Welcome to the Block & Mortar newsletter! Every week, I bring you the top stories and my analysis on where business meets web3: blockchain, cryptocurrencies, NFTs, and metaverse. Brought to you by Q McCallum.

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Newsletter #40 was a roundup of web3 podcasts episodes I’d recently enjoyed. I didn’t know it at the time, but that was the first in a series. So we’ll call this the newsletter’s second month-end media review.

I’ve included links, descriptions, and – for those of you with tight schedules – the runtimes for all of the episodes.

A couple of episodes focus on blockchain-based gaming. The lessons are widely applicable, though. So you’ll want to listen in even if (better yet: “precisely because”) your company isn’t launching a web3 game.

Of MEV and marketplaces

Unchained: The Chopping Block: Why the Once-Taboo MEV Is Now a Core Part of Ethereum

(Listening time: 1hr30mn)

(This one landed late January but I didn’t get to it till February, so … here we are.)

Laura Shin occasionally turns her Unchained podcast over to The Chopping Block, a discussion show hosted by three crypto investors. This episode features guest Phil Daian, co-founder of research organization Flashbots.

The Flashbots name stems from the paper “Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges” (which Daian co-authored). In turn, the paper’s title is a nod to Michael Lewis’s Flash Boys, a book on the early days of machine-oriented, high-frequency trading.

(For a deeper look into the history of machine-based trading, which led to the high-frequency approach, I highly recommend Scott Patterson’s Dark Pools. The lessons therein – on what happens when humans face off against machines in a work setting – are increasingly relevant in today’s world, where automation based on ML/AI continues to extend its reach.)

Daian first explores the concept of “maximum expected value” (MEV). It’s a term you hear a lot in decentralized finance (DeFi) but few people stop to explain. Around the 33:00 mark, the group then explores what it means to design a “fair” marketplace in crypto. This segment is worth a second or third listen, as the idea is relevant for any kind of bid/offer marketplace and also for the field of AI safety.

Bonus: you’ll learn why investors love acronyms and memes.

(The Chopping Block is also available on YouTube, if you prefer to watch your podcasts.)

The Ordinals perks, with a side of AI

The Breakdown: Are Ordinals Sneakily a Boon to Bitcoin Security?

(Listening time: 20mn)

A few weeks back I mentioned Ordinals, a project that is (sort of) bringing NFTs to the Bitcoin blockchain. In this “Long Reads Sunday” episode of The Breakdown, host NLW reads the George Kaloudis paper “How Bitcoin NFTs Might Accidentally Fix Bitcoin’s Security Budget” which explains Ordinals in deeper detail. It’s a bit technical in places but I think it’s worth a listen even if you aren’t into the lower-level specifics on how Bitcoin works.

Kaloudis offers a look at the economics of adding NFT-like attributes to Bitcoin’s blockchain, with possible pros and cons of doing so. Despite complaints from Bitcoin hard-liners, Ordinals is already credited with given Bitcoin’s price a boost.

(Whether that boost reflects genuine, long-term interest in Ordinals remains to be seen. The price bump could have stemmed from Bitcoin getting news coverage that wasn’t about a price drop or crypto scam.)

The second half of the episode is an essay which mixes web3 with my other big interest, the one currently known as AI. “A Pragmatic View of ChatGPT in a Web3 World” by Jesus Rodriguez’s paper looks at how generative AI tools – the likes of StableDiffusion and ChatGPT – may play a role in crypto.

NLW closes out by asking whether the entire episode was all “buzzword bingo? Or Bullshit bingo? Or just brain-explosion bingo?”

And, I have to level with you, this describes every emerging-tech wave to a tee.

The chain for big brands

The Scoop: Starbucks, Warner Music among billion-dollar brands turning to Polygon to tap web3

(Listening time: 1hr)

Polygon has made a name for itself as the place for well-known brands to launch their blockchain products. Reddit, Nike, and Robinhood have all built on Polygon. Oh, and that massive, NFT-based, soon-to-launch Starbucks Reward program? Same.

On this episode of The Scoop, a very relaxed, beachside Frank Chaparro interviews Polygon Labs president Ryan Wyatt on what it means to build on-chain products and services. Wyatt explains how Polygon is akin to cloud computing providers like AWS, and why there’s value in building a web3 rewards program on-chain even when you could do so much of that with old-school web2 tech.

The pair also discuss web3 gaming. Wyatt shares his take on marketplaces for in-game currencies and gear, what kinds of games (don’t) need to be built on-chain, and why we should not underestimate small, upstart games.

(Before you ask: this episode was released before the Polygon Labs layoffs in late February, so Wyatt doesn’t discuss that.)

Utility, unicorns, and diamonds

FYI - For Your Innovation: Powering the Next Generation of Games with Justin Hulog

(Listening time: 45mn)

“FYI - For Your Innovation” is a podcast from Cathie Woods’s firm Ark Invest.

Ark focuses on disruptive technology plays. As with any group that invests in interesting, early-stage tech, they’ve built a robust research effort to sort out what is real and what’s vapor. Unlike many investment houses, though, Ark has made a name for itself by publishing a lot of its research. So it’s no surprise that they produce a podcast.

This episode features Justin Hulog, Chief Studio Officer of Immutable Games. This is a gaming studio that runs on the ImmutableX platform. That gives Hulog’s team an interesting perspective, in that they serve as both a game studio and an in-house testbed for what it means to build games on ImmutableX. What they learn can help other developers that would like to join the platform.

This interview starts with an explanation of Layer 1 and Layer 2 blockchains (“L1” and “L2”, respectively). This is important for anyone who plans to mint a lot of NFTs. Like, say, a company that creates digital trading cards.

From there, the conversation shifts to creating sustainable in-game economies, the importance of providing actual utility for your NFTs (hint: this reduces the chances of a speculative bubble), and the benefits of game developers not needing to worry about some of the underlying technology.

The key takeaways? For one, remember that “utility” can take various forms. (See your preferred game theory textbook for details.) Two, you’ll want to focus on where you’ll put all of the “unicorns and diamonds” in your game. No, seriously. Check out the episode. It’ll make more sense.

Redefining “toy”

Web3 Breakdowns: Will Weinraub: A Toy Company From The Future

(Listening time: 45mn)

Co-founder Will Weinraub describes Cryptoys as what would happen “if a toy company like Mattel and a gaming company like Nintendo had a baby, and it was born on the blockchain.” The rest of the interview with host Eric Golden certainly supports that view.

If you’re interested in his experience with IP, licensing, and merchandising in the web3 space, this episode is for you.

Three points stood out for me:

The first is the importance of recognizing your core audience. Even though early business discussions didn’t go far, the product resonated with the target market: kids. So it was only a matter of time before prospective partners and investors would catch on.

Second is the value in seeing the world through the lens of a new technology. Weinraub’s team realized that they had the opportunity to re-imagine the concept of a “toy” in the digital sense, so they weren’t tied to older definitions thereof. I hope other companies building in web3 follow this example.

The third point – and this is the big one – hit when Weinraub pointed out that digital goods live on-chain, not within the company that releases them. Even if Cryptoys should someday cease to exist, the digital goods will remain so long as the underlying blockchain persists. This is a reminder that digital goods built on centralized platforms come with strings attached.

Granted, this requires a company to build on a stable, long-lasting blockchain if they are to do right by their customers. But the fact that they can build in such a way – such that a digital product can outlast its creator – is a step in the right direction.

(And if that reminds you of an early argument in favor of open-source software, then we’re on the same page.)

The wrap-up

This was an issue of Block & Mortar.

Who’s behind Block & Mortar? I'm Q McCallum. I've spent the past two decades in the emerging-tech space. And I'm very interested in web3 use cases.

Credit where it's due. Big thanks to Shane Glynn for reviewing early drafts. Any mistakes that remain are mine.

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