. And you can't also farm with it at the same time or stake it somewhere and gain some kind of yield off of it. But maybe the market may feel that they're more close than that. I don't know.

Igor Yuzo: Yeah, there's so many projects right now, especially just on mainnet building different solutions.

Nodar Janashia: Yeah, another thing people do is like fractionalization. That's what you were talking about. And people, I mean, at least from my view, the true NFT holders and especially NFTs that you will need to actually utilize in games, they hate fractionalization because once you fractionalize your NFT, chances are you'll never get it back the same again, right? So it kind of breaks your NFT almost, right, once you do that. And for the instant little liquidity that you get for it, right? Yeah, you basically will never own it the same again. And you will never be able to use it once that game, say, decides to, you know, utilize staking in the future or some kind of a function where you need to use the actual NFT, right? So in general, people, I feel like are gonna hate it more and more.

Nicholas: Yeah, totally. I guess one thing I noticed looking at something like fractional versus things like SharkDAO, there's definitely a different model of ownership, but also a different amount of DAO governance required for depending on which type of technique you use to collectively purchase something, which is also maybe even the other side of what you're talking about, which is individual owner voluntarily fractionalizing something in order to, I guess, get liquidity. But it seems to me like one thing that, I don't know how much it matters because there's two angles. There's one which is like, if it's an efficient tool for squeezing liquidity out of assets and collections that are popular or volatile or whatever, then some audience will seek it out. But there's this other audience of kind of, to me, I call it like the NFT side, which is like require a certain level of simplicity for the tool in order to make it popular. Something like PartyDAO, I think is a really, or PartyBit is a more successful front end for fractional, at least in my view, I don't know the actual numbers, but it seems like a very powerful interface to it because it has this kind of, you were talking a little bit, but like call to action around a goal that is of obvious use to the user without being like a deep DeFi mind.

Jiran Z: - I think Azuki actually does something interesting with fractional where they took one of their own, that's like their own one-of-one NFT, the Bobu Farmer guy, and then they're going to fractionalize that and then send out the Bobu tokens to all the Azuki holders. And they're going to use that as a governance for like deciding how the IP is used for like anime or hoodies or clothing and stuff. I thought that was like kind of an interesting way of doing it, like rather than an individual owner doing it, it's like the IP is like kind of using this as your tokenization of NFTs. And I think like GCR tweets about it pretty well, but I think like tokenization of NFTs is also like an interesting factor. But I really do like DeFri's way for collateralization where it's like rather than peer-to-peer, you're now doing it with an underwriting pool. And I think like that just like to me makes a little bit more sense when it comes to like collateralizing a NFT. And also providing liquidity is like this huge, huge, huge thing.

Nodar Janashia: - Yeah, because just to add on, like another reason why we do like put options specifically, right, is to like guarantee that floor prices. because on like traditional assets like ETH, where the spot price is like kind of very actively traded, the floor price can have huge swings. So the biggest issue why people haven't been doing these kind of scalable tools the same way exactly they are built in DeFi is because the system will probably not be able to guarantee liquidity in case everyone gets liquidated. And then the system goes out in the market and is not able to sell enough loans to cover the outstanding loads. And the whole thing breaks down. And this is why we have the put options where liquidity is readily available, right, always to liquidate whoever needs to be liquidated and repay back the loans. So that's like another like, kind of like really important thing that people have been thinking about around in this space.

Andrew Thurman: - Yeah, it's a really clever solution to those, you know, being a victim to price volatility, right? I think you guys thought that through very well. I'm curious to what degree though, how applicable to how many games do you think this is ultimately going to be? Because some of these lockups to pursue the treasure strategies depend on time horizon. To what degree is the same time horizons and mechanics, is that going to be applicable in Axie? Is that going to be applicable in June? You know, like how many other games in which, you know?

Nodar Janashia: - Right.

Andrew Thurman: - You know, it's a fabulous idea. It just almost feels as if, you know, you really need the space to really come along for this to become an embedded model across multiple games.

Nodar Janashia: - Yeah, of course. And that's what we're betting on, first of all, the whole space to obviously rise up. But also, you know, just like I said, it's kind of like each NFT project will have its own unique underwriting pool and we're going to stay flexible, right? We don't know all the answers today. So that's why, like I said, we're going to stay focused on, you know, one project and then go move on to the next, right? And see kind of where we need to change things up, where we need to modify the variables. And then eventually, right, we're going to, you can think of it as there's going to be these general categories of underwriting pools that new projects can then tap into. So like, you know, in general, like play to earn games with similar models will fall under like a specific blueprint and they'll just be able to use that and spin up their own underwriting pool without sort of like us as a core team setting it up for them. But in the beginning, yeah, we're definitely, you know, staying humble and sort of taking one project at a time and staying flexible. And that's number one thing, like that's really important in the space. I always love to say, it's the big don't need the small, the fast need the slow. So you have to be able, be ready to pivot any time and, you know, keep your ear to the ground with the users.

Jiran Z: So on speaking of like volatility, I kind of want to geek out on this. I know I was talking to Igor about it too. He's like, I'm curious how you guys are like calculating volatility. I've kind of talked about this before, but like, I'm really interested in the idea of velocity, of like how fast a floor is moving up and down, right? Like, and I feel like these analytic metrics of NFTs is so lacking and there's so much you can pull out from the blockchain. Like you can pull out the pending versus the confirmed. You can pull out, are they using flashbots? Are they like increasing gas significantly? Like, I feel like all of that can add to a volatility thing. where it's like, you're seeing like 10, 20 transactions coming in second after second. They're willing to spend three times the gas of anyone else to get in or out of a position. And then like, I think like that can calculate more interesting volatility than people who just stare at open seat floors. It's like, well, and the activity feeds like close, but it's kind of lacking, where I feel like you can kind of feel the energy of a project better with the activity or order book really.

Nodar Janashia: Oh yeah, absolutely. Like, I absolutely agree. Like I was actually shocked at how basic the analytics are around the NFT space in general right now. And you kind of get like some kind of basic stats. And that's exactly what we're like really looking into right now, kind of feeling out how deep the liquidity could be. Potentially it's a, like say potentially like we have, we'll even be looking at how many like NFTs we have in vaults and how many could potentially be liquidated at a certain price. And if that were to happen, is there actual real liquidity available in the market ready to, you know, buy it up, right? So there's definitely a lot of variables, even more than like in the DeFi space coming from like ERC20 transactions and kind of geeking out there and seeing where people are staking and unstaking. And yeah, it's definitely a little bit more intricate, just like you said, especially around like the mints also. And kind of maybe even we're looking into like calculating each holder's overall NFT activity in the space. And then, you know, given an NFT project, then taking the averages of all the holders from that NFT project, kind of like assigning a general score to how the quality of the holders for a specific project. And just like we were talking about before, like the true believer score, people who never like kind of listed their NFTs up for sale. Yeah, there's definitely a lot of things to look into. Do you want to add something up?

Igor Yuzo: Yeah, I mean, it's exactly the reason why we believe the approach of being very focused on one project is so important, because there's so much you can extract from the chain and having platforms that kind of say, hey, like we're an NFT lending protocol, like you could, here are all the collections, go ahead and do something with it. Like we don't think that's the right approach. And we think being incredibly focused and niche is really the solution. And providing a specific pricing mechanism for the NFT collection is essential. Like otherwise, it's just not going to be accurate because the NFTs are unique and they're so unique in the way that they're priced within the ecosystem that they live in.

Andrew Thurman: This is a delight to hear about. I was just talking with the Gauntlet guys. They've got a pretty fat contract with Compound doing continuous risk monitoring, dynamically trying to help adjust rates in their lending markets in that DAO. And the idea that you're inventing new risk monitoring parameters and judging NFT holders in order to apply the same sort of metrics and logic to a goddamn play-to-earn game. Oh man, that's exactly where the space should be headed. That's super exciting. Congrats to you guys.

Igor Yuzo: Thank you, Andrew. Yeah, thank you.

Nicholas: Hey, I also wanted to ask, so Nodar, you worked on Zapper previously and I saw your bio says you created Zaps. Could you tell folks a little bit about that?

Nodar Janashia: Oh yeah, of course. So yeah, I originally started in this space just making like DeFi tutorials back in the summer of 2019. Like literally, I was like Uniswap launched, I did a tutorial on them, Compound launched, I did a tutorial on them. That's kind of how I built up and built out the ecosystem. And then I saw this kind of Kyber hackathon going on. It was a virtual hackathon. So I decided to participate because I had this idea brewing of why people weren't, I was kind of surprised why people weren't doing that. It's kind of like combining transactions to kind of get you to from point A to point B in one go. So yeah, like we ended up making DeFi Zap on the virtual hackathon and ended up winning that hackathon because of kind of how user-friendly our solution was. And essentially what we were doing is just kind of like helping people go into a Compound pool and into a Uniswap pool in one go. So especially like the transaction that helped people go into a Uniswap pool in one go, that kind of what made us really stand out was kind of like Unipools at Zaps. So like for those that don't know, like essentially like in the Uniswap v2, the v1 at that time was, you needed to, when you come in, say with ETH and you're coming in with an ETH DAI pool, you need to convert half your ETH into DAI and then make a deposit transaction into the pool. And then before that, you actually need to approve, make an approval transaction. So you need to make three transactions in order to go from your money to actually being a liquidity provider in the pool. With Zaps, we took all of that out and made it all in one go. And then in January, Seb, he launched DeFi Snap, which is DeFi Zap, DeFi Snap. And DeFi Snap was like this UI dashboard that showed you where all your money is. And immediately I started speaking to Seb as a kid. This is like the front end for us because literally what people were asking all the time was like, "Where's my money?". After they like zapped in somewhere because we didn't show any UI. It was just like a box that you click to do something and then we put the transaction through a smart contract and that's it. So we didn't have any UI dashboard to show you where your money is. So yeah, after speaking with Seb, literally we merged DeFi Zap and DeFi Snap into Zapper and we launched that in May 2020. And yeah, the rest is history. We were very well positioned for the DeFi summer obviously because we kept our focus on pools like liquidity pooling and really kept the integrations up to date the most out of any existing solution. So a lot of people came for just literally seeing where their money is within DeFi because everyone just kept their deposits. Everyone constantly had people reach out to me how thankful they were that they found some extra stack that they forgot about that they deposited some time back. So yeah, that was cool. And like I said, I was really in my DeFi maximalist hole until I really started looking into NFTs and it really struck my curiosity, you would say passion. And that's why like seeing that there's no real, it kind of feels like a pre-DeFi explosion right now with the NFT space. And yeah, that's given the fact that the space really needs like liquidity solutions. We decided to spin up Defrag. So pretty excited.

Jiran Z: I think, I was just gonna say, like it just excites me. Like we were talking about lack of innovation like at the very beginning of this. And I think like what is needed is like this combination of NFTs and DeFi together in the sense that like, it kind of like, they both kind of coincide but they don't overlap yet. And there's so much overlap that can help on both. Yeah, that's what I'm saying. Like that's why I'm excited about Defrag and I feel like a lot of people are just like still kind of just chasing PFPs. there's so many new exciting projects where it's like, you guys are like engineering new risk, like risk engineering, right? Like trying to figure out how to risk profile people and then engineering all kinds of different ways of like velocity and data analytics about how floors move. Like I think this stuff is the stuff that's going to help push this space into like more interesting places than Discord waitlist grants.

Andrew Thurman: And again, the potential bleed over too because not enough, I think NFT lending markets, I'm sorry, traditional DeFi lending markets are doing this kind of stuff. You know, analyzing an assets holders by these metrics. That's actually like, you know, there's only a handful of people doing that and they're doing it on a contractual basis and they're doing it in these small cloistered experiments. Doing this and doing it for NFTs could potentially bleed over to a lot of other cool people like Euler funds. You know, yeah, there's just a lot of clear applicability for what you're doing and the fact that you're doing it for, you know, what I would derisively call rinky dink play to earn games compared to some of the sums of money that DeFi controls. It cracks me up and I think it might, you know, if your guy's thesis plays out and that more of these games blow up and these games do what I think we expect they all might be able to do, you're all are well positioned. So congrats for that.

Nodar Janashia: Yeah, you got to go where the puck is going, right? So it's kind of like when when I was doing the pooling apps, like literally like I remember we were getting like excited about like 3 million total value locked in something and like fast forward like to DeFi summer, you just got to be well positioned once the explosion happens, right? So yeah, again, you got to go where the puck is going.

Igor Yuzo: And I think Nicholas said this in the beginning was that like there is some like fatigue and tiredness of like learning this new thing, right? This new ecosystem comes out, this like P2E or some kind of narrative within a game, some game mechanics. And that's true about like existing kind of like winners in DeFi, like. maybe they're not exploring these things in detail and in such intensity as like, you know, some smaller teams that are just spinning up. So and that's the beautiful thing about I think crypto in general is that the industry is so innovative and moving so quickly that you have these pockets of opportunity. And if you're focused on the right thing and you position yourself correctly, you could really, you know, see a lot of growth there.

Nicholas: - Definitely. To change the subject a little bit, are any of you going to East Denver or are you already in East Denver?

Igor Yuzo: - Yes, we are.

Nicholas: - Awesome.

Jiran Z: - Your boy's best texting me so I can pick you up. - Oh yeah. - Gotta get the bus.

Nodar Janashia: - Yeah, yeah, yeah. We're coming in on Monday.

Jiran Z: - Oh, no doubt. All right. Let me know about that later.

Igor Yuzo: - Yeah, we actually also wanted to hit the slopes on like Saturday.

Jiran Z: - It's dumping snow right now as we speak.

Igor Yuzo: - Oh, that's so good to hear.

Jiran Z: - Yeah. So Denver's been, and Colorado in general, has been lacking on the snow.

Igor Yuzo: - Wow, great.

Nicholas: - I'm going to be there for the first time this year. What's the conference like? Are you looking forward just to hanging out or is there any part of the conference in particular you're looking forward to?

Nodar Janashia: - Honestly, just looking to meet possibly new builders. I went to Denver in 2020 and it was an awesome experience. First of all, somebody from the community bought me a ticket to go there. I was so broke back then. I didn't even consider coming. And then literally somebody said, "No, you're coming.". I didn't even know this guy literally on Twitter. I was perplexed. It was like the DeFi awards. It was like the Black Thursday. It was like all hell breaking loose. Anyways, that's why I went there. The first thing that stood out to me was just the sheer developing power, I guess you could say. Everyone being cramped in and staying even overnight. And this is another thing I really loved building during the beer market because you see that everyone is in here for DeFi, not for APY. That's why I said before, right now you have to filter out through a lot of the noise to get to the good stuff.

Jiran Z: Don't be an APY cockroach. I think that's a good tweet.

Nodar Janashia: Yeah, yeah.

Jiran Z: I might tweet that.

Nicholas: That's great. The only conference I've been to so far was NFT NYC. And that was very, very much like a social thing for meeting builders for me too. Actually, at NFT NYC, I ended up throwing together with the help of the Seasons guys. We had like a little Solidity developer meetup, which was cool. Met a bunch of, you know, totally varied people. But I guess ETH Denver is more technical than NFT NYC. At NFT NYC, I think that was the only developer-oriented event, at least that I was aware of. But I guess ETH Denver has much more like developer history behind it.

Igor Yuzo: Yeah, it seems like it's becoming somewhat of a hub for some Web3 folks.

Nicholas: You have to be doxxed to get a ticket though?

Andrew Thurman: I can give a little bit of backstory to that.

Nicholas: Oh, tell me.

Andrew Thurman: You don't have to be doxxed to get a ticket. And you can give fake information and they'll accept it. What they used to do was they would sell information to sponsors who wanted to collect it for business development purposes. My first was ETH Denver 2020 as well. And I was working for a company at the time. And that business development list that they gave me because we were sponsors was like I worked off of that for months. They've reportedly stopped doing that, however. And so I think this whole doxxed, undoxed thing is blown a touch out of proportion. What they should do is just admit that they used to give information to sponsors and say, "We don't anymore.". But they now say that they don't do it anymore. They deny having done it in the past, although they did. And you still can get in with a pretty obvious pseudonym buying a ticket and they'll accept it.

Nicholas: So they just need to change the text on the form, really.

Andrew Thurman: And that's tough because it's like an event that's sponsored. They do it in collaboration with the state economic development agency, XYZ. And so they're legally required to gather certain information, but they'll turn a blind eye if the information you give them is like John 6969. You know, that sort of thing. But I think it was a communications flub on that, but ultimately is a little bit of nonsense.

Nicholas: There's something interesting. It sounds like everyone's just going for the people, but do you all meet these people primarily outside of the actual conference venue? I feel like there's something weird where people don't really want to go to any of the conferences. I mean, it's always been the case, I guess, but it feels more than ever like you don't have to go to the conference at all to have a great time. I wonder if, is conference even the right, it's like the wrong?

Jiran Z: I think it's just you get a big group of people in a similar space. And I think like the better, the cooler discussions do end up happening maybe at the after party or maybe just have like a bar with a bunch of other really smart people getting like a couple of beers and just shooting the shit. I think a lot of like the best like business partners or people I've worked with from NFT NYC all came from just like shooting shit, having drinks with them, you know, like nowhere near the events.

Nodar Janashia: But that's also if you have some kind of idea you're working on, that would be a great place for you to kind of try to hack it, right? Try to, and there's plenty of people looking for help or offering help. So yeah, that'd be cool. But yeah, you definitely don't have to go to any conference. Like I said, like originally I participated in Kyber's virtual hackathon. So yeah, it's like if you're looking to build something and test it out, get to MVP, like you don't need to go networking. Yeah, you just need to build. So yeah.

Andrew Thurman: - Yeah, in February 2020, like the market sucked. It was tough to get VC money back then. But even then at the actual event, you know, people who were nominated for the final awards or whatever, they were shaking hands with folks the moment they got off the stage. And, you know, VCs were talking to them. It's still very good for a young ambitious person to go to the actual events, I think. But if you're more established, you're probably going to have a better time at the side events for sure.

Nicholas: - I'm looking forward to it. Yeah, it's going to be great. Are you guys going skiing this weekend? No, next weekend, you said.

Igor Yuzo: - Yes, it would be next weekend. So like Saturday, probably the day that we go. - Because we have a flight coming. - Yeah, we snowboard, but we'll keep up with you. And we have a clip on, so we don't have to wait for us. We just step into our snowboard.

Nicholas: - Perfect. I'm going to start taking people up from the audience if they have a question. No worries if you guys have prior commitments have to run. But here's Lee. Lee, what's up? What's good? Oh, maybe Lee can't speak right now.

Jiran Z: - No, I'm in the sauna. My phone's like bugging out.

Andrew Thurman: It's like mad hot.

Jiran Z: I like literally went through my whole workout while you guys were talking. Like I went, I lifted weights. I went on the treadmill.

Nicholas: - Awesome. Wow. We're useful.

Igor Yuzo: - Productive.

Nicholas: - What's good? Did you have a question or anything to throw in?

Andrew Thurman: - No, I just, I honestly just wanted to say, like, I love Andrew's, like, nihilistic bearish thoughts and it makes me, it makes me smile every single time I hear him. - Yeah, it's Lee. Glad you're doing good, man. - Yeah, we're out here.

Nicholas: - I also got Alex. Alex Angeli, how's it going?

Igor Yuzo: - Yo, yo, hey. Can you hear me?

Nicholas: - Or is it Angel J? Sorry. How do you, what's your Twitter name?

Igor Yuzo: - It's Alex Angel.

Nicholas: - Alex Angel.

Igor Yuzo: - Yeah, it's fun. - Thanks for bringing me up. This is, I just hopped into the space 'cause I saw you were talking and then I looked up Defrag and it's an awesome idea, Nodar. I think, like, in a year you guys are just going to be killing it. Like, it's definitely a good thesis. I wanted to ask if you're collaborating with any DeFi projects or you've talked to Tarun about this idea before.

Nodar Janashia: - Yeah, we're collaborating with some folks. Like, we actually just got, like, a couple of strategic partners, like Alec Anton from OneInch and particularly, like, again, we're working with, like, TreasureDAO. We have a couple of folks there that are working around, like, tokenomics and stuff like that and seeing how we would possibly, you know, flow into their existing ecosystem providing these, you know, lending boosts, borrowing boosts.

Igor Yuzo: - Yeah, 'cause I do know, I've heard from some lending protocols that, you know, they're exploring using options in place of the liquidation mechanism. So I think that's, like, a really cool area, especially since it also, you know, might bleed over to NFTs as well. - Yeah, Alex, if you want to DM us those projects or any thoughts and ideas, we'd love to hear from you. - Yes, I mean, I know Fehrari and then I know Tarun is also, you know, part of everything lending-related, you know, given he works with Gauntlet. And then also my project, Primitive, we're also doing research on this. So, yeah, happy to talk more.

Nodar Janashia: - Oh, yeah, I'd love to connect, man, for sure.

Nicholas: - What's Primitive PHY? What is it?

Igor Yuzo: - Primitive, we're building a... That's a good question.

Nicholas: - It's not a true question.

Igor Yuzo: - No, I said that's a good question. The quick answer is, Primitive is an AMM that structures liquidity in a way that enables options in a much more liquid way. And one of the things we saw right away was, like, you can actually replace liquidation mechanisms with put options. And so our head of research, Estelle, is actually working on a paper, you know, with Tarun's help and to show, like, these lending protocols, like, yeah, this is actually possible. You know, it might take some tricks to make sure, like, the risk model makes sense from, like, a capital perspective, but this is a really cool area. And I don't think, like, a lot of people don't really talk about NFTs, like, with this overlap with DeFi, but, I mean, in my opinion, I think it's gonna overlap pretty quickly. - Yeah, sure, NFTs are an asset.

Nicholas: - I have to learn from all you DeFi guys. I'm kind of stupid on all this stuff.

Igor Yuzo: - Yeah, no, no, it's gonna be really cool 'cause I think it's just a natural part of the process of, like, a lot of these DeFi protocols that are built that are gonna be really useful for NFT projects who are building, like, the same tools, but, you know, in an NFT framework. But yeah, I just wanted to ask Nodar that, pulling me up.

Andrew Thurman: - Were you cracking up with me, though, because it seemed like a lot of the sort of risk profiling for some of these NFT assets, I mean, it just has such clear parallels to what Tarun is trying to do over at Gauntlet and maybe should be doing. You know, it sounds like they look more at, you know, volume on centralized exchanges than they do at, you know, on chain data. Like, it seems like a lot of this stuff could actually apply to some of the modeling work they do. Maybe Nodar's gonna get acquired in the next year by Gauntlet. I mean, it's like this whole model is kind of blowing my mind the more I think about it.

Igor Yuzo: - Yeah, I think especially with, I mean, just like this last summer, I mean, NFTs, NFTs are still, like, relatively small. Like, I think it's like 60 billion market, or, like, value market cap-wise. So yeah, but I agree. I think, like, a lot of these models are gonna, you know, be used to actually inform a lot of the NFT stuff that gets created and, like, help it be established. So I think, like, Tarun's eventually gonna explore it as well.

Nicholas: - What did you say the market cap for NFTs was?

Igor Yuzo: - I, last I checked, was 60 billion, but I could be completely wrong.

Jiran Z: - I feel like-- - It's only just this month we hit a million unique wallets on OpenSea. I mean, give and take, obviously, 'cause a lot of people have, like, a bunch of wallets. But yeah, like, at least four, maybe 50, not me. But, like, just, like, average number-wise, I believe it's, like, one million, and then OpenSea's projecting it to be a hundred million by the end of this year.

Nicholas: - Whoa.

Jiran Z: - Yeah, of, like, unique wallets on there. - Okay.

Nodar Janashia: - That's sick.

Nicholas: - That's interesting. Yeah, previously I saw it was, like, 600k, but they were really getting two or 300,000 monthly actives. I guess things have changed since 2022 turned. I haven't seen stats since then.

Jiran Z: - Yeah, I would definitely look into them. It's, like, I mean, you can tell, right? Like, look at all these, like, insane floors and demands, and go look at the wallets. It's, like, wallets you've never seen before.

Nicholas: - How would you figure out market cap of NFTs? I'm kind of suspicious that it's possible. Maybe I just haven't thought about how to do it, but--.

Igor Yuzo: - That, I think my friend, I think it was John, John Isler mentioned that to me. So he probably did some, like, Dune wizardry.

Jiran Z: - Oh, I know John. I could ask him later. - Oh, you did? - Yeah, I'm sure. - It might have been someone else, but-- - I'm sure he did some magic.

Nodar Janashia: Yeah, I'll have to ask him.

Jiran Z: I'm sure he has a way.

Nicholas: - I just, how can you have a market cap for something where the first part of this conversation was, "It's all going to zero"?

Jiran Z: Prior-- - I think we just say that. I remember in August, early August, we were all like, "Oh, this is over, it's done.". And then it ripped to the most all-time highs we've ever seen before. So it's like, we just say it 'cause we're probably just tired and we need an excuse. But I don't think NFTs are going anywhere anytime soon.

Igor Yuzo: - But that's a good point. I mean, price discovery is really in its infancy. So like that market cap number is probably super inaccurate.

Nicholas: - We got Artem on the stage. How's it going?

Igor Yuzo: - Hi, guys.

Artem: Thank you for giving me the voice. So I come from a really heavy topic. I was on David Gopstein's spaces before. So it actually turned more into a geopolitical topic more than a crypto topic. So I saw that there was another space going on. So I just wanted to hop in and have your opinion on something. So during the Gopstein's spaces, we were talking about Ukraine and Russia. And I think that crypto has actually a role to play in it. So basically what we see happening is that a few weeks ago, Russian central bank was about to ban cryptos. And then right now, Vladimir Putin came in and he was like, "Yeah, we have a geopolitical advantage and we have a lot of energy going on which we can use for mining and et cetera.". So I think most of the people here are American. We have the petrol dollar. So basically for every petrol, every gallon we sell, we have to pay for that in dollars. And if Russia invades Ukraine, basically the SWIFT payments will be banned from Russia. And so right now we have the Minister of Finance back in Russia which is talking about allowing cryptocurrencies and being regulated at the same level as dollar. And so right now we are seeing a major adoption of cryptocurrencies and maybe, how can I say it, a loophole for Russia to use cryptocurrencies. So I just wanted to have your input on that if we are seeing a really geopolitical advantage for the usage of cryptocurrencies. So I just wanted to get your feedback on that, if it's okay. If it's not too heavy of a topic here.

Nicholas: Yeah, I'll let you guys handle that one.

Igor Yuzo: Yeah, I mean, just to cover it briefly, I mean, it's a point. I mean, it's a kind of a giga brain move, right? The threat was always cut Russia off the SWIFT banking system. And I think Putin has met with Vitalik previously. Like he's definitely thought about this for some time and it is an avenue to move capital around. So it's not too far-fetched of a thought to think that he's going to be utilizing it to move some of his treasury.

Jiran Z: I mean, it was kind of expected, wasn't it? Because if you looked 2020, top three miners in the world are Iran, China and Russia, right? They made it like, I'm from Iran, but like for Iran, it's like they would make them illegal, but they wouldn't tear down the miners. They would just absorb them and then just keep mining. And some of the TradFi guys had tried to warn about this, but no one was really listening at the time. It was like, what they're essentially doing is printing US dollars without needing US dollars. By now mining Bitcoin and ETH and stuff, they can now take that and then sell that into the market and then convert that to US dollars. That's what Igor was saying. It's like, it's kind of a Gideon Ray move of like, you now have circumvented, like it can't really... Okay, you took away SwiftBank. Cool, I got other ways. So I don't know. I mean, it's weird that all this is happening at the same time. So good old world being crazy.

Artem: I just feel like that. the US dollar has lost a lot of its power in the recent years because of all the printing, as we said before. And I think that the US don't realize the power that they can have with cryptocurrencies because today when we are selling cryptocurrencies, we're selling it for USDT or USDC or USDP or whatever. Stablecoin, we have really a few other stablecoins which are backed by central bank digital currency, so CBDCs. And I think that both parties can actually benefit from cryptocurrencies here. And I think that it's a really interesting point for both nations. And so, yeah, I think that even if this conflict is really bad, I think that crypto can actually benefit from it if it's handled correctly from both sides, at least. So yeah, that was the point that I was making here.

Jiran Z: Yeah, no, I 100% agree. I think we kind of lacked on the lobbying side and we need to step that up and not lobby in a sense of like, "Hey, just make this easy for us to make money.". And I think, I can't remember his name, there's one person who did a really good job at the last hearing where he truly educated them as to like, "Yo, the US is behind on a really, really serious topic.". And it's not just about you going around regulating and suing Uniswap unicorn, you know what I mean? There's a lot more serious topics around this that you guys need to be paying attention to. So, and I actually think it would be healthy for the space to kind of start having those conversations rather than leaving it as this wild, wild West. But that's just my opinion.

Igor Yuzo: Yeah, I mean, just from the simple standpoint of understanding how the financial ecosystem of the global digital world is going to work, that should be at the forefront of the policymaking because it could be used as a weapon against them if somebody else gets to that knowledge first. So they're going to be sucked into it regardless. The other thing is, I always, you know, 'cause crypto is kind of like a retail first and institutions after market, which is really cool. 'cause a lot of people who were super passionate and learned on the internet were able to get ahead of the institutions. And I always like to think of it like, it was like retail first, then institutions bought the retail bags. And I mean, the smart retail, right? Like the hackers and the explorers. And then now like the Fed and the government is going to buy our bags as well. So just funny chain of events.

Jiran Z: It's going to be an interesting time for sure. I don't know if like, everyone's like, "Oh, this is 2018 again.". I'm like, "Eh.". Like, I feel like crypto is pretty freaking mainstream and relevant now. I don't know if we're going to be seeing like this crazy dips, not financial bias, but these dips and stuff, right? Like, I don't know. I mean, my theory is like, things are actually simmering to reach a boiling soon for crypto. And it's going to like kind of take everyone by surprise.

Artem: - Yeah. But on the other hand, we always wanted Bitcoin to be the currency of people, not the currency of governments. And then we see this becoming an influential power and geopolitical advantage. So do we really want governments coming in and fighting over the hash rate or the amount of crypto that people actually have? As we know now, Russia has like 12% of all the cryptocurrency held by its citizens. So it's an interesting point, I think, to talk about because it's really hard to grasp if we really want institutions to come in and then we all go to the moon and then we're like, "Yeah, Bitcoin is going up, but then it's controlled by institutions.". But then on the other hand, we have this power taken away from people who really wanted to get away from banks. And so, yeah, I think it's a really interesting turnaround for cryptocurrencies right now because we have these institutional investors and we have these governments coming in Salvador, in Russia and America with the hash rate. So I think we might see some interesting movements around in the crypto space this year because right now it's not a volatile asset anymore. At least it's not considered as one anymore. Right now, it's more of a power that you have in this world and people want more freedom. And so to get this freedom, governments have to get involved. So I think it's a really interesting point and I think that this year will be really interesting for cryptocurrencies. And I also love NFTs. I'm sorry that I'm coming here and talking about this kind of subject.

Jiran Z: I think it's just as important though. It is good to think about this stuff. And also, I think the issue is, the reality was kind of like, this would always happen, is as Bitcoin eats rip up, people are going to sell. Everyday people who now have a couple million are definitely going to sell so that they can get a house and a car and live their life. So it slowly would have ended up in institution money. because it's like, as the price goes higher and higher and higher, some people are going to sell to live their lives and then it's going to get so expensive, they can't buy back in. So that effect kind of, I feel like, always existed. I'm not quite sure what the solution is for people versus government. But I mean, kind of like the harsh reality of the nature of something like this going mainstream like we've talked about.

Andrew Thurman: - It also, it just puts being a serious NFT collector or trader into perspective, right? There was a time when you were, your hobby was collecting baseball cards. You didn't have to worry about how, you know, Russia, you know, trying to control the Bitcoin hash rate and whether or not they're holding USDC or USDT, you know, and the dollar's sovereignty in crypto markets bleeding over from global markets. All that bullshit, you know, you can just collect baseball cards because it was a local market. that you did with your friends. NFTs are a global market. And so even though they're also these stupid rinky-dink things, NFT markets suddenly are also tied to all this shit too. Our pictures of apes are suddenly linked to geopolitics and NFT traders need to be watching, you know, whether or not the Fed's raising rates. That's a very, very funny thing and a relatively new thing for people who used to play collector's markets.

Igor Yuzo: - Yeah, actually, I've just been looking at the correlation between like equity markets and crypto markets as of recent and the correlation is constantly growing. And I think a lot of people, as the crypto market, you know, grows bigger and it's, you know, over $2 trillion, it's kind of hard to avoid a level of correlation, even though there's been some narrative about it being an uncorrelated asset. So yeah, it's definitely something that people should, you know, pay attention to. As you said, crypto is looked at as like a risk-on asset, whereas where you kind of pull the lever of interest rates up or down, that really, especially up, really affects the risk-on assets the most. So definitely something people should pay attention to.

Artem: - Yeah, I mean, as long as Joe Biden or Putin don't buy a Bored Ape, I think we're fine. We can still make money on NFTs and so far so good. But yeah, I think crypto is also an interesting point for people who were never really into economics and where they actually start to learn more about it because they have to understand why their poop coin goes down or up and why it follows Bitcoin, why Bitcoin goes in this way. So I think it's a really interesting point that crypto was actually a point of entry for lots of people who were not really interested in economics before and they are now and they are flipping JPEGs or whatever. And I think that NFTs allow this liberty or this freedom from the market volatility, at least a little bit.

Jiran Z: - And I think learning economics is huge. I think so many people sleep on trying to learn how the economy works. And it's like, as you learn, even doing some trading and stuff, you start learning how the world turns, and the reality of how things are and how political things go down and how negotiations go down and stuff. So I don't know. In that way, I think it's positive that people are understanding and learning about how the economies of the world work and how that kind of shapes our lives. And then that way it can also be empowering.

Andrew Thurman: - Yeah, it's just an interesting second order effect where you start out just really liking the fucking apes. And then next thing you know, in order to try and trade the apes, if that becomes part of your fandom, you have to be able to know geopolitics and fucking central bank policies. Somebody who's just trying to get into this for fun. I don't know if they can. We're onboarding degenerate gamblers who think they're smarter than central bankers right now because only degenerate gamblers would want to get involved in this as an asset.

Nicholas: - I don't know. They appreciate it so fast. That's a pretty good reason to get involved. At least in my experience, at least.

Artem: - I've seen an article from, I don't remember, I think it was Financial Times who said, rich millennials emailing their bankers, emailed their bankers saying that, "Thanks for your golf invite, but I'm good. I don't need your help.". And it was basically rich millennials who got into crypto and who got really rich really fast. And so we don't need these institutions anymore. So I thought it was kind of funny that these guys are actually outperforming Wall Street and Wall Street are getting mad about it because they all think that it's a Ponzi scheme or whatever. But I think it's kind of funny.

Igor Yuzo: - Yeah, I mean, there is a bit of a false narrative. I think a lot of people do lose a shit ton of money in this space. People don't boast about their L's. They constantly talk about their wins. But I definitely agree with you that financial literacy is improving. And I come from an RIA background. I was a partner at RIA before I left and joined crypto space. The guys that are managing the money are like 60 years plus. And you have these millennials coming in and they have no idea what the fuck they're talking about. So they can't even relate to them. And then you could get so much information out. The old way of doing things was, "Hey, nobody has access to the financial markets.". That's why they had brokers. So they would connect you to the exchanges. So it was all an access issue. And that's what you paid the high commissions for. And eventually those commissions went away and there was fee compression and the industry evolved. And all that came with information abundance through the internet and then the smartphone. And now you can literally just digest an entire financial market on your phone and make decisions to invest or trade, which is great. And then crypto is just another kind of version of that that's just amplified on steroids.

Nicholas: Yeah, it feels like the big... People perceive crypto as a scam or whatever Ponzi's galore. And there are many scams, but the big transition is the control of your own wealth, the risks and the advantages of that. And I was thinking about it the other day, why are accredited investor tests not just like an AP class or something just everybody can learn? I guess they're new is the big reason, but crypto is just that way natively. And thinking about the legality of DAOs and things, it sort of feels very much like you're taxed when you make the money and you're taxed when you spend it, and you're not allowed to pile it together and do something collectively unless you have a... Or you have to be careful about who you allow to join in. And it's not obvious. It's certainly not globally with collaborators in other jurisdictions, etc. It becomes very complicated. So with those tools and non-custodial wallets, it's on a collision course with both people getting scammed and people having opportunity to use their wealth as they choose.

Igor Yuzo: Yeah, I mean, I might be a little biased here, just because I've grown to despise like the old financial world. But like the whole accredited investor rule, it seems like it's just like a way to limit access to only the wealthy. Like, I mean, I know it's a little cynical, but what's the point of that? Absolutely, you can't make...

Nicholas: I read the Dow report the other day, the 2017 Dow report from the SEC. And it's like, you walk away from it like, "Oh, right, yeah, of course, there's no way for regular people to make any money.". It's impossible, it's illegal, actually.

Igor Yuzo: But hey, but the regular person could go buy a cup of coffee and buy a $20 lottery ticket and he only has $100 in his pocket. So 20% of his portfolio allocations go into this risk-on investment. So like, where's the sense in that? Just go... Obviously, the fractionalization and accessibility wasn't as available, maybe back then, so you can't really crowdfund. But that's changed drastically, right? So the rules should reflect that, but they don't.

Nicholas: I think the question is, I spent some time in London, and my feeling, it wasn't very long, but my brief vacation there, my feeling was, "Oh, this society sort of infantilizes its people a little bit.". Like keeping the guardrails on, that was just the whatever, the path I walked in London. Maybe it's not really like that as a society, but it does feel like we live in a society where you're not expected to be very good with your money and protected from the upside and downside of actually being responsible for your money. And it's not clear how people are gonna react long-term. Will the culture change? It seems like it will have to change to some extent, but I could also see a world in which everything is custodial wallets and everything does have the guardrails on. I think being responsible for your money, like if any of you have older relatives or something like that, it really is a big responsibility to at any point be able to lose everything.

Jiran Z: I think a lot of these NFT guys are learning this right now, like getting hacked, leaving out seed free, right? Like, "Oh, here's like the reality of like, like I'm not here to make fun of them 'cause it does suck, but it's like, this is like the hard truth.". And sometimes you have to, the best way to learn is to like have that hard hit.

Nicholas: I mean, think how many like devs must have uploaded their, you know, private keys to GitHub or whatever. - Right. - It's, but it, you know, I don't know, we, I feel we come from such an era of being protected, but, you know, consumer protections around everything and you can return anything as long as you want. And if anything breaks, it gets fixed and you pay for it built into the price. But, and everything is this sort of, you know, factory made premium, mediocre stuff. It's like, yeah, it can be replaced on a warranty because it wasn't that great to begin with. And it's definitely not gonna work in five or 10 years. It'll be broken one way or another. So I, to me, the big change with, that I'm noticing with NFTs that I feel people don't appreciate is that the NFTs are, people complain about the use cases, et cetera, but it's like very quickly the inversion will happen and they will be more real than any of the garbage crap in your physical life that comes off some Chinese factory floor or whatever. Very quickly, they will become more valued because of their actual long-term quality. Even if they don't have any application, just as a philosophical, I don't know, state of being, they'll be so different that I think the ones that keep value will be interesting. And the other thing is that people are really, maybe not people from your backgrounds, but people coming at it from the art side or from just being a regular person living in society really don't want to admit how much the value of something affects their opinion of it. And find it kind of like abhorrent to even acknowledge that that might be the case. So they see the price skyrocketing and they don't yet have a relationship with it. So they presume that it's, there is no emotional engagement with it. And yet they, whatever, value Beyonce's opinion more than somebody else. Or if Beyonce walked into the room, would have a reaction to it based on the popularity. And the floor price is a function of its sort of cultural relevance. So I don't know, yeah.

Igor Yuzo: Yeah, I don't know if you guys have the same thing, but the NFT artwork, like for me personally, just always looks better, like exponentially better every time the price goes up. It's like, well, wow, this artwork is beautiful.

Jiran Z: - It's the Salvador Mundi effect. You guys know that story. Basically it was a fake Da Vinci, but because it's like Saudi Prince bought it for like 500 million, Sotheby's like pretended it was real. And then everyone kind of pretended it was real, just because someone like spent stupid amounts of money on it. So, I mean, yeah.

Igor Yuzo: - So like the old version of a wash trade? - Yeah. - Like an NFC wash trade?

Jiran Z: - But like, even to your point, Nicholas, like there's a lot of sneaker collectors. Like I have a friend who like collects sneakers, right? And by collect, he has them in a box in a closet, just stacked like hundreds of boxes. And it's like, you should just NFT these, you know, take a picture, mint it. Like, you're not even gonna look at them. It's just gonna sit in a box and take up room in your house anyway.

Nicholas: - Yeah, I think StockX just came out with like the service that I've been dreaming of for a long time, which is like custodial. I don't actually give a shit about sneakers, but custodial sneakers, like, you know, collectible, custodial collectibles, basically. Which is, you know, it is a perfect match for it. they might even be doing NFTs for, to represent the ownership of them.

Jiran Z: - Oh, wow. That's interesting.

Nicholas: - But it's like, not my keys, not my sneakers.

Artem: - I think they got sued for that. I think they got sued by Nike for that.

Nicholas: - Oh yeah, I saw that. But I'm sure it'll, you know, so Nike will do it instead. But, you know.

Jiran Z: - Are they doing an artifact right now? What's that like box thing that they have? The airdrop they gave everyone? I bet you it's a sneaker.

Nicholas: - Oh, I doubt it. I think it's pretty complicated. You need like a whole storage facility or something. My concept for this was that you can buy, let's say sneakers, and they're in like an aquarium with LCD screens on all four sides or whatever, all six sides. And you can like, you know, the owner's name, every night at 7 p.m. there's a show that is just like the, whatever runs through the whole list of sneakers that are the hot sneakers right now. And takes a live camera shot of the sneaker in its little coffin with whatever the owner's name or branded, whatever bullshit they want behind the sneaker. But I feel it, you know, it'll happen. But it's interesting because then you, really the NFT, like it's the opposite of Bitcoin logic if you do the custodial collectibles.

Jiran Z: - What do you mean? it's the opposite?

Nicholas: - Like you don't own the sneaker. Like the sneaker's in some warehouse and you have an NFT. It's like a USDC of--.

Jiran Z: - Well, this is like why the Bitcoin guys are kind of ringing, right? Like it's kind of headed that way. Anyways, that like a lot of people are kind of giving up a little bit.

Nicholas: - Oh, I lost you for a second there.

Artem: - Yeah, I just wanted to get back on the side of the collectible that you don't actually own. So for non-custodial collectible, for example, let's say if you buy a pair of Nikes, right? For example, a pair of Jordans or whatever. And you have their NFT copy on your, so basically their clone as an NFT. So I talked about this. So I live in France here and I have one of my friends who is really into this NFT stuff. And so we had the NFT Paris conference here two weeks ago. And we talked about that. And basically, so if you tie the value of your shoes, or for example, let's say Air Jordans to an NFT, let's say that you want to sell your pair of Jordans, right? So you have to transfer the NFT with this pair. But you have no way of controlling if you will actually get a right pair of Jordans when you buy it from the person. Or, for example, if you only sell the NFT, then the pair of Jordans that you have actually loses its value. So I guess for the moment, we don't really have a solution for that. Unless you put a QR code on your shoes or whatever. But the problem is tying an NFT to a real life object. It's kind of tricky right now because we don't really have a solution unless you have a third party audit for that. But I think that that's why StockX are doing that just because of this problem, basically.

Igor Yuzo: Yeah, I don't want to discourage any projects at all because everyone loves to build and create something new. But I really just don't particularly like this constant attempt. I don't know what it's called, skeuomorphism or whatever, taking real world assets and then digitizing them. And this is kind of like a half big thought, I think, or rather not fully big. And once again, I'm going back to Treasure now because I think it's a good example. Traditionally, from web to world, you had players like Google and then Facebook. They vied for your attention. Google vied for your attention because you wanted to explore the internet, right? You want to search stuff up. And Facebook vied for your attention because you had all these other people creating content and you want to see what everybody's doing. Everything is constantly vying for your attention. And before, the flywheel was ads, right? So money from ads kept everything spinning and working. That flywheel is now able to change because of tokenomics. And Treasure now, once again, is a perfect example where they've developed this flywheel where they have this almost like a potential of a multimedia narrative, right? They have these fictional characters that go on these adventures and all these stories are created from it. And as long as you're captivating the attention of a community that is growing and you have some kind of flywheel to fund it, that is incredibly interesting and has a lot of potential. So I don't know, just being given that a lot of thought recently, like where we're moving and what the real potential is here.

Artem: We have an artist in France called Pascal Boyard. I don't know if you know him. So he did the Satoshi portrait with the dollars. And he basically does street art. And so he painted the 16th chapel in a street art form. And so he sold every character of this 16th chapel. So I think there were like 400 of them overall. He sold these characters as NFTs. And so because it's street art, it will not be there forever, because if people just decide to take the whole place down to build something new or whatever, you will still have your NFT. So this kind of an interesting point, an interesting take on NFTs. But otherwise, I agree with you is that tying NFTs to physical objects should not be a priority for artists. And if people don't want to understand your art as JPEGs, basically, please don't hate me for that. But if people don't understand that, just don't sell it to these people and focus on the audience, which actually gets the whole point of ownership. And I think this project of the 16th chapel street art was a great example of how to tie a real world asset to an NFT because it's not permanent. So but otherwise, it's not really worth it, in my opinion.

Igor Yuzo: Yeah, for sure. There are definitely going to be some use cases where it makes sense and it's creative and impactful.

Jiran Z: Nick, I gotta hop. Gotta get some other stuff done. Yeah, awesome. I had a great time on the podcast today with you, bud.

Igor Yuzo: Yeah, get the bus ready.

Jiran Z: Let's go, Igor. I'm looking forward to seeing Nodar and the team in a few days. Yeah, we're super excited. I'm gonna dip now.

Nicholas: All right, thanks, Jiren. Thank you, Igor. Thank you, Andrew and Nodar. We can call it there.

Artem: I just want to get back on one point and then I'm going to bounce as well. There was one thing that we discussed earlier is that people didn't really have access to investment before and they couldn't really invest by themselves before. And so basically, I was born in Russia and then I moved to France and my family never really invested. And now when I talk to my mom and tell her that I bought a JPEG for $1,000, she doesn't understand that at all. But also there is a problem in our educational system, I guess, because we don't really learn how to invest because it involves taking risks. And if schools teach you to take risks, then they can be held accountable for your losses as well. And so I think this is a big problem in the educational system because I studied in the USC as well. And it was a big problem because I never learned how to invest. I had to learn by myself and not even talking about cryptocurrency. I was also talking about stocks and real estate. So I think that by giving this information, by giving their risks, and by making people understand what are those risks, we actually make a better off population for whatever country you are in, just because people understand that today. So we have this thing called "Livre A" in France. So basically, you put your money in your bank and then you get like... Last year, you had 0.5% return on that while inflation was like 2% or 3%. So you were basically losing money. And then this year, they were like, "Hey, we're going to multiply it by two. So you're going to get 1% return on your investment.". And a lot of people in France, it's like the investment that they prefer here. They put their money in the bank and then banks get whatever return that they get. But people don't really want to invest there. They basically have to accept this inflation and lose their money. But I think by educating people, we can get rid of that and have a better population and have more retail actors coming in. So I think that that's one of the points that can be improved in the educational system for every country.

Igor Yuzo: Absolutely, Artem. I think what Milton Friedman said, "Inflation is taxation without legislation." It's a dangerous thing.

Artem: Yeah, and then we take risks. So here in France, we have 30% tax on whatever return that we make. So for example, if I invest $1,000 and then I get back $2,000, then I have to pay 300 euros of tax because I made a $1,000 return. So it's really, really...

Igor Yuzo: You're talking about some form of capital gains tax?

Artem: Yeah, exactly.

Igor Yuzo: And what's the percentage there in France?

Artem: So 30% on cryptos.

Igor Yuzo: Does it matter how long you hold it for? Like more than a year, less than a year, short term, long term?

Artem: So you have this banking system thing where you can actually get rid of the taxes. But I think it's like four or five years. And then you have to accept whatever the bank does with your money. So basically, it's like certain stock that is accepted. It's called PEA, so P-E-A. And when you hold for long enough, then you're not taxed on this return. But otherwise, for crypto, for example, it's 30%.

Igor Yuzo: Across the board. Okay, cool.

Artem: Yeah, but then on the other hand, you're the one taking all the risk. And if you lose all your money, nobody's going to get your money back. So I think it's kind of dumb and it prevents people from investing because they know that they will pay taxes anyway. So yeah.

Nicholas: Well, thank you guys for coming through. It's been a great conversation. And I'll see you next week.

Igor Yuzo: Nicholas, we'll see you in Denver. Super excited to meet you and hit the slopes with you.

Nicholas: Totally, yeah, let's hang. All right, cool. Cool. All right, see you everybody.

Artem: See you guys, bye.

Nicholas: Hey, thanks for listening to this episode of Web3 Galaxy Brain. To keep up with everything Web3, follow me on Twitter @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.